Should Investors Buy Nykaa Shares After 100% Gains On IPO Listing Day?

Against the IPO issue price of Rs. 1125, Nykaa on its listing day nearly doubled investors money and hit a price of Rs. 2248 per share in the previous session. Post the listing in trade on November 11, 2021, the stock of Nykaa primarily given the profit booking in the stock tumbled to day’s low price of Rs. 2043.75, which is an over 7 percent fall from the previous day’s closing price of Rs. 2205.80 per share.

Does the current decline in Nykaa stock price offers an opportune time to buy into the stock?

Motilal Oswal’s AVP Retail Research believes Nykaa’s key strengths lies in its inventory-led business model for beauty and personal care (BPC) segment, which allows it to offer authentication for all its products and ensures availability and efficient distribution. The online BPC market is highly underpenetrated at just 8% in India and is growing at a very fast pace of 60% p.a. over CY16-20. Given 35% market share of Nykaa in online BPC, we believe Nykaa is rightly placed to tap the high growth digital/online penetration in BPC/Fashion market. We like Nykaa given its leadership position in online BPC market, customer centric approach, profitable tech platform and capital efficient business model

Now given the strong fundamental, the stock is certainly a buy and here we would point out what analysts suggest on Nykaa counter.

Accumulation at current levels suggested on Nykaa stock

Profit booking in the counter of Nykaa is expected to prolong for some more time and it can take the scrip to price levels between Rs. 2000-1800 levels. There is suggested that investors can ‘Accumulate’ Nykaa scrip from here on in a calibrated way.

“Valuation could be a concern for Nykaa shares after a big listing gain. However, Rs. 2000 could act as a support level in the near term. It is difficult to buy after a big gain at opening however fresh investors can accumulate in parts where they can invest 25 per cent at current levels while if it witnesses any correction towards Rs.1800 level then they can add more”- Santosh Meena, Head of Research, Swastika Investmart Ltd is quoted as saying in a report.

For other investors who betted on the scrip for listing gains, they can put a stop loss of Rs. 1950, while still aggressive investor class can continue to ‘Hold’ the scrip for long term.

Target price for Nykaa

The stock of Nykaa is seen to hit a target price of Rs. 3600 in two year time and investor are suggested to buy the scrip at Rs. 1900 levels for the period with a stop loss maintained at Rs. 1770- says GCL Securities -Ravi Singhal.

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