Marico domestic volume strength and international growth support FY27 momentum

Investment View

Motilal Oswal Financial Services reiterates its BUY rating on Marico and considers the company one of its top picks. The broker’s view is supported by Marico’s stable growth trajectory, increasingly diversified revenue streams and strong focus on expanding its total addressable market.

Marico made a robust start to FY27, with growth momentum intact. The broker’s target price of Rs 1,050 is based on 50 times March 2028E EPS.

1QFY27 Financial Performance

Marico reported consolidated net sales growth of 23 per cent year-on-year to Rs 3,960 crore in 1QFY27, broadly in line with the broker’s estimate of Rs 3,930 crore. India revenue grew 21 per cent, led by 11 per cent domestic volume growth, one of the strongest performances in recent years.

The international business grew 15 per cent in constant-currency terms and 29 per cent in rupee terms. Vietnam, MENA and South Africa recorded constant-currency growth of 27 per cent, 24 per cent and 8 per cent, respectively. Bangladesh grew 4 per cent in constant currency against a high base, amid elevated inflation and pricing anniversarisation. NCD and exports grew 16 per cent.

Broad-Based Category Growth

Category performance was broad-based. Parachute Coconut Oil revenue grew 23 per cent and volumes rose 10 per cent, aided by consumer offtake and calibrated pricing. Parachute Rigids expanded volume market share by more than 400 basis points to 59 per cent. Following a correction in copra costs, Marico reduced prices by about 10 per cent in non-price-point large loyalty packs.

Value-added hair oils grew 22 per cent in value and gained 80 basis points of value market share on a moving annual total basis. The almond hair-oil franchise is scaling well, with Marico targeting an annualised revenue run rate above Rs 100 crore by FY28.

Saffola edible-oil revenue grew 7 per cent, although volumes declined by high single digits as Marico rationalised select variants to protect threshold profitability amid edible-oil inflation. The Foods portfolio grew 43 per cent year-on-year and crossed an annualised revenue run rate of Rs 1,300 crore.

Margins and Profitability

Reported gross margin expanded 30 basis points year-on-year to 46.6 per cent, broadly in line with the broker’s 47 per cent estimate. It also rose 220 basis points sequentially as copra prices corrected.

EBITDA increased 25 per cent to Rs 820 crore, compared with the broker’s Rs 826 crore estimate. EBITDA margin expanded 40 basis points to 20.7 per cent, in line with expectations. PBT grew 20 per cent to Rs 790 crore, while PAT rose 25 per cent to Rs 630 crore, compared with estimates of Rs 820 crore and Rs 610 crore, respectively.

Advertising expenditure increased 25 per cent as Marico invested in brand equity, innovation and consumer salience.

FY27 Management Outlook

Management targets double-digit consolidated revenue growth in FY27, with revenue exceeding Rs 15,000 crore. It is targeting high-single-digit India volume growth, mid-teen constant-currency international growth, high-teen EBITDA growth and operating-margin expansion of 140–150 basis points in FY27.

Management expects copra prices to remain range-bound, although crude remains volatile owing to Middle East developments and vegetable-oil costs remain elevated. It also flagged that polymers and vegetable oils may raise input costs in 2Q. Inflation, monsoon trends and evolving El Niño forecasts remain under monitoring.

FY30 Strategic Ambitions

For FY30, Marico aims to exceed Rs 20,000 crore of revenue, implying a 10–11 per cent revenue CAGR from FY26, alongside a mid-teen EBITDA CAGR.

International diversification is improving, with Bangladesh’s revenue contribution expected to decline from about 45 per cent in FY26 to about 35 per cent by FY30. Project SETU is intended to expand direct reach and support general-trade growth in India.

Earnings Estimates and Valuation

Motilal Oswal largely retains its FY27 and FY28 EBITDA estimates but raises its FY28 EPS estimate because management guided to an 18 per cent effective tax rate in FY27, increasing to 19–20 per cent in FY28.

The broker believes Marico’s premium valuation can be sustained by its growth profile, portfolio diversification and market expansion.