Mamaearth Hits 20% Upper Circuit On Strong Q2 Results; Jefferies Predicts 52% Upside – News18

Last Updated: November 23, 2023, 12:01 IST

Mamaearth and Honasa Q2 results triggers 20% surge in share prices.

Shares of Honasa Consumer, which runs the Mamaearth, on Thursady surged around 20% to touch a fresh peak post Q2 results

Shares of Honasa Consumer, which runs the Mamaearth, on Thursady surged around 20% to touch a fresh peak of Rs 422.50 on BSE after the beauty and personal care products retailer reported 94% year-on-year (YoY) growth in Q2 profit.

The parent firm of direct-to-consumer (D2C) brands like Mamaearth, The Derma Co, and BBlunt, had recorded a loss of Rs 15 crore in the year ago period. Profit in the previous quarter (Q1FY24) was Rs 24.7 crore. The stock was trading at its highest level since its debut on November 7. Till 10:07 AM; a combined 10.1 million equity shares changed hands on the NSE and BSE. There were pending buy orders for a combined around 1.4 million shares on the exchanges, data shows.

According to the firm’s first-ever earnings update since its stock market debut earlier this month, consolidated revenue from operations grew 21 per cent YoY to Rs 496.1 crore, driven by volume growth of 27 per cent YoY. The company’s like-for-like growth for continuing business was 24 per cent, Honasa said. The company’s earnings before interest, tax, depreciation, and amortisation (Ebitda) grew 53 per cent YoY to Rs 40 crore. Ebitda margin improved 170 bps to 8.1 per cent from 6.4 per cent in a year ago quarter. Dr Sheth’s has become the 4th brand from Honasa portfolio to enter the Rs 150 crore club in terms of annual recurring revenue after Aqualogica and Derma Co.

Meanwhile, the stock price of Honasa has zoomed 65 per cent from Rs 256.10 touched on November 10, in intra-day trade on the BSE. The sharp rally in the stock is attributed to Jefferies coverage on the stock with a ‘Buy’ rating and price target of Rs 520 per share. Honasa made a lacklustre stock market debut, with its shares listed at Rs 337.15, a 4 per cent premium over its issue price of Rs 324 per share on the BSE. Honasa’s flagship brand, Mamaearth, is designed to cater to the essential customer desire for safe and natural products. Mamaearth focuses on developing beauty products free from harmful toxins and made with natural ingredients. By the end of FY23, Mamaearth had become the fastest-growing BPC brand in India, achieving annual revenue of Rs 1,000 crore within six years of its launch.

Honasa chairman and CEO Varun Alagh said the business has grown by 33% YoY in H1 FY24 which is 3.8 times the median growth of FCMG companies in India.

“Mamaearth, our largest brand has entered the Top 15 BPC brands in India, overtaking many legacy brands, as per a report by Jefferies. Our profits grew much faster than our revenues, with H1 PAT growing by 1,377% to Rs 54 crore,” he said.

While the exact split was not disclosed, growth was led by new brands, while Mamaearth also grew double-digits in H1. Within new brands, The Derma Co is now at an annual revenue run-rate (ARR) of Rs 380 crore and Aqualogica is at Rs 180 crore. Dr. Sheth became the fourth brand to cross Rs 150 crore ARR, growing 30x since acquisition. BBlunt’s product business has also grown 3x since its acquisition.

Global brokerage Jefferies has raised the target price on Honasa Consumer, which operates the Mamaearth brand, to Rs 530 from an earlier Rs 520, estimating a 52% upside, post strong second-quarter results.

“Management noted that Q2 had a high base as some revenue was shifted from Q1 to Q2 last year due to ERP implementation on June 22. H1 performance is hence a better indicator, wherein Honasa grew 33% YoY (36% LFL). Offline channel revenue was impacted more due to this ERP implementation,” Jefferies said.

Disclaimer:Disclaimer: The views and investment tips by experts in this report are their own and not those of the website or its management. Users are advised to check with certified experts before taking any investment decisions.

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