Marico Stock Surges as Falling Costs Boost Q3 Margins

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AuthorAnanya Iyer|Published at:
Marico Stock Surges as Falling Costs Boost Q3 Margins
Overview

Marico's Q3FY26 outlook brightens with steady demand and improving margins. Falling copra prices are set to boost profitability, with revenue growth projected in the high twenties. Value-added hair oils and international operations show strong momentum. Analysts anticipate double-digit profit growth despite high stock valuation.

Marico Navigates Q3 with Demand Strength and Margin Tailwinds

Marico Ltd. provided an optimistic operational update for its third quarter ending December 2025-26 (Q3FY26), highlighting steady consumer demand and strong prospects for margin expansion. The fast-moving consumer goods (FMCG) sector is showing resilience, with Marico leveraging this trend through continued investment in brand building and portfolio diversification.

Margin Improvement on the Horizon

The company anticipates a sequential improvement in gross margins, having found a bottom in Q2FY26. This recovery is largely driven by easing inflation and a significant correction in copra prices, which have fallen by approximately 30% from their peak. Lower goods and services tax (GST) rates further contribute to margin enhancement. Vegetable oil prices remain elevated, but declines in crude oil derivatives offer some relief.

Robust Growth Across Segments

Marico projects Q3FY26 revenue growth in the high twenties year-on-year (Y-o-Y), supported by domestic volume growth in the high single digits. While Parachute coconut oil volumes saw a marginal dip, price hikes compensated, driving revenue up an estimated 55-60%. Value-added hair oils (VAHO) delivered robust growth in the twenties, particularly in mid-premium segments, benefiting from GST rationalization. Premium personal care (PPC) and digital-first brands also outperformed expectations, with Foods poised for higher growth in the coming six months.

International Business Outperforms

Marico's international operations demonstrated strong momentum, posting early-twenties constant currency growth. Bangladesh provided a positive surprise, and Vietnam and South Africa achieved double-digit growth. This segment contributes 25% of consolidated sales and is expected to sustain its strong performance.

Profitability and Future Outlook

Operating profit growth is forecast to reach double digits Y-o-Y, meeting company guidance and marking a recovery from the mid-single-digit growth in the first half of FY26. Margin expansion opportunities exist in Foods, digital-to-consumer (D2C) channels, and the high-margin VAHO business. Marico remains on track to achieve its full-year revenue guidance of above 25% Y-o-Y.

Valuation Concerns Linger

Analysts are aligning with consensus estimates of 27-28% Y-o-Y consolidated sales growth for Q3FY26, with India volume growth around 7.5%. Operating and net profit are expected to grow by 10-11% Y-o-Y. The company maintains its ambition to double FY25 sales to ₹20,000 crore within five years. However, Marico's high valuation is a key monitorable; any misses could trigger significant selling pressure. Performance of new portfolios and potential volume compression due to price hikes will also be closely watched.

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