Why Citi Analysts See A 27% Growth Prospect In Mamaearth

Mamaearth’s parent company saw its shares surge on Friday after Citi Research gave Honasa Consumer Ltd. a ‘buy’ rating as it started its coverage on the stock.

What did Citi say? The firm highlighted that Mamaearth is fortifying its market presence through innovative consumer-centric products, expanding distribution networks, and diving into rapidly growing sectors like colour cosmetics.

Honasa’s growth is also boosted by its other brands, including The Derma Co., Aqualogica, and Dr. Sheth's, which cater to specific consumer needs and contribute to its accelerated growth. Citi Research set a target price of ₹550 for Honasa’s stock, foreseeing a potential upside return of 26.9%.

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The firm expects Honasa to maintain high market shares through distribution and innovation, new brand growth, and improving financial metrics. Citi estimates Honasa's consolidated revenue will grow at a 25% compound annual growth rate (CAGR) from FY24-26E. This projection includes a 14% CAGR for Mamaearth, driven mainly by offline expansion, and a 46% CAGR in its other brands.

Earnings before interest, taxes, depreciation, and amortization (EBITDA) are expected to grow at a faster 55% CAGR, reaching an 11% margin by FY26E. This growth is attributed to advertising spend rationalization, an improving channel mix, and operational leverage.

Price Action: Honasa Consumer Ltd. shares were trading 4.3% higher at ₹452.20 on Friday midday.

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