The shares of Honasa Consumer, the parent company of popular personal care brand Mamaearth, experienced a remarkable surge, escalating by 11 per cent during the afternoon trading session on November 24. This surge marked the continuation of a robust rally that had persisted for two consecutive days, propelling the stock to an impressive 35 per cent gain. The driving force behind this surge was the resounding endorsement from Jefferies, a renowned financial services company, which not only maintained its "buy" recommendation on the stock but also augmented the target price. Furthermore, Jefferies took the notable step of incorporating Honasa Consumer into its model portfolio, an action that replaced Marico.
In a comprehensive note released on November 23, Jefferies elucidated the rationale behind this strategic move. The financial giant expressed confidence in Honasa Consumer's ability to weather economic headwinds, citing the company's focused approach towards catering to premium customers. Jefferies opined that this market positioning would fortify the company against the dual challenges of inflation and demand slowdown. The note highlighted the company's robust growth trajectory, characterized by consistent revenue expansion exceeding 30 per cent and a commendable margin expansion.
Honda Consumer's stellar financial performance in the September quarter also played a pivotal role in bolstering investor confidence. The company reported a remarkable 21 per cent growth in revenue, coupled with a noteworthy doubling of net profit, which surged to Rs 30 crore. This financial resilience further solidified Jefferies' positive outlook on the company's prospects, prompting the brokerage to elevate its target price for the Mamaearth parent company.
As of 1:16 pm on November 24, the Honasa Consumer stock was actively traded at Rs 471.25, registering a substantial 11.21 per cent increase. Notably, Jefferies not only reiterated its "buy" rating on Mamaearth but also revised its target price upward to Rs 530. In conjunction with this, the brokerage adjusted its earnings per share (EPS) estimates, anticipating a 5-6 per cent increase.
A closer examination of the Honasa Consumer stock reveals interesting dynamics. According to data from CNBC-TV18, only 23.5 per cent of the total outstanding shares, equivalent to 7.56 crore shares out of 32.17 crore, are available for trading. A considerable portion, comprising 1.18 crore shares, is currently locked for sale until December 2023 and January 2024. Additionally, a substantial block of 21 crore shares remains restricted for sale until May 2025. These factors contribute to the limited availability of shares in the market, potentially amplifying the impact of positive market sentiment on the stock price.
In summary, the recent surge in the shares of Honasa Consumer, propelled by Jefferies' strategic endorsement and the company's robust financial performance, underscores the resilience and growth potential of Mamaearth's parent company in the dynamic market landscape. Investors and market observers keenly await further developments as the company continues to navigate and capitalize on evolving market conditions.
