Why Jefferies Analysts See A 57% Growth Prospect In Mamaearth

Honasa Consumer, the parent company of the popular brand Mamaearth, saw its stock rise by 6% amidst volatile trading. This boost came after Jefferies India initiated coverage, giving the stock a high conviction buy rating and setting a target price of ₹520 per share.

What does the analyst say? Jefferies predicts a remarkable 57% growth for Honasa Consumer over the next three years. Despite recognizing challenges like stiff competition, mergers and acquisitions, and slow brand expansion, the brokerage is optimistic about the company’s future. It expects double-digit growth in the Beauty and Personal Care (BPC) segment, steady online sales, and a positive overall trajectory.

Honasa Consumer's diverse brand portfolio, including successful names like The DermaCo and Aqualogica, reached ₹1,200 crore in revenue in FY23, marking its leadership in the Indian BPC market. Other brands like Ayuga BBlunt and Dr Sheth are still in the early development stages.

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Jefferies highlights Honasa Consumer's strengths in tapping emerging trends, with 25-50% of its annual revenue coming from new products. The company's focus on millennials through content and community-based approaches sets it apart. Additionally, Jefferies notes that offline channels, where Honasa's brands are available in 150,000 general trade outlets and 31 merchandise trade chains, offer higher margins than online sales.

Honasa performance so far: Despite the optimistic market view, Honasa Consumer reported a net loss of ₹150.9 crore for the year ending March 2023, attributed to impairment loss on goodwill and other intangible assets, contrasting with a ₹14.4 crore profit in the previous year.

Although volume growth significantly declined to 68.23% in FY23 from higher rates in previous years, the revenue from operations grew robustly at a Compound Annual Growth Rate (CAGR) of 80.14% during FY21-FY23. The market is closely watching how Honasa Consumer adapts in the evolving business environment.

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Posted In: Price TargetInitiationAnalyst RatingsMoversTrading IdeasHonasa ConsumerMamaearth