Marico’s profits roar back. Can it sustain gains beyond copra windfall?
Marico’s investors have reason to change their mind after the September quarter (Q2FY27) earnings announced post-market hours on Monday. The stock gained about 8% on Tuesday. Recall that the stock had slumped 9% after its Q1 results.
The turnaround in sentiment has come on the back of market-share gains and a sharp recovery in profitability, with consolidated Ebitda growing 27% year-on-year, the fastest growth in 50 quarters, as per Marico. The Ebitda margin expanded 200 basis points (bps) to 18.2%, benefiting from softening of copra prices year-on-year.
But with revenue missing estimates and commodity prices remaining a wild card, the question is whether this optimism can last. Consolidated revenue grew 13% year-on-year in Q2, while net profit rose faster at 31% to ₹550 crore. India underlying volume growth stood at 10% and revenue growth was 9%, reflecting healthy demand and improving distribution.
More than 95% of the portfolio gained or sustained market share and penetration on a moving annual total basis. Traditional and organized trade grew in double-digits, while quick commerce gained momentum, making up for the uneven growth reported in mainstay Parachute coconut oil and Saffola edible oil products.
Parachute delivered 13% volume growth—the strongest in 22 quarters—taking its volume market share beyond 60%. However, value growth was barely 1%, as price cuts to pass on lower copra costs supported volumes but constrained realizations.
Saffola saw high single-digit volume decline despite 6% revenue growth. Rationalization of lower-margin variants and pricing interventions may improve profitability, but reviving volumes remains important. Parachute and Saffola together accounted for half of Marico’s India revenue.
Value-added hair oils continued to impress with 21% value growth, and the foods business grew 45%, crossing an annualized revenue run-rate of ₹1,500 crore. Premium personal care and digital-first brands are also scaling up, targeted at 27% of India revenue by FY27, up from 23% in FY26. This should strengthen domestic growth engines beyond its traditional franchises.
Overseas markets
International revenue grew 23% in rupee terms, with constant-currency growth of 13%. Vietnam grew 22% and Middle East and North Africa 15%, making up for Bangladesh's subdued 5% growth amid persistent inflation and mellow demand. Marico expects non-Bangladesh markets to account for 65% of international revenue by FY30, versus about 55% in FY26.
Gross margin expanded about 600 bps year-on-year to 48.1%, aided by copra prices falling 35% from their previous peak and a favourable product mix. This opened up room for higher brand-building expenses without taking a hit on Ebitda margins.
Advertising and promotion (A&P) expenses increased 44% to ₹451 crore, or 11.6% of sales, the highest in a decade. With A&P spending expected at 10-10.5% of sales, organic revival of demand will be critical, particularly as benign copra prices offer only partial protection against inflation in crude oil-linked derivatives and vegetable oils. Geopolitical uncertainty and weather-related supply disruptions remain risks.
Still, the management is hopeful of achieving its FY30 revenue target of ₹20,000 crore in FY29 itself, if the current momentum is sustained. Thanks to a favourable product mix, stronger Parachute volumes, and improving profitability of foods and digital-first portfolios, Ebitda growth guidance has also been pushed up to the mid-twenties from the high-teens earlier.
“Earnings upgrade is a rare case in such a challenging environment. Limited consumer companies across discretionary and non-discretionary could achieve such earnings delivery over the next 12-months,” said Motilal Oswal Financial Services.
The stock trades at 41 times FY28 earnings, according to Bloomberg estimates, and that’s not exactly cheap.