The humble coconut has emerged as an unlikely buffer for Marico Ltd, even as war-led disruption and cost pressures are set to lash its fast-moving consumer goods (FMCG) peers. The Nifty FMCG index is down 16% so far this year, while Marico’s stock has been largely flat. The key driver: copra prices. The commodity, a core input for the maker of Parachute hair oil, has fallen about 35% from its peak and is expected to remain range-bound in the months ahead, Marico has said.
That decline offers Marico a cushion against broader input inflation triggered by the ongoing West Asia conflict, giving it relatively stronger earnings visibility than peers. Copra accounts for roughly half of Marico’s raw material basket, according to Motilal Oswal Financial Services. Further, crude derivatives (including packaging) form 18-20% of total raw materials, implying a lower impact than that faced by Marico’s peers, said the brokerage.
In its March quarter (Q4FY26) business update, Marico said it expects its gross margin to increase sequentially during the quarter, thanks to easing copra prices. This would mark a second straight quarterly improvement after margins recovered to 43.5% in Q3 from a multi-quarter low of 42.6% in Q2. JM Financial Institutional Securities estimates Marico’s Q4 gross margin at 44.8%, though lower from the 48.6% seen in Q4FY25.
Continued brand building investments would mean double-digit year-on-year growth in Ebitda in Q4. JM Financial expects 15% Ebitda year-on-year growth in Q4. Note that Ebitda had increased 7.5% year-on-year in the nine-month ended December (9MFY26).
“Marico also has other margin levers (margin expansion in foods/D2C and improving growth in VAHO), which will drive overall earnings trajectory over FY27/28E,” said JM’s analysts in a report on 2 April.
Meanwhile, Marico said its consolidated revenue for Q4FY26 grew year-on-year in early 20s, enabling it to meet FY26 aspiration of mid-20s revenue growth. The India business delivered high single-digit underlying volume growth, while the Parachute franchise saw selective price cuts to pass on the benefit of lower copra costs. Value-added hair oils (VAHO) posted growth in the 20s and the company expects double-digit VAHO growth in FY27 and over the medium term, aided by focus on the portfolio’s mid and premium segments, enhanced direct reach through project SETU, and better affordability after the goods and services tax (GST) rate rationalization.
Marico’s foods business delivered high-teens value growth in Q4FY26. The premium personal care, including digital-first brands, business outperformed expectations. The international business (about 25% of revenues) saw high-teens constant currency growth in Q4; each market contributed positively, except the Gulf region impacted by the war in March.
Notwithstanding brighter earnings prospects, Marico’s valuations aren’t exactly cheap. The stock trades at 46 times estimated earnings for FY27, as per Bloomberg consensus. Marico is confident of delivering healthy volume-led revenue growth in FY27.
Execution will be key from here. “We expect commencement of price cuts in Parachute due to falling copra prices to moderate Marico’s overall sales growth going forward but lead to margin improvement and double-digit to mid-teens operating profit growth,” said analysts from Nomura Financial Advisory and Securities (India).
Any slowdown in foods or premium personal care could temper investor sentiment.