The Indian Citigroup Brokerage Company has initiated coverage in the E-commerce FSN business stock, Nykaa operator, with a “buy” rating and the price target of Rs 1,620, imply a 16 percent increase from the current level.

Brokerage companies believe that the company has a strong economic unit in the core segment and personal care (BPC) to create a strong platform to jump into a wider retail opportunity.

“We believe the introduction of brands + a holistic business model targets Nykaa Inti TAM (personal beauty & care), providing a durable competitive advantage,” Citi said in a note. Brokerage companies believe that the total market can be addressed for “interesting” because seeing the BPC market grew to $ 5 billion to 2025-26 from $ 1.2 billion in 2020-21.

Citi’s optimism for the company came in the midst of the occurrence in the Nykaa stock so far this year. Nykaa’s shares fell 34 percent by 2022 as far as the prospect of higher interest rates in the US caused a steep compression of assessment. Higher interest rates tend to reduce the current net value of the future profits of a company.

Citi expects Nykaa to maintain a market share of 35 percent on the BPC market for the next 5-10 years. Furthermore, brokerage companies have high hopes of vertical fashion where it sees Nykaa capturing 9 percent market share in online mode in 2030-31.

“Nykaa market leadership in BPC specifically allows companies to grow strong brand affinity among customers, increasing its appeal to the brand to partner with it,” Citi said. Brokerage companies expect Nykaa’s revenue to grow by 36 percent every year for the next five years driven by BPC and the fashion business online.

Citi estimates that the dirty margin is overall up 400 basis points to 43 percent on 2025-26 due to a mixture of income and advertising sales.

“Our target price implies almost 100% premium for higher global e-commerce assessments, but in line with an average of three-four years of assessment for several high growth em e-commerce platforms,” ​​Citi said.