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We met with Marico’s management team, to gauge the medium-term outlook and discuss its guidance. We reiterate BUY on Marico with Sep-26E TP of Rs850, on 50x P/E, as we continue to see the company fortifying its portfolio to align with consumer evolution and drive better growth. The management maintains its aspirations of doubling revenue in coming five years and becoming a globally recognized digital FMCG company (ranked #2 in India after Honasa). This will be aided by actions in new growth engines (20-25% CAGR), which are gradually adopting emerging consumption trends. Easing copra prices are likely to help rebuild margins, and we see enhanced profitability in new growth engines supporting overall margins. The mgmt targets a mid-teens earnings CAGR.

Focus on low-teens growth in the next five years As articulated in the company’s Annual Report for FY25 (Link), the company is looking to double its topline in the next five years, with a low-to-mid-teens CAGR, driven by a mix of organic and inorganic actions. Marico’s core business in India is likely to see mid-tohigh single-digit growth, the food business CAGR of >20%, digital brands CAGR of 25%, and international business CAGR in the mid-teens. The mgmt sees risks to achieving its target only if overall consumption slows down. GST-related tailwinds are likely to help consumption from Q4FY26. The company sees sustained pressure at the bottom end of the pyramid in the urban market, where income growth is crucial compared to easing expenses. Project Setu, focused on enhancing general trade, has been achieving strong results. Through this project, the company has been able to address assortment needs in general trade, leading to improved performance in VAHO. Also, the project has helped address distribution gaps in chemist outlets, food specialty stores, and beauty and cosmetics outlets. Also, it is aligned with Q-Com, the revenue mix of which is 5% now.

With thrust on profitability, focus on driving mid-teens earnings growth The company targets a mid-teens earnings CAGR for the next five years, with a focused approach to diversifying profitability. Historically, Marico was highly skewed toward the coconut oil portfolio for driving profitability, which it looks to arrest in the next 5Y. The focus ahead is to enhance profitability in the food portfolio through corrective actions. Additionally, as new-age brands see profit enhancement, they will add to current margins. Copra prices have eased by ~20% from their peak – this provides an opportunity to improve margins. Further, with the next flush expected from Mar-26, we see price stability, which is positive for Marico. The mgmt expects margins to be better in 2H versus 1HFY26. Amid new engines of growth, it aims for a double-digit OPM from digital-first premium personal care offerings, while for food, efforts are on to drive profitability.

Remains an execution play; maintain BUY We like Marico owing to its attentiveness to align with evolving consumer needs. Post Covid, it has a strengthened management team that can deliver better results.

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