Whalesbook
Marico reported robust top-line and steady earnings growth for Q2FY26, despite significant margin contraction due to high copra prices. The company benefited from strong performance in its core portfolio and profitable scaling of new businesses like food and digital-first brands, including Beardo and True Elements. Advertising investments were maintained, supporting sales growth. Future growth is expected to be driven by accelerated domestic momentum, international business, a growing premium mix, and expanded distribution. The appointment of PHD India for media strategy is a key move.
Marico Limited delivered a strong top-line performance and steady earnings growth in the second quarter of FY26 (Q2FY26), even as its margins faced a sharp contraction. This mixed performance was largely attributed to the continued impact of high copra prices, which drove Parachute's sales growth through price hikes but squeezed profitability. Despite this, Marico maintained its investments in advertising and promotion, which helped sustain high revenue growth year-on-year.
The company's core portfolio, including flagship brands like Parachute and Saffola, showed resilience with market share gains and increasing penetration. The value-added hair oil (VAHO) segment, particularly mid and premium products, gained market share from unorganized players, supported by increased media spending and expansion efforts like Project SETU.
A significant driver of future growth is the scaling up of new-age businesses. The food portfolio, led by Oats, crossed an annual run rate of Rs 1,100 crore and is expected to achieve operating margins comparable to the company's overall margins. Similarly, digital-first brands such as Beardo, Just Herbs, and True Elements achieved an annual revenue run rate exceeding Rs 1,000 crore, driven by strong demand and execution.
Looking ahead, Marico has set an ambitious consolidated revenue growth target of 24-25% for FY26, with a strong emphasis on its high-growth food and digital-first brands. The company anticipates that a growing premium portfolio and higher margin contributions from these new businesses will narrow the gap between top-line and operating profit growth. While double-digit EBITDA growth is guided for the second half of FY26, margin expansion of 200-250 basis points is expected within the next 12 months.
The stock is currently trading at 41 times its estimated FY28 earnings, which analysts consider reasonable given multiple growth and margin expansion levers that could lead to a valuation re-rating. The strategic appointment of PHD India as its media agency is also seen as a move to strengthen brand equity across its portfolio.
Impact
This news is significant for Marico's investors as it provides insights into its recent financial performance, strategic direction, and future growth prospects. The company's ability to navigate input cost inflation while scaling new-age businesses is key. The outlook suggests continued growth, driven by diversification and innovation, which could positively impact its stock performance. The market impact is specific to the company and its shareholders, with potential ripple effects on the Fast-Moving Consumer Goods (FMCG) sector. Rating: 7/10
Difficult Terms Explained:
Copra: Dried kernel of a coconut, used for its oil.
Margins: The difference between revenue and the cost of goods sold, indicating profitability.
GST: Goods and Services Tax, a consumption tax implemented in India.
VAHO: Value-Added Hair Oil.
Project SETU: A strategic plan by Marico to expand its direct distribution reach.
EBITDA: Earnings Before Interest, Taxes, Depreciation, and Amortisation; a measure of a company's operating performance.
Bps: Basis Points, a unit of measure equal to one-hundredth of a percent (0.01%).
Valuation Re-rating: An upward adjustment in a stock's valuation multiple (like P/E ratio) due to improved financial performance, growth prospects, or market perception.
PHD India: A media agency that handles advertising and media planning for brands.
FY26: Fiscal Year 2025-2026.
