Honasa Consumer, the parent company of Mamaearth, witnessed a significant surge in its stock price, hitting the 20% upper circuit after its recent earnings release. Initially, the results appeared underwhelming with weak margins and operating performance. However, a closer look into the internals of the company’s performance reveals a more optimistic picture, sparking a strong positive reaction in the market.
While headline numbers suggested softness, the company’s internal metrics and forward guidance painted a different, more promising story. This deeper analysis has driven investor sentiment and pushed the stock up by 18% in intraday trade.
Let’s first examine what went right in the results. Honasa posted the strongest revenue growth in its industry, backed by an impressive 21% volume growth. In its key focus categories like face wash, shampoo, and sunscreen, the company registered double-digit growth. Notably, its derma segment crossed an average revenue run rate of Rs 100 crore through offline channels, signaling a strong retail footprint.
Furthermore, all other segments of the company grew by nearly 30%, showcasing a well-rounded growth story. Inventory management remained robust, and the company operated with a negative working capital cycle — a positive indicator of operational efficiency.
The forward guidance for FY26 was another key driver of the rally. Honasa has set an ambitious goal of achieving double-digit topline growth. It also aims to improve its EBITDA margin by around 2.5%. Marketing and promotional spending (A&P spend) is expected to reduce, thereby improving profitability.
In terms of retail expansion, the company plans to increase its distribution outlets from 100,000 to 150,000. Over the next two to three years, Honasa is targeting to derive 90% of its income from its focus categories, up from the current 25%.
This strategic clarity and strong execution roadmap have been well-received by the market. The stock, which had seen a steep correction earlier, has now rebounded and is trading close to its IPO levels, signaling renewed investor confidence.
With a solid growth trajectory and clear execution plans, Honasa Consumer seems poised for a strong performance in the coming quarters. However, it's important to note that despite the recent rally, the stock is still down around 36% from its all-time high. It had touched a peak of Rs 531 in September 2024.
Disclaimer:
The information provided in this article is for educational and informational purposes only. It does not constitute investment advice, financial guidance, or a recommendation to buy or sell any stocks. Always do your own research or consult with a qualified financial advisor before making investment decisions.
