Shares of Honasa Consumer faced a sharp decline of 20% to Rs 295.80 at market open on Monday, hitting the lower circuit limit after the company reported a dismal second quarter performance in fiscal 2025. This marks the company’s first quarterly loss in five quarters, sending shockwaves through the market.
The company reported a net loss of Rs 19 crore for the July-September quarter, compared to the Rs 29 crore profit in the same period last year. Revenues for the quarter fell 7% year-on-year to Rs 462 crore due to sluggish demand, a one-time inventory correction of Rs 630 crore, and mounting pressures on its direct-to-consumer (D2C) distribution model.
The brokerage cited a slower-than-expected recovery and challenges in Mamaearth’s offline and online segments as key reasons for the downgrade.
The Mamaearth brand, Honasa’s flagship, has been grappling with a slowdown. The waning appeal of its natural product line, coupled with execution lapses in offline distribution across key cities, has dented the brand’s growth prospects, according to Emkay Global. Online sales have also been sluggish amid rising competition, with “actives” gaining traction in the market.
“Honasa is experiencing significant challenges, including reduced operating leverage and higher competition. We foresee a steep decline in FY25 earnings and a slow recovery trajectory into FY26,” Emkay noted in its report.”We conservatively cut our topline estimates by 9% for FY25 and 16% for FY26-27, along with a ~35% reduction in EPS for FY25-27. The downgrade reflects reduced operating leverage, slower growth in core brands, and a lack of a robust offline presence, which could enable competition to gain ground,” the report stated.Also read | Hero MotoCorp shares in focus after Q2 PAT, revenue see double-digit growth
The brokerage now values Honasa at 4 times EV/Sales, which is substantially below the sector average of 6.5 times. This reflects a cautious outlook on the company’s prospects, highlighting concerns about its ability to achieve a meaningful recovery in the medium term.
To revive its core Mamaearth brand, Honasa plans to focus on improving distribution networks and increasing marketing investments. However, Emkay Global warned that these measures, while necessary, may not yield immediate results and pose risks to medium-term profitability.
Today’s sharp sell-off reflects investor concerns over the uncertain turnaround timeline. With a 52-week high of Rs 547 and a low of Rs 309, the stock has seen a volatile year. Honasa’s management has committed to corrective actions, but the brokerage underscores the need for clear evidence of execution success before sentiment can improve.
The downgrade and reduced target price signal that the path to recovery will be challenging, with FY25 expected to remain a tough year for the company. Investors are advised to tread cautiously as the company works on its strategic reboot.
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