Honasa Consumer (HONASA) Q2 24/25 earnings summary

Executive summary

• Management is recalibrating strategies due to rapid changes in consumer behavior, media, and distribution, especially in India.

• Q2FY25 saw a one-time inventory correction due to Project Neev, impacting both revenue and profit margins.

• Focus is shifting from broad category expansion to dominating select categories and optimizing investments in core SKUs.

• Young brands in the portfolio are growing at 30%+ year-over-year, while focus categories like face cleansing, serum, and sunscreen grew 28% in H1.

• Approved unaudited standalone and consolidated financial results for the quarter and half year ended September 30, 2024.

Financial highlights

• Q2 results were impacted by a significant sales return and inventory correction, totaling INR 63 crore, leading to a negative EBITDA margin of about 10%.

• Q2FY25 reported EBITDA margin was -6.6%, but adjusted EBITDA margin was 4.1% after inventory correction.

• Consolidated Q2 FY25 revenue from operations: Rs 4,618.22 million, down from Rs 5,540.57 million in Q1 FY25; H1 FY25 revenue: Rs 10,158.79 million.

• Q2 FY25 consolidated net loss: Rs 185.75 million, compared to net profit of Rs 402.59 million in Q1 FY25; H1 FY25 net profit: Rs 216.84 million.

• Working capital cycle remains negative, with -15 working capital days.

Outlook and guidance

• Recovery is expected to be gradual, with a few quarters needed to scale up offline and implement new strategies for Mamaearth.

• Management remains confident in achieving high double-digit margins in the medium term, despite short-term margin pressure from increased investments.

• Project 'Neev' transition to a direct distribution model across top 50 cities, expected to strengthen future trade distribution.

• Expectation to deliver double-digit EBITDA in FY26 for younger brands.

• FY2026 is expected to start with a clean slate, while H2 FY2025 may remain volatile.