Mamaearth to announce Q2 results this Wednesday, stock rallies 7%

Shares of newly-listed Honasa Consumer, which runs Mamaearth and other beauty and personal care brands, on Monday rallied 6.8% to a fresh high of Rs 354.65 on BSE. Led by husband-wife duo Varun and Ghazal Alagh, the company will announce its September quarter earnings this Wednesday, November 22.

“Given a lack of history and our understanding of seasonality, we forecast a 20% YoY growth in 2Q with slight QoQ margin improvement. We do note that ERP implementation in the base has boosted YoY growth in 1QFY24 and 1HFY24 revenue growth should still be c30%,” Jefferies analyst Vivek Maheshwari said.

Earlier in the month, the foreign brokerage had picked Mamaearth as a conviction buy with a target price of Rs 520.

“Some investors, who prefer an earning-based valuation methodology, find our price target a bit aggressive. With steady-state margins still some ways away, we have used 6x EV/sales as our PT basis (implying 67x FY26E P/E),” Jefferies said, adding that it is convinced of company EBITDA margins doubling over FY24-26E.

“At a time when FMCG incumbents are probably trying to tilt more towards profitability over growth, we see Honasa’s growth priority as a positive. Margins should converge with peers over long-term, but mgmt must go ahead with its growth agenda and we expect key investors to be patient here,” it said.

The company had posted a loss of Rs 151 crore in FY23 against a profit of Rs 14.4 crore a year earlier. The Delhi-based company had reported a 58% jump in its revenues to Rs 1,493 crore in the same period.

In the recent June quarter, its revenue from operations rose 49% year-on-year (YoY) to Rs 464 crore. Net profit was at Rs 9.24 crore as against a loss of Rs 2.51 crore a year ago.The stock has been on a roller-coaster ride since listing on November 7. Against the initial public offering (IPO) issue price of Rs 324, the stock was listed at a 2% premium at Rs 330 and hit a high of Rs 340.45 on the intraday basis on the listing. The initial excitement fizzled out soon and the stock prices fell to as low as Rs 256 on BSE after 2 days.

However, investor faith resumed soon after Jefferies surprised by initiating coverage with bullish remarks on the stock.

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