Marico's margin to be on slippery slope despite healthy demand outlook
Marico Ltd's stock reached a 52-week high of ₹764.65 after a 31% revenue increase to ₹3,482 crore in Q2FY26. Despite challenges from high input costs, the company anticipates double-digit Ebitda growth in H2FY26, with margins expected to improve by FY27.
The Marico Ltd stock hit a new 52-week high of ₹764.65 on the NSE on Monday after its consolidated revenue surged 31% year-on-year to ₹3,482 crore in the September quarter (Q2FY26), led by broad-based growth across product categories.
“Domestic revenue growth of 35% (underlying value growth of 7%) was best in class among the Staples peers," said JM Financial Institutional Securities.
Domestic volumes grew 7%, driven by new franchises in the food and premium personal care portfolios and value-added hair oils. Volumes of its flagship product, Parachute Coconut Oil, fell 3%, while those of Saffola edible oils stayed flattish, reflecting the impact of higher pricing and package volume changes.
Parachute has absorbed cumulative price hikes of more than 60% without any material hit to underlying demand, suggesting volumes should stabilise as input costs ease.
Demand outlook for the rest of FY26 is encouraging – the management reiterated its 25% revenue growth target for FY26. Brokers have upgraded their FY26/FY27 earnings estimates. But elevated input costs could overshadow positives such as sustained market share gains across key portfolios.
Prices of copra, from which coconut oil is extracted, surged 113% from a year ago and vegetable oils remained firm, pulling the gross margin down by 810 basis points (bps). Even after price increases in Q2, the Ebitda margin contracted 352 bps to 16.1%. For a business that has tried to move away from commodity dependence through a better mix, the numbers still look anchored to old cost cycles.
Margin revival
Marico expects double-digit Ebitda growth in H2FY26 and margins to expand by 200 bps by FY27 from the current levels. Copra prices have declined by about 15% from the July peak, and more moderation is likely from March as the new crop arrives. This should aid margin revival.
“We expect margins to remain under pressure until Q4 even as improving profits in foods and B2C will provide some respite," PL Capital said in a report. Margins are likely to improve after H2FY26, driven by premiumization with strong sales momentum in B2C and foods and a revival of growth in value-added hair oils, it added.
Marico’s food segment grew 12% and crossed ₹1,100 crore in annualised revenue. Foods and the premium personal care segments together accounted for 22% of the company’s India revenue in H1FY26 and should move towards 25% by FY27. Beardo is nearing double-digit EBITDA margin.
The Marico stock, up 23% over the past year, trades at about 45x FY27 earnings, according to Bloomberg data. With valuations already rich, the margin trajectory becomes the key variable.
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