Jefferies's New Target Price For Honasa Consumer Indicates 58% Upside Potential
Jefferies hiked the target price after Honasa Consumer reported profit in the July–September.
Jefferies hiked the target price for Mamaearth's parent Honasa Consumer Ltd. as the business consolidation phase is over. The new target price for the stock indicated 58% upside potential from Wednesday's close price.
Jefferies maintained a 'Buy' rating and hiked the target price to Rs 450 from Rs 400 apiece earlier.
The second-quarter results provide the glimpse of the turnaround for the Honasa Consumer, which had seen a difficult time since its listing on Nov 7, 2023. The business will likely deliver strong growth in the coming quarters, Jefferies said.
Mamaearth is back on a growth trajectory with its offline strategy offering results, which will ultimately set the stage for other brands to benefit, according to Jefferies. After many years of decline, brands have turned into +ve growth deliverers. Management is expecting that the Mamaearth will grow at mid-single digit in the third quarter. It will gradually become high-single digit growth to double-digit growth in quarters ahead.
Honasa Consumer's younger brands grew at 20% on the year. The focused categories grew in double-digit in the second quarter. Honasa Consumer focuses on seven categories which contributes 75% of the revenue, Jefferies said.
Honasa Consumer Q2 Earnings Key Highlights (Consolidated, YoY)
Revenue up 16.5% at Rs 538 Crore vs Rs 462 Crore
Ebitda at Rs 47.6 Crore vs loss of Rs 30.8 Crore
Margin at 8.8%
Net Profit at Rs 39.2 Crore vs loss of Rs 18.5 Crore
The Derma Co has delivered strong growth with its revenue reaching Rs 750 crore annual recurring revenue. The reported margins in the high-single digit. Honasa Consumer claimed that The Derma Co is the number one brand in sunscreen in calendar year 2024, Jefferies said.
Honasa Consumer launched Lumineve to enter the prestige night skin-care with products priced three times more than Honasa's consumer current offerings. The company is continuing to make small investments of Rs 10 crore to acquire 25% stakes in Fang, an oral care brand with focus on teeth whitening.
Honasa Consumer's management is targetting Ebitda margins by 100 basis points every year. For the next few years, the focus will be on key categories, Jefferies said.
