Honasa Consumer shares dip 20%; stock hits lower circuit limit after weak Q2 earnings

Shares of Honasa Consumer Ltd., which owns FMCG brands such as Dr. Sheth's, Aqualogica, Mamaearth, BBlunt, and The Derma Co., tumbled a staggering 20% today, after the firm reported a consolidated loss of Rs 18.57 crore for the second quarter ended September 30, 2024, largely on account of inventory correction.

The stock slumped to Rs 295.80 on BSE, hitting the lower circuit limit on the bourse. At the NSE, it tanked 20% to hit the lowest trading permissible limit for the day at Rs 297.25, hitting its 52-week low. The company's total market cap stood at Rs 9,655.39 crore on the NSE.

Honasa reported profits after tax after worth Rs 29.43 crore for the quarter ended September 2023, per the company's filing. The company's revenue from operations was down 6.9% to Rs 461.82 crore in the second quarter of this fiscal.

Chairman and CEO Varun Alagh said over the past few months, Honasa Consumer has been working to optimize its distribution model, pivoting towards becoming a direct to consumer (D2C) brand, under its project Neev.

"In this quarter, we have taken strategic steps towards transitioning from super-stockists to direct distributors in the top 50 cities. This change has impacted our revenue and profits, leading to a slowdown for Mamaearth," he said.

While brokerage houses like Jefferies expressed disappointment over the company's quarterly performance, they maintained their buy call on the stock, albeit cutting the target price to Rs 425 from the previous Rs 545.

On the other hand, Emkay Global downgraded the company's stock ratings to sell as opposed to the previous buy call, alongside cutting down the target price from Rs 300 as compared to its earlier target of Rs 600. Per the firm, Mamaearth is likely to see decline in FY25E and aims to recover base in FY26E.

2024 has not been a great year for Honasa so far, with the stock crashing 30.36% so far this year.