Last Updated:
Shares of Honasa Consumer surged 10% in early trading on Thursday, reaching Rs 222 per share after the company released its Q3 results; Should you sell?
Honasa Share Price
Honasa Consumer Share Price: Shares of Honasa Consumer surged 10% in early trading on Thursday, reaching Rs 222 per share after the company released its December quarter results. The company’s net profit remained unchanged at Rs 26 crore compared to the same period last year, while revenue grew 6% year-on-year to Rs 518 crore.
Although profit growth remained flat, investors were buoyed by the company’s return to profitability in Q3 FY25, following a loss of Rs 18.5 crore in the previous quarter. This rebound came after the company’s shift to a direct-to-consumer (D2C) model under Project ‘Neev,’ which had caused some inventory adjustments earlier.
The company’s gross profit margin improved by 132 basis points to 70%, while EBITDA stood at Rs 26 crore, yielding a 5% EBITDA margin for the quarter. CEO and Chairman Varun Alagh highlighted the company’s long-term growth strategy, which includes bolstering offline distribution in top 50 cities and driving innovation to enhance consumer value.
At 11:19 am, Honasa Consumer shares were trading at Rs 220.85 on the NSE. The sharp rise in the share price was also accompanied by a surge in trading volume, with 46 lakh shares of Mamaearth being traded, nearly six times the average daily trading volume of 8 lakh shares over the past month.
The stock had been on a five-day decline leading up to Tuesday, losing 13% of its value. This suggests that any negative reactions to the Q3 earnings had already been priced in during the recent drop.
Despite Honasa’s growth, CEO Varun Alagh acknowledged the increased competition from quick-commerce platforms like Blinkit, Swiggy Instamart, Zepto, and BigBasket, which have made brand discovery and launches easier. However, he noted that while quick commerce has affected the company more than modern or general trade, its impact is less significant compared to e-commerce giants like Flipkart and Amazon.
The company also achieved a milestone in the first nine months of FY25, surpassing Rs 1,500 crore in revenue for the first time. Revenue for FY25 so far reached Rs 1,533 crore, marking a 5.8% year-on-year growth. Adjusted for a one-time inventory correction in Q2, revenue stood at Rs 1,596 crore, reflecting a 10.2% year-on-year increase.
How to Trade Honasa Consumer Stock Post Q3?
Honasa’s Q3FY25 performance was similar to Q2FY25, with its younger brands continuing their growth trajectory (over 30% YoY in Q3FY25, and over 40% salience), while Mamaearth experienced a decline as strategy refresh pilots are still in progress. ICICI Securities stated that the results of these pilots are expected to revitalize growth in FY26.
The operating margin declined due to operating leverage but is expected to stabilize in FY26. “At the current market cap, we believe the market is attributing only ~28% of Honasa’s value to Mamaearth. We view this as an opportunity for long-term investors,” the brokerage said, maintaining a Buy rating on the stock with a target price of Rs 400.
JM Financial also kept its Buy call on Honasa following the Q3 FY25 results but lowered the target price to Rs 285 from Rs 340, citing a more gradual recovery. “We have trimmed our estimates by approximately 12%, but remain optimistic as large FMCG players have also undergone similar distribution revamps and inventory corrections. Post the sharp correction, valuations at 2.4/2.1x FY26/27E sales are not expensive,” the brokerage noted.
Disclaimer:Disclaimer: The views and investment tips by experts in this News18.com report are their own and not those of the website or its management. Users are advised to check with certified experts before taking any investment decisions.
