2 weeks Ago
Marico Ltd has held up better than its FMCG peers amid muted urban demand. While the Nifty FMCG index has dropped 19% over the past six months, Marico’s stock has declined by just 6%, reflecting its relative resilience. The company’s stronghold in Parachute coconut oil and Saffola edible oils, along with steady growth in newer categories like personal care and foods, has provided a solid cushion.
“Notably, Marico has been one of the most resilient companies witnessing consistent improvement in volume growth during FY25 despite price hikes," said a report by Antique Stock Broking. The brokerage noted that cumulative price increases on Parachute and Saffola edible oils stand at about 15% and 20%, respectively. Following its December quarter (Q3FY25) results, Marico saw relatively smaller earnings estimate cuts compared to peers.
The company's consolidated revenue rose 15% year-on-year to 2,794 crore in Q3, but Ebitda margin contracted 210 basis points to 19%. However, while revenue growth momentum could sustain in Q4, weak profit margins remain a concern. Prices of copra, a key raw material, remain stubbornly high, forcing Marico to implement significant price hikes.
This could pinch volumes, and growth can stay sluggish until a meaningful recovery emerges. In an interaction with Motilal Oswal Financial Services, Marico’s management indicated that the FMCG sector is currently witnessing a stable demand landscape. “Rural demand is gradually improving, while urban demand is expected to recover over the next few quarters as inflation eases," the brokerage said in a report dated 25 March.
For now, inflation-hit consumers remain cautious, adding pressure on the value-added hair oils segment. Intense competition from regional players, driven by aggressive pricing and promotions, is forcing Marico to navigate a delicate balance between growth and margins. The company has maintained its FY25 Ebitda margin guidance of about 20%.
For 9MFY25, the margin stood at 20.7%. Copra prices are expected to ease by early Q1FY26, but until then, Marico’s margins may stay under pressure.
The company is banking on strong pricing growth in Q4FY25 and Q1FY26, with some respite likely from Q2FY26 as the effect of last year’s price hikes wanes. Meanwhile, the company’s transformation strategy is picking up pace. now contribute over 20% of domestic revenues.
The company aims to grow foods at 20-25% CAGR to 2x of FY24 revenues in FY27. The contribution of foods within Saffola is expected to reach a 50% share over the next few years. Among the digital-first brands, Plix alone is on track to become a 500 crore brand by FY26, while Beardo is targeting double-digit Ebitda margins.
Marico’s digital portfolio, currently at an annualized run rate (ARR) of 600 crore, is expected to double by FY27. While traditional retail remains critical, Marico’s bet on quick commerce (QC) is yielding results. “The company is expanding its direct reach in General Trade (GT) through Project SETU and is benefiting from the growth of QC, which now accounts for ~3% of India sales," said Motilal.
The brokerage expects 11% and 13% revenue and Ebitda CAGR for Marico during FY25-27. However, with the recent de-rating in consumer staples valuations, Antique has lowered Marico’s target multiple from 50x to 45x FY27 estimated price-to-earnings. While this reflects sector-wide caution, Marico’s strategic shift and premiumization efforts remain key strengths.
Still, defending market share and margins in commoditized categories while scaling up premium and digital-first brands will be a challenge. Investors are betting on Marico’s transformation story, making its execution critical in the coming quarters..
