Honasa Consumer Ltd shares experienced a sharp decline of 18% on Tuesday, following a 20% drop in the previous session. The stock hit a low of ₹242.60, marking a total 34.7% plunge in just two days. This steep fall comes on the back of weaker-than-expected Q2 results, primarily driven by inventory corrections and a sluggish demand for its Mamaearth products.

Brokerage Views and Insights

• JM Financial: Predicts continued near-term pressure on the stock, emphasizing the importance of sales recovery. The DCF-based target price has been revised to ₹410 after cutting earnings estimates for FY25-27 by 17-34%.
• Kotak Institutional Equities: Reported a 6.9% YoY decline in Q2 revenue, impacted by a one-time GT inventory adjustment. On the positive side, new brands showcased 30% YoY growth, though overall margins dipped.
• Emkay Global: Downgraded the stock to 'Sell' with a 50% cut in the target price, citing challenges in operating leverage and margin recovery. Revenue expectations were also trimmed by 9-16% for FY25-27.

Management’s Strategy

The management has acknowledged gaps in execution and aims to implement structural changes to adapt to evolving market challenges. While efforts to strengthen offline channels are in motion, significant recovery may take a few quarters.

Investor Takeaways

The stock’s performance hinges on factors like sales revival, improved margins, and execution of strategic changes. Investors are advised to monitor these metrics closely to make informed decisions.