Honasa Consumer - Breaking Boundaries; Initiate With Buy: ICICI Securities

ICICI Securities Report

‘Honasa’ is derived from Honest, Natural, Safe. We believe its flywheel of ‘Mamaearth’ is replicable in other brands (demonstrated by success of ‘The Derma Co’, etc.).

We like the business model (digital-first approach) as it allows for faster product launches (business necessity in beauty and personal care) and efficient resource allocation (in marketing and distribution).

Its long-tail strategy (willing to have high number of stock keeping units) is a new template versus conventional fast moving consumer goods.

At its current size and scale, it has growth drivers like-

1. offline distribution (including key modern retail) and

2. relevant low unit packs (let’s say at Rs 50).

That said, we reckon scale-up in offline channel would be relatively challenging (versus online) while the niche (natural ingredient-oriented approach) may limit the total addressable market. Buy; target price 550.

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