Honasa stock plunges after poor Q2 show
Honasa Consumer, parent of personal care brand Mamaearth, plunged 20% — the lowest trading limit of the day — after the company posted losses in its second-quarter earnings. The stock closed at ₹297.25, below its initial public offering (IPO) price of ₹324. The company was listed last November.
Concerns over a likely decline in sales in its flagship brand, Mamaearth and earlier expectations of strong earnings growth have made investors sceptical about the stock's prospects.
«The concerns on distribution model stability and rise in quick commerce have been cited as the main drivers for the losses, but that doesn't seem plausible as both factors existed in the previous quarters as well,» said Hemang Jani, director at Finazenn, an investment advisory. «In the last two to three quarters, Honasa reported decent numbers. However, this quarter, the revenue and loss were shocking, especially as the management had implied a bullish outlook.»
Goldman Sachs downgraded its rating on Honasa to 'neutral' and set a price target of ₹375 on the stock. Emkay Global also downgraded Honasa to 'sell' from 'buy' and slashed the target price to ₹300 from ₹600.
«As the natural trend waned, Mamaearth as a brand has seen growth slowdown,» said Emkay. «This was further accentuated by execution lapses offline, leading to a brand decline in Q2, which should persist in FY25 given distribution gaps in top-50 cities.»
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