Buy Honasa Consumer: target of Rs 750: ICICI Securities

Moneycontrol • 2 days ago

Original source

Key Investment Pillars

  • Sustained momentum in core brands: Mamaearth and The Derma Co. (TDC) continue to drive growth, with Mamaearth sustaining high-teens growth and TDC crossing INR 10bn in NSV ARR.
  • Accelerating traction in younger brands: Brands like BBlunt, Dr. Sheth's, Aqualogica, and Staze are gaining traction, with growth of over 40% YoY, indicating emerging growth engines beyond Mamaearth and TDC.
  • Improving offline execution: Average secondary sales per retailer increased 30% YoY, and retail outlet reach expanded 26% to ~320,000, driven by focus on general trade and modern trade.
  • Operating leverage and margin expansion: EBITDA margin expanded 385bps YoY to 12.7%, driven by A&P efficiencies and operating leverage, with management expecting margins to remain ~12.5% in H2.

Thesis Validation Checklist

  • Revenue growth: Watch for sustained high growth in core brands and accelerating growth in younger brands.
  • Margin expansion: Monitor EBITDA margin expansion driven by operating leverage and A&P efficiencies.
  • Offline execution: Track improvement in average secondary sales per retailer and retail outlet reach expansion.
  • New brand launches and expansions: Look for successful launches and expansions of new brands, indicating the company's ability to scale beyond core brands.