Honasa: ad spend drops to 32% of sales, profit doubles

Honasa Consumer Limited (NSE: HONASA), owner of Mamaearth and The Derma Co, posted record Q1 FY27 profit of ₹90.5 crore, up 119%. Revenue rose 27% to ₹755.9 crore. What happened Like for like revenue grew 32%. EBITDA nearly doubled to ₹110 crore. Ad spend rose 16.7% to ₹241 crore, slower than sales, falling to 31.8% of revenue from 34.6%. The Derma Co crossed a ₹1,000 crore yearly sales run rate, making it the group's second brand of that size. Focus categories like face wash, sunscreen and serums grew above 35%. Mamaearth grew in the high teens. Why it matters Younger buyers pick brands on social media, not on the shop shelf. Honasa was built for that. For a brand house, the test is whether sales grow faster than the ad budget. This quarter, they did. My view The profit story is simple. Every percentage point that advertising falls as a share of revenue adds about ₹30 crore a year to EBITDA at this scale. Nearly three points came off this quarter. That explains a big part of the jump. Two cautions. First, April to June is peak sunscreen season, and management itself flagged that some seasonal tailwinds may not repeat. Second, about ₹22 crore of other income helped the bottom line, nearly a quarter of net profit. A second ₹1,000 crore brand also cuts reliance on Mamaearth. At around ₹469, the stock trades near 60 times trailing earnings, up 54% in a year. That price needs ad spend to keep falling as a share of sales. What I am watching Q2 FY27 results in November, the ad spend ratio staying below 32%, and Mamaearth growth holding up. On the chart, ₹510 is the 52-week high and ₹420 is support. My stance: Hold. Add near ₹420, not at the highs. Disclosure: I do not hold a position in Honasa Consumer Limited at the time of writing. This is not investment advice.