Kotak Institutional Equities initiates coverage on Mamaearth parent, sees 5% upside

Honasa Consumer shares have gained over 27 percent over the past six months.

Trade

• Watchlist
• Portfolio
• Message
• Set Alert

 

 

live

• bselive
• nselive

Volume

Todays L/H

More

×

Kotak Institutional Equities initiated coverage on Honasa Consumer with an add rating, as the brokerage is bullish on the Mamaearth parent's "strong marketing, flair for capturing emerging trends and nimble execution".

Kotak set a target price of Rs 450 per share, indicating an upside of almost 5 percent.

The brokerage said that since launching its first product in 2016, Honasa Consumer has demonstrated "an enviable track record of speed and success in seeding and scaling several brands and achieving omnichannel command—all while maintaining sound financial discipline".

At 11.10 am, Honasa Consumer shares were quoting at Rs 429.5 on the NSE, higher by 0.5 percent compared to the previous close.

Follow our market blog to catch all the live updates

There are three key factors that make Honasa stand out, as per the brokerage.

Kotak is upbeat about the stock over its successful scale-up of multiple brands, such as Mamaearth, The Derma Co, Dr Sheth's, Aqualogica; the firm's omnichannel operations, with a 50:50 split between online and offline distribution; and its "financial discipline", with a gross margin of over 68 percent.

Honasa is poised to grow, with Mamaearth likely to clock 9-10 percent CAGR, driven by offline distribution expansion, innovations and portfolio augmentation. Other brands, such as The Derma Co, Dr Sheth's, are seeing growth, as consumers are shifting to buying products based on their ingredient-based buying, said the brokerage.

There are also new opportunities in the market for Honasa to capitalise on,  such as color cosmetics, exports, mass BPC market and new sub-categories, according to the brokerage.

"A steady increase in repeat offtakes as a result of conversion of experimentative consumers into a sticky base, a reduced dependence on innovation and rise in mix of core products, along with a continuous improvement in products/R&D can drive the transition into a formidable BPC player from a challenger," said Kotak in a note.

On April 23, Honasa Consumer Limited announced its skincare unit Derma Co achieved an annual revenue rate of Rs 500 crore.

The Derma Co had earlier crossed the Annual Revenue Rate (ARR) of Rs 350 crore in September 2023 and had also achieved an EBITDA positive status during the December quarter.

Key risks to Honasa Consumer could be deceleration in Mamaearth's growth and rise in competition from traditional BPC players/platforms.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.