Honasa Consumer shares surge 9% after Q3 results but still trade 60% below all-time high. Should you buy, sell or hold?
Honasa Consumer shares rose nearly 9% to ₹222 following better-than-expected Q3FY25 results. While net profit remained flat at ₹26 crore, revenue grew 6% to ₹517.5 crore.
Shares of Honasa Consumer, the parent company of Mamaearth, surged nearly 9% in early trade today, February 13, reaching ₹222 per share following the release of the company's December quarter numbers, which slightly exceeded Street estimates.
For Q3FY25, the company's consolidated net profit remained flat at ₹26 crore. However, sequentially, net profit improved, as the company had reported a net loss of ₹19 crore in the preceding September quarter.
Revenue from operations rose 6% to ₹517.5 crore, compared to ₹488.2 crore a year ago. The underlying volume growth stood at 1.5% in Q3FY25, which was lower than revenue growth due to the channel mix impact from the general trade (GT) transition.
On the operational front, the company reported an EBITDA of ₹26 crore, marking a 24.1% year-on-year (YoY) decline, while the EBITDA margin fell from 7% to 5%, primarily due to higher marketing expenses.
Last year, Honasa undertook a transition exercise for its general trade strategy. In the top 50 cities, it moved to a direct distribution model, phasing out reliance on super stockists. Due to this shift, the company’s financials took a hit in the July-September quarter.
"In Q3FY25, we remained committed to long-term growth, advancing the strategic implementation of Project Neev to strengthen our offline distribution through direct distributors in the top 50 cities," the company stated in its Q3 earnings report.
During the quarter, the company expanded its market share and household penetration. The brand reached 216,814 FMCG retail outlets in India, increasing distribution by 22% YoY.
Honasa’s emerging brands—The Derma Co., Aqualogica, BBlunt, and Dr. Sheth’s—delivered over 30% YoY growth year-to-date. Additionally, its focus categories (face wash, shampoo, serums, moisturizers, sun care, and baby care) recorded approximately 18% growth in 9MFY25.
The company stated that it will continue expanding in these categories, aiming to gain a significant market share in the next 3-5 years. Moreover, the company expects the moisturizer segment to grow rapidly as consumers transition from traditional cream formats.
With increasing awareness, consumers are incorporating multiple skincare products such as sunscreen, serums, and toners. Lightweight moisturizers are gaining traction as they allow layering with other skincare products. Honasa projects the moisturizer market to grow from ₹3,172 crore in 2024 to ₹5,962 crore by 2027.
How to trade Honasa Consumer stock post Q3?
Honasa’s Q3FY25 performance was largely similar to Q2FY25, with younger brands maintaining the growth trajectory (>30% YoY in Q3FY25; >40% salience), while Mamaearth saw a decline as strategy refresh pilots are currently being tested, said brokerage ICICI Securities, adding that the results of these pilots are expected to revive growth in FY26.
Operating margin declined primarily due to operating leverage but is expected to normalise from FY26. "At the current market cap, we believe the market is attributing only ~28% of Honasa's value to Mamaearth. We view this as an opportunity for long-term investors," it said while assigning a Buy rating to the stock with a target price of ₹400.
JM Financial also retained its Buy call on Honasa following Q3 FY25 results but slashed the target price to ₹285 from ₹340 earlier. "We are factoring a more gradual recovery; hence trimmed our estimates by c.12%. Recent steps are in right direction, we remain hopeful since lot of large FMCG incumbents have also undergone distribution revamps/inventory corrections despite much higher experience. Post sharp correction, valuations at 2.4/2.1x FY26/27E sales are not expensive," said the brokerage.
Stock trades 60% below recent peak
The company's shares, which debuted on Dalal Street in November 2023, saw a strong rally for the next 10 months, reaching a record high of ₹547 per share in August 2024. However, the stock struggled to maintain its momentum, posting losses every month since then.
Over the past seven months, including the current one, the stock has declined by 57%. From its peak, it has corrected by 60%.
Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.
Catch all the Business News , Market News , Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
- Top Gainers
- Top Losers
- 52 Week High