Honasa Consumer shares plunge 20% after weak Q2 results; hits lower circuit

Honasa Consumer, the parent company of D2C brand Mamaearth, witnessed a 20 per cent share price decline during the morning session on November 18, hitting the lower circuit at Rs 297.25 on the NSE. The sharp drop led the stock to slip below its IPO price of Rs 324 per share, reflecting investor disappointment following the company's Q2 results for FY25.

Honasa posts first quarterly loss in five quarters

For the July-September quarter, Honasa Consumer reported a net loss of Rs 19 crore, marking its first quarterly loss in over a year. This is a stark contrast to the profit of Rs 29 crore it reported in the same quarter last year. The company's revenue also took a hit, declining by seven per cent year-on-year to Rs 462 crore, down from Rs 496 crore in the corresponding period of the previous year. The fall in revenue has been attributed to a slowdown in demand and disruptions related to changes in distribution strategy.

Total expenses rose nine per cent year-on-year, amounting to Rs 506 crore, despite a sequential decline. Honasa’s shift towards a direct-to-consumer (D2C) model under Project 'Neev' has led to significant inventory adjustments, further impacting the bottom line. Advertising and promotional expenses surged to thirty-nine point seven per cent of revenue, up from thirty-five per cent a year ago, indicating aggressive spending to drive demand amid challenging market conditions. 

Brokerages react with mixed views

Brokerages were divided in their response to Honasa Consumer's Q2 performance. Jefferies maintained a 'buy' call but cut its target price to Rs 425 per share from Rs 545 earlier. Jefferies acknowledged the disappointing quarterly performance but expressed optimism about the management's plans to steer the business back on track. "While the loss and higher inventory correction were concerning, we continue to trust the founders' long-term vision," the brokerage said.

Goldman Sachs downgraded its stance to 'neutral' from 'buy', reducing the target price to Rs 375 from Rs 570. It highlighted the weak demand trends, particularly for Mamaearth’s skincare portfolio, as a key risk factor.

With investors expressing concerns over liquidity and ongoing challenges in the D2C transition, Honasa's stock is expected to face continued pressure in the short term. Analysts warn that the turnaround could take two to three more quarters as the company scales up its new distribution channels and stabilizes inventory levels.