Why Mamaearth shares crashes by over 56% in 6 months? Here’s what you need to know

India’s personal care sector is booming, with a projected CAGR of 11% and a market size of $28 billion in 2024, expected to reach $46.6 billion by 2033. The organic segment is growing at 23.72% CAGR, driven by consumer preference for natural products.

Price Movement

With a market capitalization of Rs 7,224.09 crore, the shares of Honasa Consumer Ltd were trading at Rs 221.80 per share, with a flat movement as compared to the previous closing price of Rs 221.80 apiece.

Matter Explanation

Mamaearth’s shares have plunged 51% from their September highs, as analysts cite overvaluation. In November, Honasa Consumer traded at a lofty 150 times P/E, now corrected to 107 times. For Q3 FY24, revenue grew 4% to Rs 470 crore from Rs 451 crore, while net profit declined 25% to Rs 21.58 crore.

Inventory Management

The company’s inventory correction focused on distribution rather than retail, with over 85% completed last quarter. It is expanding its new distribution system, appointing Tier 1 distributors in the top 50 cities. The full impact of this strategy is expected to be seen in the coming quarters.

Brand Performance

Non-Mamaearth brands, including The Derma Co, have maintained strong growth, exceeding 30% year-to-date, contributing over 40% of total revenue. Meanwhile, the Mamaearth brand continues to face challenges, showing performance similar to the previous quarter, highlighting the company’s shift towards younger, faster-growing brands for overall revenue expansion.

Also read: Stock hits 5% upper circuit after promoter increases stake and announces new subsidiary

Market demand

The company sees weak urban demand due to wage inflation and distribution shifts. Management remains cautious, avoiding linking internal changes to broader demand trends, instead emphasizing long-term fundamentals.

Distribution Strategy

The company has appointed 150+ distributors in the top 50 towns over the past 6–9 months, with 80% being new partners. Their performance is closely monitored for growth. Premium beauty outlets contribute less than 20% of general trade sales, while chemists and modern trade remain key focus areas.

Quick Commerce

Quick commerce’s contribution to total sales has risen from 4%-5% to 7%-8%, making it the fastest-growing channel. Management aims for its market share to exceed that of e-commerce, highlighting its growing importance in the company’s sales strategy and future expansion plans.

Financial Guidance

The company targets an 8% EBITDA margin by FY26, aiming for double-digit margins by FY27. Gross margin expansion is driven by a favorable brand mix, with higher-growth, younger brands contributing better margins. This strategic shift is expected to support long-term profitability and financial stability.

Competitive Landscape

Management recognizes rising competition but remains focused on a consumer-first brand strategy. Derma Co stands out as a stronger and faster-growing player compared to competitors, highlighting its solid market position and growth potential.

Company Overview

Honasa Consumer Limited is the largest digital-first beauty and personal care company in India. it has worked with the primary objective of developing products that address beauty and personal care problems faced by consumers.

Written by Abhishek Singh

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