Honasa Consumer shares crash 20% after poor Q2 show; stock hits 52-week low

Shares of Honasa Consumer Ltd, the parent company of Mamaearth crumbled 20 per cent in the trading session on Monday, hitting its lower circuit, after the company reported a disappointed set of numbers in the September 2024 quarter leading to multiple downgrades by the brokerages.

Honasa Consumer slipped into the red in the second quarter of financial year 2024-25 as it reported a consolidated net loss of Rs 19 crore versus a net profit of Rs 29 crore reported in the year ago period. The company reported a negative bottomline on the back of one-time inventory correction amid a shift in its distribution model.

The revenue from operations stood at Rs 462 crore, falling 7 per cent on a year-on-year (YoY) basis over Rs 496 crore posted by the Mamaearth brand operator in the corresponding quarter of the previous financial year. Ebitda loss for the quarter came in at Rs 30.7 crore for the reporting quarter.

Following the announcement of Q2 results, shares of Honasa Consumer Ltd hit a 20 per cent lower circuit at Rs 295.80 on Monday, hitting its 52-week low, commanding a total market capitalization of slightly above Rs 9,600 crore. The scrip had settled at Rs 369.75 in the previous trading session on Thursday.

The stock has crashed nearly 46 per cent from its 52-week high at Rs 546.50, hit on September 10, 2024. Listed in November 2023, the company raised a total of Rs 1,701.44 crore via IPO, selling its shares for Rs 324 apiece. The stock is 9 per cent down from its issue price.

Honasa Consumer said that the revenue adjusted for inventory correction was Rs 525 crore with a growth rate of 5.7 per cent YoY, in its filing to the exchanges. EBITDA margin was reported for Q2FY25 at 6.6 per cent, with EBITDA margin adjusted for inventory correction at 4.1 per cent for the quarter.

Emkay Global Financial Services has downgraded Honasa Consumer to 'sell' from 'buy' rating and cut its target price by 50 per cent, saying Q2 print was weak and the ride ahead is bumpy. The brokerage has 'conservatively' cut its earnings expectations by 35 per cent over FY25-27. It has chopped its revenue expectations by 9-16 per cent and cut margin expectations.

The domestic broker has downgraded Honasa Consumer with a new September 2025 target price of Rs 300 from Rs 600, earlier. The broking firm said it would await proof of execution, as the management aims for a business turnaround.

On the other hand, overseas brokerage firm Goldman Sachs also downgraded Honasa Consumer to 'neutral' and chopped its target price at Rs 375. Another global brokerage firm, JP Morgan has an 'Underweight' rating on Honasa Consumer and has reduced the price target to Rs 330 per share.