Target: ₹500

CMP: ₹438.70

Honasa Consumer, in a journey to gain scale in the Indian Beauty market, has built ‘The Derma Co’ — their second profitable brand, with ARR of ₹500 crore+. The Derma Co, launched in 2020, offers science-backed products powered by active ingredients. It leads the market, sized at ₹2,000 crore, with about 20 per cent share. As the trend of products with active ingredients spreads, we see large traditional category incumbents joining in, further increasing the TAM.

We also expect innovations extending actives from face care currently to others, like hair and color cosmetics. With enhanced execution, the brand used Mamaearth’s playbook to not only scale fast, but profitably too. We expect the brand to see 50 per cent revenue CAGR over FY23-26, with steady improvement in profitability.

Honasa has created a playbook to help scale newer brands faster, which is likely to drive profitability in the business. The Derma Co is gaining scale fast with EBITDA margin in the low-single digits, unlike any other active brands. We do see some cannibalisation, but active ingredient-based products are likely to enhance overall category consumption.

We maintain a Buy recommendation and Mar-25E TP of ₹500/share at 6x EV/sales.