Marico - Volume Momentum Accelerates; Margin Outlook Remains Resilient | Initiating Coverage

Marico delivered another strong quarter, with conso revenue grew by 22.9% YoY, while the India business expanded 21% YoY, driven by 11% volume growth—the highest in the last 20 quarters—supported by robust momentum in the core portfolio and continued scaling of new growth engines. The IB also sustained double-digit growth despite geopolitical challenges. The management remains optimistic about the near- to medium-term outlook. For FY27E, targeting high-single-digit volume growth in the India business and double-digit consolidated revenue growth. GM expanded to 46.6%, driven by lower copra prices and a favorable product mix, partly offset by higher edible oil and crude oil derivative costs. Despite a ~25% increase in A&P spends, EBITDA margin improved 40bps YoY to 20.7%. The company expects GM to remain broadly stable and is targeting high-teen EBITDA growth, with an aspiration to achieve 20% EBITDA growth in FY27E. The company is well positioned to sustain its growth momentum, supported by a resilient core portfolio, continued scaling of digital businesses and acquisitions, premiumization, and Project SETU. With copra prices moderating, we expect volume growth to improve, driving healthy earnings growth. We initiate coverage with a 'Buy' rating, valuing the stock at 50x FY28E EPS to arrive at a target price of Rs 1,009.

Q1FY27 Performance:

Revenue in line; EBITDA and APAT ahead of consensus estimates: Revenue grew by 22.9% YoY to Rs 39.6bn. GM expanded by 30bps YoY to 46.6%, supported by favorable input costs in the core portfolio. EBITDA grew by 25.0% YoY to Rs 8.2bn. A 30/20bps decline in RM cost/ other expenses was partially offset by 20bps increase in A&P spends. Consequently, EBITDA margin expanded by 40bps YoY to 20.7%. APAT grew by 27.1% YoY to Rs 6.5bn.

Segmental Performance:

Parachute Coconut Oil delivered 23% revenue growth with 10% volume growth, supported by selective price cuts, strong pricing power, and market share gains. Saffola Edible Oils reported 7% revenue growth, while volumes declined by high-single digits due to portfolio rationalization, whereas the Foods portfolio grew 43%, driven by strong performance across Soya Chunks, Oats, Muesli, True Elements, 4700BC and Cosmix. VAHO sustained robust momentum with 22% value growth, led by premiumization, innovation and distribution expansion. The IB maintained its double-digit growth trajectory, while digital brands continued to scale with healthy profitable growth. Going forward, management expects mid-single-digit volume growth in Parachute, mid-single-digit growth in edible oils, sustained double-digit growth in VAHO and the International Business, with Foods and digital businesses remaining key long-term growth drivers.

Outlook:

We expect Marico to sustain healthy double-digit revenue growth over the medium term, supported by improving domestic demand, continued market share gains, premiumisation, product innovation and strong momentum in its foods and digital-first portfolios. Stable input costs, calibrated pricing actions and a favourable product mix are expected to support gradual margin expansion, while continued investments in brand building, distribution expansion and international markets should drive sustainable earnings growth.

Valuation:

We forecast a Revenue/EBITDA/PAT CAGR of 11.7%/19.7%/22.0% over FY26–FY28E. Marico's strong brands, premiumisation strategy, and emerging growth engines provide healthy earnings visibility and support its long-term growth outlook. We initiate coverage with a 'Buy' rating, valuing the stock at 50x FY28E EPS to arrive at a target price of Rs 1,009.

Company website: https://www.nerolac.com/

*CMP is as per report published date

Click to download the full Kansai Nerolac Ltd Q1FY27 Company Update

Analyst:

• Sachin Bobade - HOR, Institutional Equities (NISM-201700098683)
• Akshay Patel - Senior Research Associate, Institutional Equities (NISM-202100071038)

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Frequently Asked Questions (FAQs) – Marico Q1FY27 Company Update

How did Marico perform in Q1FY27?

Marico’s consolidated revenue increased 22.9% YoY to approximately ₹3,960 crore. EBITDA grew 25% to approximately ₹820 crore, while EBITDA margin expanded 40 basis points to 20.7%. PAT increased 27.1% YoY.

What is Marico’s target price?

The institutional research report initiates coverage with a Buy rating and a target price of ₹1,009, based on 50x FY28E EPS. This is an analyst estimate and does not guarantee future returns.

What drove Marico’s India volume growth?

India volumes grew 11%, the strongest growth in 20 quarters, supported by momentum in the core portfolio, premiumization, market-share gains and the scaling of newer growth platforms.

How did Marico’s margins perform?

Gross margin expanded to 46.6%, supported by lower copra prices and a favorable product mix. EBITDA margin improved 40 basis points YoY to 20.7%, despite approximately 25% higher advertising and promotion spending.

Which businesses are driving Marico’s future growth?

Key growth engines include Parachute, Value Added Hair Oils, Foods, digital-first brands and the International Business. Foods and digital businesses are expected to remain important long-term contributors.

What is the outlook for Marico’s FY27 growth?

Management is targeting high-single-digit India volume growth and double-digit consolidated revenue growth for FY27E. It also aspires to deliver approximately 20% EBITDA growth, subject to business and input-cost conditions.

What are the key risks for Marico?

Key risks include volatility in copra and other input costs, weaker consumer demand, competitive intensity, slower international growth and execution risks associated with newer businesses and acquisitions.

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