Mamaearth shares rise after JPMorgan initiates coverage with ‘neutral’ rating

Mamaearth shares rose on Thursday after brokerage JPMorgan initiated coverage on the skincare startup’s parent, Honasa Consumer, with a ‘neutral’ rating and a target price of Rs 425. The brokerage’s target implies an upside of 9.6 per cent from the previous close.  

The newly-listed stock of Honasa Consumer rose by as much as Rs 10.6, or 2.7 per cent, to Rs 398.3 apiece in early deals on BSE.  

"We forecast a 25 per cent revenue CAGR over FY23-26E, with EBITDA margin rising to 10 per cent (vs around 7 per cent in 1HF24)," the brokerage said, adding that the stock has risen 20 per cent post listing and its valuations stand at “85x/59x FY25/26E P/E price in the franchise strengths.  

The ability to successfully scale up Mamaearth's offline channel (growth moderated to low teens in the first half of the current financial year) and relatively new brands along with sustained improvement in profit metrics will be crucial for valuations to hold up, according to JPMorgan. 

Honasa Consumer shares debuted in the secondary market on November 7, 2023, listing at a premium of 1.85 per cent over the issue price at Rs 330 apiece on NSE. 

In late November, Jefferies maintained its 'buy' call on the counter with a target price of Rs 530.  

According to Jefferies, the beauty products company posted strong Q2 on both topline as well as margins, as the company saw growth deceleration from Q1  which the management attributed to enterprise resource planning (ERP) changeover.  

The brokerage further said that the company’s growth of more than 35 per cent in the first half of the year reflects its true picture.