Mamaearth’s robust Q2 results saw it hit the 20% upper circuit; Jefferies predicts a 52% upside

On Thursday, the Mamaearth’s operator, Honasa Consumer, saw its shares soar 20% higher to a new high of Rs 422.50 on the BSE. The retailer of beauty and personal care items recorded a 94% YoY increase in Q2 earnings.

In the previous year, the parent company of direct-to-consumer (D2C) businesses such as Mamaearth, The Derma Co., and BBlunt, reported a loss of Rs 15 crore. The prior quarter’s profit, Q1FY24, was Rs 24.7 crore. Since it began trading on November 7, the stock was at its highest point. A total of 10.1 million equity shares were exchanged on the NSE and BSE till 10:07 AM. Data indicates that there were pending purchase orders on the exchanges for a total of around 1.4 million six year ban for a former west indies star under the anti corruption code mamaeart

In its first financial release after going public earlier this month, the company reported consolidated revenue from operations that increased 21% YoY to Rs 496.1 crore, mostly due to a 27% YoY increase in volume. According to Honasa, the company’s like-for-like increase for ongoing operations was 24%. Earnings before interest, taxes, depreciation, and amortization (Ebitda) for the firm increased by 53% year over year to Rs 40 crore. The EBITDA margin increased by 170 basis points to 8.1% from 6.4% in the same period last year. After Derma Co. and Aqualogica, Dr. Sheth’s is now the fourth brand from the Honasa portfolio to reach the Rs 150 crore club in terms of recurring income annually.

In the meanwhile, Honasa’s stock price has surged by 65% from its intraday high of Rs 256.10 on November 10 on the BSE. Jefferies’ coverage of the company, which has a “Buy” rating and a price target of Rs 520 per share, is credited with the stock’s dramatic surge. With its shares trading at Rs 337.15, a 4% premium above their issue price of Rs 324 per share on the BSE, Honasa had a lackluster start on the stock market. Mamaearth, the main brand of Honasa, is designed to satisfy the fundamental consumer need for natural and safe goods. Mamaearth is dedicated to creating natural beauty products that are devoid of toxic substances. After six years of debut, Mamaearth achieved an annual turnover of Rs 1,000 crore, making it the fastest-growing BPC brand in India at the end of FY23.

The firm has increased by 33% YoY in H1 FY24, according to Honasa Chairman and CEO Varun Alagh. This is 3.8 times the median growth of FCMG businesses in India.

According to a Jefferies analysis, “Mamaearth, our largest brand, has entered the Top 15 BPC brands in India, overtaking many legacy brands.” With H1 PAT rising by 1,377% to Rs 54 crore, our earnings increased much faster than our sales, he added.

The precise division was not revealed, but new brands drove growth, with Mamaearth seeing double-digit increase in H1. The Derma Co. and Aqualogica are two new brands with annual revenue run-rates (ARRs) of Rs 380 crore and Rs 180 crore, respectively. After expanding 30 times since purchase, Dr. Sheth became the fourth brand to surpass Rs 150 crore ARR. Since its takeover, BBlunt’s product company has expanded thrice as well.

Following impressive second-quarter performance, international stockbroker Jefferies increased its target price on Honasa Consumer, the company that runs the Mamaearth brand, to Rs 530 from Rs 520 before. Jefferies is projecting a 52% upside.

“Management saw that Q2 had a high base because, as a result of the June 22 ERP deployment, some revenue was moved from Q1 to Q2 of the previous year. Therefore, H1 performance—which showed Honasa growing 33% YoY (36% LFL)—is a stronger sign. The ERP deployment had a greater negative effect on sales from offline channels, according to Jefferies.

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