Marico expects growth to pick up on better demand, pricing

Synopsis

Marico shares have risen 8% in a month, buoyed by expansion into high-growth segments like value-added foods and premium personal care. With strong volume growth and stable pricing, Marico anticipates double-digit revenue growth by FY26. Core brands and the international portfolio remain robust contributors.

ET Intelligence Group: Marico shares have gained 8% in a month, outperforming the 5% gain in Nifty FMCG index in a choppy environment. The FMCG major is expanding into high-growth segments such as value-added foods, premium personal care, and digital-first brands. It expects a double-digit revenue growth in FY26, driven by healthy volume growth and continued momentum in foods and premium personal care portfolios.

The company expects growth to pick up from FY26, driven by stronger urban demand, stable pricing, and momentum in premium personal care, foods, and international markets. While Q3 remained modest, core brands like Parachute and Saffola held firm. Foods and premium segments are projected to grow 20-25% annually. For the domestic business, volume growth in December quarter was 6% vs 2% growth in the year-ago quarter.

The Saffola franchise, which derives about 30% of company's revenue from foods, is expected to increase to 50% over the next 4-5 years, stated Motilal Oswal Financial Services in a report. Saffola Oats continues to dominate the market with strong double-digit growth, while honey and soya chunks segments are seeing healthy traction. It is strengthening its digital-first brands such as Plix and Beardo, which are on track to achieve profitability by FY26.

Agencies

Despite double-digit price hikes across key product categories, demand for Parachute Coconut Oil and Saffola edible oils has remained stable. Parachute Coconut Oil (PCNO) is expected to deliver 5-7% volume growth, supported by transition from loose to branded coconut oil consumption. Value-added hair oils display strong traction in mid-to-premium segments, which continue to outperform budget offerings.

International portfolio is projected to deliver double-digit constant currency growth in the medium term. For December quarter, the international business grew by 16% in constant currency compared with 6% growth int year-ago quarter. The international business contributes over 25% of Marico's consolidated revenue and is expected to maintain its trajectory. Operating margin declined by 210 bps on year to 19.1% in Q3, FY25. The firm aims to hold the margin at around 20% for FY25.

With food and digital segments gaining scale, core categories stabilising, and international momentum intact, company expects a stronger growth cycle from FY26. Motilal Oswal has reaffirmed 'buy' rating on Marico, with target price of ₹775, indicating 20% upside from Tuesday's closing price of ₹645.9 on BSE, indicating FY25 forward P/E multiple of 50.

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