Why Mamaearth Owner Honasa Consumer Is Quickly Becoming Analysts' Newest Stock To Watch

Shares of Mamaearth’s parent firm were on the rise on Tuesday after the consumer firm received bullish recommendations from brokerages.

What Happened: Kotak Institutional Equities recently initiated coverage on Honasa Consumer with an “add” rating, expressing optimism about the parent company of Mamaearth due to its “strong marketing, flair for capturing emerging trends, and nimble execution.” Setting a target price of ₹450 per share, the brokerage foresees a potential upside of nearly 5%.

Honasa Consumer, since its inception in 2016, has showcased remarkable agility and success in introducing and expanding several brands while maintaining financial prudence, the brokerage said.

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Kotak highlighted three key factors contributing to Honasa’s strength: its adeptness in scaling multiple brands like Mamaearth, The Derma Co, Dr Sheth’s and Aqualogica; its balanced omnichannel operations with a 50:50 split between online and offline distribution; and its disciplined financial management, with a gross margin of over 68%.

Anticipating continued growth, Kotak projects Mamaearth to achieve a 9%-10% compound annual growth rate, driven by offline distribution expansion, innovations, and portfolio enhancement. Other brands within Honasa, such as The Derma Co and Dr Sheth’s, are also experiencing growth, fuelled by consumer preferences for ingredient-based products.

Kotak foresees a transition for Honasa from a challenger to a formidable player in the beauty and personal care (BPC) segment, driven by factors like increased repeat purchases, reduced dependence on innovation and product portfolio enhancements.

ICICI Securities also recently initiated coverage on Honasa with a “buy” rating and a target price of ₹550, implying an upside of over 25%, believing its business strategy for the Mamaearth brand can be replicated to create success in its other brands. The brokerage also sees offline retail distribution and relatively low-cost products as key growth drivers.

Price Action: Honasa Consumer’s share price was up 0.84% at ₹431.25 around noon, recouping losses earlier in the session.

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