Buy Marico Ltd for the Target Rs 1,050 by Emkay Global Financial Services Ltd
Marico’s 1QFY27 results beat expectations. Revenue grew 23% yoy (known from the pre-quarter update) while margins surprised positively (helped by copra price deflation), resulting in EBITDA/PAT growth of 25% yoy – coming 7/9% above consensus’ estimates. Domestic volume improved sequentially to 11%, led by 10% growth in Parachute. VAHO grew strongly at 22%, while Saffola Edible Oils growth was adequate (value: +7%; volume decline in a high single digit). Gross margin was up by 30bps due to lower input costs and better mix. EBITDA margin expanded by 40bps yoy. Foods and digital-first brands continued to grow at a strong pace. We raise our FY27-29 earnings estimates by 2-6%, to factor in the margin beat and lower tax rate (in line with Management guidance). We continue to favor Marico, given expectations of mid-teens earnings CAGR over the next 3 years, led by profitable scale-up of its digital-first brands along with strong growth in its core domestic portfolio and in international businesses. We maintain BUY on Marico while revising up our TP by 5% to Rs1,050 from Rs1,000 (50x Jun-28E EPS).
1QFY27 result summary
Revenue grew strongly at ~23% yoy on a high base of 22% (in line with consensus). Volume growth was healthy at 11% (8% in 4QFY26 and 9% in 1QFY26). Gross margin expanded by 30bps yoy (up by 220bps qoq) to ~46.6%, led by softer copra prices and favorable mix. EBITDA grew ~25% yoy, albeit on a low base, and was 7-8% above our and consensus’ estimates. EBITDA margin expanded by 40bps yoy to ~20.7% (up by 490bps qoq), supported by gross-margin expansion. Adj PAT grew 25% yoy and was 9- 10% above our and consensus’ estimates, led by lower effective tax rate vs last quarter.
Earnings call KTAs
Parachute logged 10% organic volume growth (without ml-age increase), mainly aided by ~10% price cuts. Management expects mid-to-high single-digit volume growth in FY27, healthy 2Q growth, and no further pricing action. VAHO posted 22% value growth, with high-teens volume growth in mid/premium segments, backed by Project Setu. Saffola continues to prioritize profitability, and cold-pressed oils are emerging as the new growth engine with superior margin. Digital brands (ARR: >Rs11bn) remain focused on profitable 20-25% growth. Foods grew 43% (ARR: >Rs13bn), with core foods portfolio maintaining double-digit growth and 4700BC/Cosmix beating expectations. Mgmt is confident of scaling Parachute Shampoo (Rs1bn target in FY27) and Almond Hair Oil (Rs1bn ARR aspiration by FY28). Management expects gross margin to sustain in FY27 and believes EBITDA margin will expand by 150-160bps. GT/MT channels posted double-digit growth, QC grew >50% (5% of India sales ex-digital; digital channels: >20% growth), although growth in MT and marketplace e-commerce moderated, while that in Bangladesh slowed to 4% CC due to inflation-led demand softness.
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