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.

• 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.

• Mamaearth's growth lagged expectations, prompting structural changes to restore momentum.

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

Financial highlights

• Q2FY25 reported revenue from operations was INR 462 Cr, down 6.9% YoY; adjusted revenue was INR 525 Cr.

• Q2 FY25 consolidated revenue: Rs 4,618.22 million, with a net loss of Rs 185.75 million; H1 FY25 revenue: Rs 10,158.79 million.

• Q2FY25 reported EBITDA margin was (6.6)%, adjusted EBITDA margin was 4.1% after inventory correction.

• 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%.

• H1FY25 revenue grew 5.8% year-over-year to INR 1,016 Cr, with adjusted growth after inventory correction.

Outlook and guidance

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

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

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

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

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