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Marico Ltd. Q4 FY26: Volume Growth Outpaces Profitability
Marico Ltd. reported a strong fourth quarter for FY26, with net profit rising 14% year-on-year to Rs 391 crore, meeting market expectations. Revenue jumped 22.1% to Rs 3,333 crore, driven by solid demand and significant volume growth. The company's domestic business, a key driver, saw revenue climb 21%, with India volume up 9% for the quarter and 8% for the full fiscal year – the highest annual volume increase in seven years. International revenue grew 25%, reaching 20% growth on a constant currency basis in FY26, its best performance in 14 years. Despite these strong results, Marico's shares fell nearly 2% on April 6, 2026, amid wider FMCG sector weakness. The stock trades around Rs 775-788, with daily volumes near 1.7-1.8 million shares.
Profit Margins Shrink Despite Sales Growth
However, the company's profit margins are shrinking. Marico's EBITDA margin fell to 15.6% in Q4 FY26 from 16.8% a year earlier, missing analyst forecasts of 16.1%. This decline stems from increased operating costs and volatile input prices, continuing a trend seen in prior quarters. Marico's operational profitability also lags behind rivals: Hindustan Unilever (HUL) reported a 23.6% EBITDA margin for Q4 FY26, and Godrej Consumer Products (GCPL) posted 18.21%. Marico's premium valuation, with a Price-to-Earnings (P/E) ratio between 57.43 and 60.0, is significantly higher than HUL's P/E of about 35.12. This valuation suggests high growth expectations, making current margin performance a significant concern for investors.
Concerns Over Growth Sustainability
Investors are questioning whether Marico's volume-driven growth is sustainable when it erodes profitability. Although Marico achieved record domestic volume growth in FY26, its overall expansion is in the high single digits. This pace is moderate compared to the broader FMCG sector, which saw value growth of 13.9% and volume growth of 6% in Q1 FY26. While the FMCG sector anticipates higher volume growth and better margins in 2026 due to easing inflation, geopolitical tensions still cause commodity and currency volatility, affecting input costs. Marico's dependence on inputs like copra, which experience price swings, adds to this vulnerability. The company's forecast for high single-digit volume growth and high-teen EBITDA growth in FY27 seems optimistic if profit margins continue to be squeezed, especially given the stock's dip after reporting strong sales.
Analyst Outlook and Future Plans
Looking ahead, Marico aims to maintain high single-digit volume growth in FY27. It targets mid-teen growth in international markets and expects double-digit overall revenue growth to surpass Rs 15,000 crore. The company has set a long-term goal of reaching Rs 20,000 crore in revenue by 2030. Analysts largely hold a positive view, with a consensus 'Buy' rating and an average price target of Rs 853, suggesting a potential upside of 8.47% to 16.13%. Brokerages like JM Financial (Rs 875 target) and BofA Securities (Rs 850 target) point to potential margin improvement from moderating input costs, such as copra, as a key factor. However, this positive outlook relies on input costs stabilizing and Marico successfully turning its volume growth into higher profits, a balance that has been difficult to achieve recently.