Mamaearth Parent Honasa Consumer Share Price Plunges 20%; Should You Buy, Sell Or Hold?— Traders Corner

Is Mamaearth parent Honasa Consumer Ltd., still a good choice to invest or is it better to exit at the current prices? Honasa Consumer Ltd.'s share price fell by 20% on Monday, dropping below its listing price after several downgrades.

The company, which owns Mamaearth, posted a loss of Rs 18.6 crore in the second quarter, reversing the Rs 29.4 crore profit reported in the same period last year.

"Even considering the lower profitability this quarter, one must note that the company took a Rs 60 crore write-down on inventories. Even after adjusting profitability for this one-off expense, it remains a very expensive stock," said Lancelot DCunha, Chief Investment Officer at ValueX Wealth Connect LLP.

"Given that we are not witnessing significant revenue growth and with the company's focus shifting to direct-to-consumer, which is far more challenging than B2B, the situation is complex," D'Cunha added. "In such circumstances, the stock's multiples need to be significantly re-rated downward to make it an attractive option," he noted.

DCunha suggested to exit at the price that you are getting right now. "If you get an option to exit, especially if it opens at this level or lower, take it because you will get it at a reasonable valuation," he said.

What's Gone Wrong For Honasa Consumer?

• Operating revenues have declined and the company has slipped into losses.

• Project Neev- the inventory pipeline correction- has impacted both topline and bottom line for Q2 FY25. Strategy was to ramp up their offline distribution.

• The shift from a super stockiest model to direct distributors for general trade, that has not worked well for Honasa.

• Exceptional one-time general trade inventory takeback (distribution transition) worth Rs 63 crore.

• The quick commerce and competition from new online brands.

• Strategy to scale beyond Rs 1,000 crore gone wrong.

• Product lineup, design and marketing approach. Plus investment allocation across categories.

Mamaearth stock fell as much as 20% to hit the lower circuit at Rs 297.25 apiece on the NSE. This compares to a 0.34% decline in the benchmark Nifty 50.

Six out of the 10 analysts tracking the company have a 'buy' rating on the stock, two suggest a 'hold' and four have a 'sell', according to Bloomberg data. The average of 12-month analyst price targets implies a potential upside of 36.9%.