Honasa share price extends losses, slumps 18% to hit 52-week low on weak Q2 results

Stock Market Today: Honasa share price extended losses in Tuesday's session to hit a fresh 52-week low as investors continued to offload the stock following weak Q2 results. Honasa share price today slumped 18% to hit the intraday low of ₹242.60 apiece on BSE. The firm that owns FMCG brands like Mamaearth and The Derma Co. declined 20% on Monday. 

The company, last week, posted a consolidated loss of ₹18.57 crore for the second quarter ended September 30, 2024, due to inventory adjustments. The firm had reported a profit after tax of ₹29.43 crore for the same quarter last year.

According to Rajesh Bhosale, Equity Technical and Derivative Analyst at Angel One, Honasa share price has reacted negatively in the last two sessions post-bad results. “This is a new listing, hence sufficient technical data is not available. However, considering the negative momentum, avoid catching the falling knife and use any bounce to exit longs as it will continue to underperform in the near term,” advised Bhosale.

Honasa share price has dropped more than 30% in the past week and has decreased by 53% from its 52-week high.

The revenue for Q2 was ₹462 crore, showing approximately 6.9% growth, while revenue adjusted for inventory correction was ₹525 crore, reflecting a growth rate of 5.7%, according to Honasa Consumer's earnings statement. Varun Alagh, the Chairman and CEO, mentioned that Honasa Consumer has been focusing on optimising its distribution model over the last few months.

According to ICICI Securities, it is evident that Honasa has transitioned to being predominantly a 95% "show me" story and only 5% "trust me" story. The company's new brands, including The Derma Co, Aqualogica, and Dr. Sheth's, are showing strong performance, contributing 35% of revenue with roughly 30% growth. The consensus seems to be overlooking this positive performance, it said. The expected revenue growth is likely being adjusted to low-to-mid teens, down from the previous estimate of 20%, in ICICI Securities' view.

“We reckon the stock faces near-term tussle of emotions vs. long-term (probabilistic) fundamentals. We stay believers in the Honasa team. Moving our rating with earnings cut, recommend ADD (Buy earlier) with a target price of ₹400,” the brokerage said.

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