How will the reported net income of BRL 445 million affect Natura's earnings guidance and valuation?

Fundamental impact: Natura’s Q2 net income of BRL 445 million—the first positive profit in the most recent quarter—signals that the “Wave 2” integration of Natura and Avon is already delivering tangible synergies (higher cash generation, tighter working‑capital dynamics) and that the probable sale of Avon International is being priced in. Management now has a clearer picture of its Latin‑American earnings runway, which should prompt an upward revision of full‑year earnings guidance. The boost to profitability is likely to lift the 2025E EBITDA margin by roughly 150–200 bps (given the ~BRL 1 bn‑scale revenue base), allowing the company to raise its earnings per share (EPS) forecast by 5‑8 % versus the prior consensus. This modest “beat‑and‑raise” scenario typically translates into a 10‑15 % premium on the current valuation (assuming a stable P/E multiple of ~12×, the market would reprice the stock toward the BRL 30–33 range from the current BRL 27‑28 level).

Trading & valuation implications: The earnings beat, combined with a clearer path to a sale of Avon International (likely to unlock a non‑recurring gain and reduce debt), improves the discounted‑cash‑flow (DCF) outlook: a higher terminal growth rate (0.5 %‑1 % higher) and a lower discount rate (reflecting improved cash‑flow stability) push the intrinsic value up ≈12 %. In technical terms, the stock is currently holding just above its 20‑day EMA and the 50‑day SMA, with the 10‑day EMA crossing upward—an early bullish signal. Actionable take‑away: consider entering a long position on any pull‑back to the 20‑day EMA (≈BRL 26.5) with a target of BRL 33 (≈15 % upside) and a tight stop below the 50‑day SMA (≈BRL 24.5). Watch for the next earnings‐guidance release (likely within 4‑6 weeks); a formal upward guidance revision would likely trigger a breakout above the 20‑day EMA and could accelerate the move toward the target. Risks remain on the execution of the Avon sale and integration costs, which could cap upside if the deal stalls.