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Growth scorecard intact; a slight delay in margin recovery

* Marico (MRCO) reported consolidated revenue growth of 23% YoY (in line) in 1QFY26. Domestic revenue growth was 27% YoY with volume growth of 9%. International growth was 12% YoY (+19% CC).

* Domestic revenue growth was driven by strong core category growth and sustained success for its new growth drivers. Parachute coconut oil (PCNO) posted 31% YoY value growth with a 1% volume decline, primarily driven by price hikes. MRCO undertook an additional ~30% price hike in 1QFY26, the full impact of which is expected to be reflected in 2Q. Meanwhile, copra prices have begun to soften, currently down ~12% from their peak.

* Value-added Hair Oils (VAHO) recovered, and its revenue rose 13% YoY; volumes expanded in the mid-single digits. Excluding the Amla segment, where the company continues to face intense competition, VAHO recorded double-digit volume growth. Saffola oil clocked mid-single-digit volume growth, with revenue growing 28% YoY, led by pricing. Foods delivered 20% YoY growth. Premium Personal Care sustained its healthy growth trajectory.

* Gross margin contracted 530bp YoY to 46.9% (est. 48.7%). It was at a 10- quarter low and was hit by sharp RM inflation. EBITDA margin contracted 360bp YoY to 20.1%. EBITDA grew 5% (est. 8%). Management anticipates margin pressure to persist in 2QFY26 but projects a gradual easing in 2HFY26, as the impact of recent price hikes should be sufficient if RM stabilizes now. We model EBITDA margins of 18%-20% during FY26-FY28.

* Revenue growth is expected to remain in double digits in FY26 in the medium term (unlike other FMCG peers), driven by pricing, expanded direct reach, and strong performance in Foods and Premium Personal Care.

* Although rising input costs may weigh on near-term margins, the outlook for 2HFY26 remains positive. The company aims to deliver a double-digit PAT CAGR over the next two years, and we project an 11% PAT CAGR over FY25–28E. Given the sustained growth trajectory, we believe the stock’s premium valuation is likely to be sustained. We reiterate our BUY rating on the stock with a TP of INR825 (based on 50x Jun’27E EPS).

Revenue outperformance continues; volume growth at 9%

* Sustaining revenue outperformance: Consolidated net sales grew 23% YoY to INR32.6b (in line) in 1QFY26. Domestic revenue growth was 27% YoY, and volumes grew 9% YoY (est. +8% YoY). International business delivered 19% CC growth, led by Bangladesh/MENA/Vietnam, which posted 17%/42%/1% CC growth, while South Africa saw flattish CC growth.

* Pressure on margin: Consolidated gross margin contracted 530bp YoY to 46.9% (est. 48.7%). Copra prices increased 18% sequentially and ~107% YoY in 1QFY26. Vegetable oil prices moderated due to reductions in import duties, while crude oil derivatives remained stable during the period.

* During 1QFY26, MRCO’s employee expenses rose 8% YoY, ad-spends were up 25% YoY, and other expenses also increased 14% YoY. EBITDA margin contracted by 360bp YoY to 20.1% in 1QFY26 (est. 21.2%). EBITDA grew by 5% YoY (est. 8%).

* EBITDA/PBT/PAT grew 5%/8%/9% YoY to INR6.6b/INR6.6b/INR5.0b/ (est. INR6.8b/INR6.6b/INR5.1b).

Highlights from the management commentary

* The sector has witnessed stable to improving demand trends over the past couple of years, and a gradual uptick in overall demand is expected in the upcoming quarters, supported by easing inflation, a favorable monsoon, and continued policy support.

* The company expects to maintain positive momentum in volume and revenue growth through the year while delivering resilient profit growth despite elevated input costs.

* While achieving double-digit EBITDA growth in FY26 may be challenging, the management remains confident of delivering it in 2HFY26. Moreover, the company is targeting a double-digit CAGR in PAT over the next two years.

* Non-core distribution (NCD) and exports delivered 37% growth, reflecting strength in newer geographies and emerging business lines.

Valuation and view

* We cut our FY26E EPS due to the recent copra inflation, but we maintain our FY27 and FY28 EPS estimates.

* The improvement in market share gain, accelerated growth in Foods and Premium Personal Care, healthy growth in the international business, and normalization of prices are expected to help MRCO deliver a better revenue print in FY26.

* To improve its distribution reach, MRCO has also started Project SETU, which helps drive growth in GT through a transformative expansion of its direct reach.

* We model a 13%/12% revenue and EBITDA CAGR during FY25-28E and reiterate our BUY rating on the stock with a TP of INR825 (based on 50x Jun’27E EPS).

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