Marico Q3 performance shows margin stability amid falling copra prices
Margins are set to recover sequentially as falling copra prices ease cost pressures, but year-on-year pressure and volatile copra prices could cap gains.
Shares of Marico Ltd shares hit a fresh 52-week high of ₹768.05 on Monday, as its December-quarter (Q3FY26) update suggests the worst of margin pressures may be behind. Copra prices have eased roughly 30% from their peaks and are expected to trend lower in the coming months, ahead of the flush season. While margins may still decline year-on-year, they are likely to rise sequentially after hitting multi-quarter lows in Q2.
JM Financial Institutional Securities estimates Q3 gross margin at around 44%, up 135 basis points sequentially, with Ebitda margin rising to 16.5%. Operating profit growth Q3 for is projected in double digits, improving from mid-single-digit growth in H1FY26. In H1, Ebitda margin had fallen 360 bps year-on-year to 18.1%, primarily due to steep copra price inflation.
Volume-led growth has remained resilient despite cumulative price hikes. Domestic volumes grew in the high single digits, slightly above the 7% growth seen in Q2. Volumes for Parachute dipped following sharp price increases but held up better than feared, while Saffola reported a muted quarter.
Consolidated Q3 year-on-year revenue growth is estimated in the high 20s, exceeding JM Financial’s earlier forecast of around 24%. Growth in value-added hair oils (VAHO) accelerated to the 20s from 16% in Q2, driven by mid-premium product expansion, wider distribution, and goods and services tax (GST) rationalization, helping offset pressure in the core Parachute segment. International business growth in constant currency is in the early 20s, led by Bangladesh, while Vietnam and South Africa posted double-digit rebounds.
Overall, Marico is on track to meet its FY26 revenue growth guidance of 25% plus. Beyond raw material cost relief, margin recovery will also hinge on portfolio mix. Improving margins in the food portfolio through corrective actions, along with scaling profits in newer and digital-first brands, are expected to broaden the earnings base over time.
The stock trades at 46x the estimated FY27 earnings, as per Bloomberg data. Valuations seem to be pricing in a fair bit of margin recovery. Investors will track if margin improvement can sustain. “If copra prices continue to ease, we may see price cuts from the company in Q4FY26E," said Emkay Global Financial Services, adding, “Any sharp swing in cprice will be negative for Marico."
topics
