Marico delivers a strong Q1 FY26 on volume growth and price hikes

Q1FY26 revenue to rise in low 20s YoY; volume up despite price hikes; copra inflation pressures margins, but recovery expected in H2; strong performance across segments

The pre-quarter update for the first quarter of 2025-26 (Q1FY26) from Marico was promising. The demand environment in Q1 appeared to be improving, with rural demand continuing to grow and urban demand remaining steady.

 

The guidance is for consolidated revenue in Q1 growing in the low-twenties year-on-year (Y-o-Y), which is higher than Street estimates, and likely to be the highest in the sector. The company expects India volumes to improve quarter-on-quarter (Q-o-Q) and reach a multi-quarter high, surpassing the volume growth of 7 per cent in Q4FY25 despite material price hikes.

 

Operating profit is likely to see modest growth in low single digits as gross margins will be under pressure due to continued uptrend in copra prices. The management expects gross margin pressure to ease from the second half (H2) of FY26. The continued uptrend in copra prices is compressing gross margins. Crude derivatives remained range-bound, and vegetable oil prices eased, led by import duty cut. As of Q1FY26, operating profit margin compression could be significant but it may be transient as raw material inflation eases and brand-building investments taper off. Analysts expect operating profit margin to sustain around the 20 per cent mark, down from around 23-24 per cent, with a recovery due in H2FY26. 

 

There was growth across categories. Parachute coconut oil, which contributes about 26 per cent of consolidated sales, saw cumulative price hikes to over 30 per cent for the quarter. Despite the sharp price hikes, Marico claims only a marginal dip in volumes. Saffola edible oil (14 per cent of consolidated sales) is likely to report strong growth in the high twenties Y-o-Y. The company has passed on lower custom duty on edible oils (from 20 per cent to 10 per cent on May 31, 2025) but the full impact is likely to be seen only in Q2FY26. 

 

In value-added hair oil or VAHO (14 per cent of consolidated sales), sales grew in low double digits Y-o-Y (after 13 quarters), led by volumes on the back of traction in the mid and premium segments. Management expects continued improvement in FY26. The foods business and premium personal care (including digital-first brands), which contribute 20 per cent of consolidated sales, saw high growth momentum. The international business (25 per cent of consolidated sales) reported high-teen (above 15 per cent) constant currency (CC) sales growth, better than street expectations of low double-digit CC Y-o-Y growth. The key market, Bangladesh, saw resilience, with high teens CC growth.

 

Marico has made aggressive investments in brand-building in line with its strategy. The management expects easing inflation, favourable monsoon, and policy stimulus to support gradual improvement in sentiment. The FY26 guidance is unchanged. Marico maintains double-digit revenue guidance. 

 

Monitorables include higher-than-expected volume pressures due to price hikes, or sharper-than-expected declines in copra prices in H2FY26F, or weaker growth trends.

 

Analysts are now modelling for revenue growth of 22-24 per cent Y-o-Y, and likely operating profit rise of only by 3-4 per cent Y-o-Y (19.8 per cent revenue growth and 3.6 per cent operating profit growth Y-o-Y in Q4FY25). Domestic volumes may rise 8 per cent Y-o-Y in Q1FY26, with Parachute sales up 24 per cent Y-o-Y on price hikes with volumes down 1 per cent Y-o-Y (-1 per cent in Q4FY25; +2 per cent in Q1FY25). VAHO shall grow 10-11 per cent Y-o-Y while Saffola edible sales may rise by 25 per cent Y-o-Y driven by pricing. Foods and digital could grow at a faster 30 per cent Y-o-Y.