Honasa Consumer shares: Why Emkay downgraded Mamaearth stock price target by 50%

Emkay Global has downgraded Honasa Consumer Ltd 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, given reduced operating leverage benefits.

"Bunched-up corrective actions is a bold call from the management which risks medium-term growth but is a positive move to build the offline franchise. Amid a recent correction in the FMCG sector and growth slowdown ahead, we now value Honasa at 4 times EV/Sales, which is 50 per cent discount to sector average EV/Sales vs 6.5 times earlier," Emkay Global said.

The brokerage 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.

For the quarter, Honasa Consumer reported Rs 19 crore loss and said its revenue de-grew 7 per cent amid like-to-like volume growth and one-time inventory correction of Rs 630 crore. Weak seasonality and calls to improve hygiene of offline business has taken a toll on like-to-like growth, which will see gradual recovery ahead, Emkay Global said.

Saying building Mamaearth brand health is key ahead, Emkay said Mamaearth as a brand has seen growth slowdown as the natural trend waned. This was further accentuated by execution lapses in offline, leading to brand decline in Q2, which should persist in FY25 due to distribution gaps in top-50 cities.

"Also, the online channel sales is under stress, where traction for activities has heightened. Given the brand size, there is a need for targeted investments. Going ahead, the management would look to course correct by addressing distribution gaps and enhancing A&P deployment," it said.

Emkay Global said young brands are sustaining healthy momentum with over 30 per cent growth. It sees Honasa's ‘House of Brands’ approach in personal care as the key to counter competitive stress.

"Our thesis of accelerated growth with steady share gains in personal care got a beating from weak business commentary in Q2FY25. Mamaearth is likely to see decline in FY25E and aims to recover its base in FY26E. Limited offline presence and slower growth in core brands may pave the way for the competition, where recouping in the long term would be daunting," it said.