Analysts see Marico post strong Q3 on pricing power, margin recovery

Nomura expects Marico's consolidated revenue to rise in the high twenties Y-o-Y in Q3FY26, estimating growth of around 27%, despite a broadly stable demand environment for the FMCG sector.

Fast moving consumer goods (FMCG) company Marico is set to deliver another strong operating performance in the December quarter (Q3FY26), driven by robust pricing power, improving margins and better-than-expected momentum in its value-added and international portfolios, according to recent notes from Nomura and JM Financial.

 

Nomura expects Marico’s consolidated revenue to rise in the high twenties year-on-year (Y-o-Y) in Q3FY26, estimating growth of around 27 per cent, despite a broadly stable demand environment for the FMCG sector. The brokerage said India volumes are likely to improve sequentially and grow in high single digits, compared with about 7 per cent growth in the September quarter, even after a sharp price hike of nearly 25 per cent Y-o-Y. This, Nomura noted, underscores the company’s strong brand equity and resilience.

 

 

Sequential margin improvement is another key highlight for the quarter. Nomura expects consolidated Ebitda growth to move into early double digits, estimating around 11 per cent year-on-year growth in Q3FY26. This is primarily on account of easing input costs, with copra prices correcting about 30 per cent from their peak after the flush season. While copra prices had surged nearly 120 per cent at their peak, Marico has taken price hikes of only about 60 per cent, giving it room to benefit from lower raw material costs without needing to immediately roll back prices.

 

Category-wise performance mixed but resilient

 

Within categories, Nomura said Parachute coconut oil, which accounts for about 26 per cent of consolidated sales, is expected to show strong value growth despite steep price hikes. The brokerage estimates Parachute sales growth of nearly 59 per cent Y-o-Y in Q3FY26, with only a marginal decline in volumes of around 1 per cent. Marico has partly offset price hikes through pack-size reductions, and after normalising for this, management indicated volumes were positive compared with flat volumes in the September quarter, highlighting superior pricing power.

 

Saffola edible oil, contributing about 14 per cent of consolidated sales, is expected to see flattish volumes, with muted value growth as pricing anniversarises during the quarter. Value-added hair oils (VAHO), also around 14 per cent of sales, surprised positively, with sales growth in the twenties Y-o-Y, well above Nomura’s earlier expectations. Management expects this double-digit momentum to sustain, supported by a focus on mid and premium segments, Project SETU and a sharp GST rate cut on hair oils from 18 per cent to 5 per cent.

 

The foods business had a benign quarter after a multi-year high growth phase, with management indicating consolidation in FY26 and a revival over the next two quarters. Premium personal care, including digital-first brands, continued to post strong growth, while the international business, about 25 per cent of consolidated sales, reported early-twenties constant currency growth. Bangladesh outperformed despite political instability, while Vietnam and South Africa returned to double-digit growth on targeted initiatives.

 

Margins, outlook and valuations

 

JM Financial echoed the positive tone, saying Marico’s pre-quarter update points to better-than-expected delivery. It highlighted high-twenties consolidated revenue growth, aided by a lower-than-expected decline in Parachute volumes and strong VAHO and international performance. With copra prices moderating further, JM Financial expects gross margins to improve quarter-on-quarter (Q-o-Q) and operating profit growth to return to double digits in Q3FY26, compared with mid-single-digit growth in the first half.

 

Both brokerages remain constructive on Marico’s medium-term outlook. Management has reiterated its double-digit revenue growth guidance for FY26, backed by expectations of easing inflation, a healthy monsoon and improving consumer sentiment. Nomura maintained its ‘Buy’ and top-pick status on the stock, with a target price of ₹875, valuing the company at 50 times December 2027 earnings. JM Financial also retained a ‘Buy’ rating with a revised target price of ₹875, citing strong execution, portfolio transformation and multiple margin levers.

 

Key risks flagged include sharper-than-expected volume pressure from price hikes, a faster-than-anticipated fall in copra prices and weaker growth in newer portfolios. However, brokerages believe Marico’s demonstrated pricing power, expanding direct reach under Project SETU and strong growth targets position it well for sustained earnings growth over the coming years.

 

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