Honasa Consumer shares in focus after Goldman Sachs initiates coverage with 'buy'; sees potential upside of over 26%

Shares of Mamaearth brand owner Honasa Consumer are in focus in Tuesday's trade (August 13) after the global brokerage Goldman Sachs initiated coverage on the stock with a 'buy' rating. The brokerage has pegged the target at Rs 570, implying a potential upside of over 26 per cent.

In the previous day's trade, despite the company's good Q1 performance, shares of the company ended lower by nearly 5 per cent at Rs 451.65 per share.

As per the brokerage, beauty transformation in the country offers a multi-year growth opportunity. The combined revenue of five leading new beauty companies, including Honasa and Minimalist grew exponentially 28x over FY19-23. Further, the brokerage sees two major levers to fuel the 2.5x revenue growth and doubling of EBITDA margins over FY24-30. Also, it sees scaling up of the portfolio of brands under the derma skin care stable.

Honasa Consumer Q1 results

In the quarter ending June, Honasa posted 63 per cent rise in consolidated net profit to Rs 40 crore. Consolidated revenue of Q1FY25 stood at Rs 554 crore, with a YOY growth of 19.3 per cent and sequential growth of 17.3 per cent.  The company's product business grew by 20.3 per cent on the back of Underlying Volume Growth (UVG) of 25.2 per cent in Q1FY25. The EBIDTA margin expanded by 201 basis points (bps) y-o-y to 8.3 per cent.

Honasa has captured a strong market share in the face wash category in online while steadily gaining ground offline, driven by its House of Brands strategy and innovation capabilities. The category achieved approximately INR 800 crore GMV ARR ( annual revenue run-rate) for Honasa Consumer. 

Honasa Consumer share price performance 

Since its listing in November last year, the stock has gained nearly 40 per cent since its listing.