Honasa Rallies Post First Profitable Fiscal; Share Price Climbs Over 3%

Shares of Mamaearth parent Honasa Consumer Ltd rose 3.25% on the BSE to INR 431.70 during intra-day trading on May 24 from the previous close of INR 418.10. 

The company’s market cap also jumped up to $1.68 Bn (INR 13,979.79 Cr), from last Saturday’s (May 18) $1.58 Bn. 

The hefty spike in Honasa’s shares comes a day after the company reported improving financials for the fourth quarter of the fiscal year 2023-24 (Q4 FY24) as well as the entire fiscal.

The fiscal year FY24 was the listed beauty major’s first full year of profit, with it reporting a net profit of INR 110.5 Cr. In contrast, it incurred a loss of INR 150.96 Cr in FY23.  Similarly, operating revenue for the entire fiscal also jumped 30% to INR 1,919.6 Cr in the year ended March 2024 from FY23’s INR 1,492 Cr.

For the fourth quarter, its net profit jumped up 17% sequentially to INR 30.47 Cr from previous quarter’s INR 25.9 Cr. 

The healthy uptick in Honasa’s profits were also reflected in brokerage firms’ sentiment towards the startup. JM Financials maintained a ‘BUY’ rating for the stock and gave it a price target of INR 505, a 17% upside from the stock’s current standing. 

While Kotak Institutional Equities gave Honasa an “Add” rating with a PT of INR 450, Emkay gave the shares a PT of INR 500. 

These brokerages expect the company to bank on its house of brands strategy moving forward. 

Kotak highlighted that although its flagship brand Mamaearth’s growth decelerated to 6-7% in FY24, there was a “nice heavy lifting by the younger brands.” 

“Honasa would be able to replicate Mamaearth’s success with some of its other brands which should aid overall revenue performance, enable it to extract savings across lines and drive profitability,” JM Financials said.

In the quarter, the company said that Derma Co scaled to an annual recurring revenue (ARR) of INR 500 Cr and is now expected to touch an ARR of INR 1,000 Cr within 3-5 years.

Similar growth projections are also anticipated for its other brands Aqualogica and Dr. Sheth’s, which are expected to have ARR of INR 500 Cr as well as BBlunt, which is expected to touch INR 250 Cr in the same time frame.

Interestingly, ICICI Securities, which initiated its coverage on Honasa in the quarter,  expected these brands to grow at a compound annual growth rate of 45% during FY24-FY26. It also gave the company ‘BUY’ rating and a PT of INR 550 back in April.