Marico Q3FY26 Preview: Revenue to Jump 27% on Pricing Power

Introduction

Fast-moving consumer goods (FMCG) company Marico is poised to deliver a strong operating performance in the December quarter (Q3FY26). According to recent analyses from brokerages Nomura and JM Financial, this growth is expected to be driven by the company's robust pricing power, improving profit margins, and better-than-anticipated momentum in its value-added and international product portfolios. The outlook suggests a resilient quarter for Marico, even as the broader FMCG sector navigates a stable but not expansionary demand environment. The company's ability to implement significant price hikes without substantially impacting volume underscores its strong brand equity and market position.

Strong Revenue Growth on the Horizon

Nomura projects that Marico’s consolidated revenue will increase significantly, estimating a year-on-year growth of approximately 27% for Q3FY26. This forecast comes despite a generally stable demand landscape for the FMCG industry. A key factor supporting this projection is the expected performance of its India business, where volumes are likely to improve sequentially and grow in the high single digits. This is a notable achievement, considering it follows a 7% growth in the September quarter and comes after the company implemented sharp price hikes of nearly 25% year-on-year. This performance highlights the inelastic demand for Marico's core products and the strength of its brands in the minds of consumers.

Margin Revival Fueled by Easing Input Costs

A significant highlight for the upcoming quarter is the anticipated sequential improvement in margins. Nomura expects Marico's consolidated EBITDA growth to reach early double digits, forecasting an 11% year-on-year increase. This recovery is primarily attributed to easing input costs. Copra prices, a key raw material, have corrected by about 30% from their peak following the flush season. This provides a substantial cost cushion for the company. It is important to note that while copra prices had surged by nearly 120% at their peak, Marico strategically increased its product prices by only about 60%. This gap now allows the company to benefit from lower raw material costs without needing to immediately pass on price reductions to consumers, thereby boosting profitability.

Deep Dive into Category Performance

The performance across Marico's product categories is expected to be mixed but largely resilient.

Parachute Coconut Oil: This segment, which accounts for roughly 26% of consolidated sales, is projected to deliver strong value growth. Nomura estimates Parachute's sales will grow by nearly 59% year-on-year in Q3FY26. This is particularly impressive as it comes with only a marginal volume decline of around 1%. Marico has skillfully managed price hikes by partly reducing pack sizes. After normalizing for these adjustments, management has indicated that volumes were positive, an improvement from the flat volumes seen in the September quarter.

Value-Added Hair Oils (VAHO): The VAHO segment, contributing about 14% of sales, has been a positive surprise. It is expected to post sales growth in the twenties, far exceeding earlier expectations. Management is confident that this double-digit momentum can be sustained, supported by a strategic focus on mid and premium segments, the expansion of its direct reach through Project SETU, and a significant GST rate cut on hair oils from 18% to 5%.

Saffola and Foods: Saffola edible oil, another 14% of sales, is likely to see flat volumes and muted value growth as the effects of previous price increases anniversarise. The foods business is going through a consolidation phase after a period of high growth, with a revival anticipated over the next two quarters. Meanwhile, the premium personal care portfolio, including digital-first brands, continues to show strong growth.

International Business: A Key Growth Engine

Marico's international business, which constitutes about 25% of its consolidated sales, continues to be a strong performer. The segment reported growth in the early-twenties in constant currency terms. The Bangladesh market has been an outperformer, showing resilience despite political instability. Furthermore, both the Vietnam and South Africa markets have returned to double-digit growth, thanks to targeted strategic initiatives. This diversified international performance provides a stable and growing revenue stream, balancing the dynamics of the domestic market.

Brokerages Maintain Bullish Stance

Echoing the positive sentiment, JM Financial noted that Marico's pre-quarter update indicates a better-than-expected performance. The firm highlighted the high-twenties consolidated revenue growth, supported by a smaller-than-anticipated decline in Parachute volumes and strong results from the VAHO and international segments. With copra prices continuing to moderate, JM Financial expects gross margins to improve quarter-on-quarter and operating profit growth to return to double digits.

Both brokerages remain optimistic about Marico's medium-term prospects. Management has reiterated its guidance for double-digit revenue growth for the full fiscal year FY26. This confidence is backed by expectations of easing inflation, a favorable monsoon, and improving consumer sentiment. Nomura has maintained its 'Buy' rating and top-pick status on the stock, with a target price of ₹875. Similarly, JM Financial has retained a 'Buy' rating with a revised target price of ₹875, citing strong execution and multiple margin levers.

Outlook and Potential Risks

Looking ahead, Marico appears well-positioned for sustained earnings growth. The company's demonstrated pricing power, expanding direct distribution network under Project SETU, and ambitious growth targets are key strengths. However, potential risks remain. These include sharper-than-expected pressure on volumes due to price hikes, a more rapid fall in copra prices that could force price rollbacks, and weaker-than-expected growth in its newer product portfolios. Despite these risks, the overall outlook remains constructive, with the company's strategic initiatives expected to navigate potential challenges effectively.