Honasa Consumer shares climbed 14% today; is it still an 'avoid' at current levels?

Mamaearth's parent Honasa Consumer Ltd shares saw a sharp uptick in Thursday's trading session. The stock moved up 14.40 per cent to hit a day high of Rs 234.25. Last checked, it was up 13.31 per cent at Rs 232. At this price, the scrip has crashed 44.66 per cent in a year.

Honasa's revenue during the December 2024 quarter (Q3 FY25) stood at Rs 518 crore, reflecting 6 per cent year-on-year (YoY) growth. EBITDA margin for Q3 FY25 came at 5 per cent and profit after tax (PAT) was recorded at Rs 26 crore.

"In Q3 FY25, we remained committed to long-term growth, advancing the strategic implementation of Project Neev to strengthen our offline distribution through direct distributors in the top 50 cities. We are shaping Honasa to become a house of brands that will not only lead today but also define the future of India's beauty and personal care landscape," said Varun Alagh, Chairman and CEO & Co-founder at Honasa.

A few analysts advised caution at the current market price due to "lack of conviction." I would avoid the stock for the time being, one of them said.

"Today's price action is based on the Q3 earnings. In terms of valuations, we are not comfortable at this level even now it is trading at 100-plus P/E. It is a risky bet to consider after what has happened in the last few quarters due to the mismatch in the company's inventory as well as sales distribution. So, there is still a concern there in the books. One should try and wait for some more time and buy at a better price. For the time being, I would like to avoid it," Prashanth Tapse, Senior VP (Research) at Mehta Equities, told Business Today.

"Honasa Consumer has been into a secular downtrend. Though in the recent period, the counter has started gaining some traction, conviction is lacking until a sustainable buying emergence is not evident above the Rs 250 zone. On the other hand, on the lower end, the lifetime low level of Rs 197 is likely to be seen as intermediate support," said Osho Krishan, Senior Research Analyst - Technical & Derivatives at Angel One.

Technically, the stock traded higher than the 5-day and 10-day simple moving averages (SMAs) but lower than the 20-day, 30-, 50-, 100-, 150-day and 200-day SMAs. Its 14-day relative strength index (RSI) was 48.78. A level below 30 is defined as oversold while a value above 70 is considered overbought.

According to BSE data, the company's stock has a price-to-equity (P/E) ratio of 108.12 against a price-to-book (P/B) value of 6.40. Earnings per share (EPS) stood at 2.10 with a return on equity (RoE) of 5.91.

As of December 2024, promoters held a 35.03 per cent stake in the firm.