Mamaearth Shares Crash Over 56% in Six Months – Here’s What You Need to Know

Mamaearth Shares Crash Over 56% in Six Months – Here’s What You Need to Know

Mamaearth Shares Crash Over : a well-known personal care brand under Honasa Consumer Ltd., has seen its stock price nosedive by over 56% in just six months. Once a high-flying stock, the company has been facing a series of challenges, including overvaluation concerns, declining profitability, and weak market demand. Investors and analysts are now questioning whether the company can regain its lost momentum.

Stock Price Movement

As of the latest trading session, shares of Honasa Consumer Ltd. were trading at ₹221.80 per share, with no significant movement from the previous closing price. The company’s market capitalization currently stands at ₹7,224.09 crore.

Why is Mamaearth’s Stock Falling?

1. Overvaluation Concerns

One of the biggest reasons behind the stock’s steep decline is overvaluation. When Mamaearth went public, it was trading at a massive 150 times price-to-earnings (P/E) ratio. Even after the correction, the stock is still trading at a high P/E of 106, making it significantly overvalued compared to the industry average of 30.6. This has led investors to pull back, triggering a major sell-off.

2. Slowing Revenue Growth & Declining Profits

While the company is still growing, its revenue numbers have slowed down significantly. In Q3 FY24, Mamaearth reported a 4% increase in revenue to ₹470 crore, compared to ₹451 crore in the same quarter last year. However, net profit took a sharp hit, declining 25% to ₹21.58 crore.

3. Weak Urban Demand

Urban demand for personal care products has been sluggish due to rising wage inflation and changing distribution strategies. Unlike before, consumers are now looking for premium yet affordable products, and Mamaearth’s pricing strategy has not fully adapted to this shift.

4. Inventory and Distribution Challenges

The company has been restructuring its distribution system, focusing more on wholesale rather than retail. Over 85% of inventory corrections were completed last quarter, and the company is in the process of appointing Tier 1 distributors in the top 50 cities. However, the full impact of this transition is yet to be seen.

5. Brand Performance – A Mixed Bag

While Mamaearth’s flagship brand has struggled to grow, the company’s other brands, such as The Derma Co., have shown strong performance. Non-Mamaearth brands have grown over 30% year-to-date, contributing more than 40% of the company’s total revenue. This shift in brand focus could reshape the company’s future revenue structure.

6. Rising Competition in the Personal Care Industry

India’s personal care industry is booming, with a CAGR of 11% and an expected market size of $46.6 billion by 2033. The organic personal care segment is growing even faster, at 23.72% CAGR. However, competition is fierce, with new and established brands vying for consumer attention.

Strategic Moves and Future Outlook

1. Strengthening Distribution Channels

The company has appointed over 150 distributors in key cities, with 80% of them being new partners. While this strategy could help in the long run, it may take a few quarters before showing positive results.

2. Expansion in Quick Commerce

Quick commerce (rapid delivery services) has become a fastest-growing sales channel for Mamaearth. Its contribution to total sales has jumped from 4%-5% to 7%-8%, showing a promising trend. The management believes that quick commerce could soon surpass traditional e-commerce sales.

3. Financial Targets

The company aims to achieve:

  • 8% EBITDA margin by FY26
  • Double-digit EBITDA margin by FY27
  • Improved gross margins by shifting to high-growth, high-margin brands

4. Market Positioning & Competitive Strength

Despite the challenges, Mamaearth remains the largest digital-first beauty and personal care company in India. Its focus on direct-to-consumer (D2C) sales and influencer marketing gives it an edge, but whether it can maintain this advantage against rising competition remains to be seen.

Key Financial Ratios & Metrics

MetricValue
Market Cap₹7,224 Cr.
Current Price₹222
52-Week High/Low₹547 / ₹197
Stock P/E106
Book Value₹35.5
Dividend Yield0.00%
ROCE17.1%
ROE
Face Value₹10.0
Promoter Holding35.0%
Debt to Equity0.10
Price to Earning106
Pledged Percentage0.00%
QoQ Profits245%
Quarterly Profit Variation-25.4%
Industry PE30.6
Graham Number₹41.0
Intrinsic Value₹86.4
RSI46.3
EPS₹2.10
No. of Equity Shares32.5 Cr.
PEG Ratio1.10
DMA 200₹333
Free Cash Flow (3Yrs)₹230 Cr.
Free Cash Flow₹211 Cr.
Debt₹117 Cr.

Conclusion – Should You Invest in Mamaearth?

The sharp decline in Mamaearth’s stock price reflects the company’s struggle with overvaluation, slowing revenue growth, and distribution challenges. However, it still holds a strong position in the digital-first personal care space.

For long-term investors, the stock’s correction might present an opportunity if the company successfully executes its distribution and brand diversification strategies. However, for short-term traders, the stock may remain volatile due to market competition and financial uncertainties.

Would you invest in Mamaearth at its current levels? Let us know in the comments!

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Disclaimer: This blog post is for informational purposes only and should not be considered financial advice. Investors should conduct thorough research and consult with a qualified financial advisor before making any investment decisions.

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