MARICO - Marico Limited Share Price

Management's outlook for Marico, as discussed during the earnings conference call on May 2, 2025, indicates a positive trajectory, expecting to sustain double-digit revenue growth and striving for double-digit operating profit growth in FY26. The company highlighted key points, including:

1. Revenue Growth: Management achieved double-digit consolidated revenue growth for FY25, driven by an improving volume trajectory in the India business and broad-based growth overseas. The company aims to scale revenue from Rs.10,000 crores to Rs.20,000 crores in the coming years.

2. Volume Expectations: Management anticipates volume growth in FY26 to exceed 5%, with a target range of 6-7%. The Foods segment is particularly optimistic, expecting growth of 25%+ over the medium term, driven by expansion in categories like Oats and Muesli.

3. Margin Management: The consolidated operating margin for FY25 was near 20%, with an expectation of gradual margin recovery from Q2 FY26, contingent upon stabilizing input costs. Management has taken significant price increases, including a cumulative 30% in Parachute oil, without experiencing adverse volume impacts.

4. Project SETU: This initiative aims to improve the quality of distribution, particularly in rural areas, and is expected to enhance market share and volume growth in key categories like Value-Added Hair Oils (VAHO).

5. Investment in A&P: A&P spending increased by 35% in Q4 FY25, reflecting a commitment to building core brands and supporting future growth. The company plans to continue aggressive A&P investments to strengthen market positions.

6. Performance of Digital and Premium Segments: The Digital-first portfolio is projected to significantly increase, with Beardo expected to surpass Rs.1,000 crores in ARR. Premium Personal Care products also witnessed strong growth, with expectations to achieve higher operating margins.

Overall, Marico's management expresses confidence in successfully navigating external pressures and achieving sustainable long-term growth through strategic initiatives and diversified product portfolios.

Major Q&A from Marico Limited's Q4 FY25 Earnings Call

Question 1: On gross margins, how should one think about that going forward? When should we expect improvements to start showing? Any guidance for FY26?

Answer: As for gross margins, we expect pressure for at least one more quarter due to sustained high copra prices. Historically, copra prices follow an 18-24 month cycle. We anticipate some softening by the end of Q1. We're hopeful for improvements starting in Q2. Notably, as we expand profitability through other portfolios, our dependence on copra will decrease. Although margins may struggle temporarily, we are optimistic about recovery in subsequent quarters.

Question 2: Can one say the low-hanging fruits in Foods growth are behind, and how sustainable is the 25% CAGR guidance?

Answer: There's significant growth potential in Foods that hasn't been fully tapped yet. Most of our business has been skewed towards organized trade, while we are just beginning to leverage quick commerce. Products like Oats and Honey have low penetration in general trade, providing ample opportunity for growth. Our focus remains on scaling existing products and exploring new categories within True Elements. We're confident that we can sustain our growth trajectory in Foods.

Question 3: Regarding the expectation of double-digit growth in FY26, how is that built in, considering the recent palm oil price corrections?

Answer: Our expectations are based on three key drivers: improvement in core volume growth, sustained strong performance in Foods growing over 25%, and dynamic growth from our digital-first businesses. Even with fluctuations in oil prices, we believe that these segments will contribute significantly to achieving our double-digit growth targets for FY26.

Question 4: What benefits should we expect from SETU?

Answer: SETU is aimed at enhancing direct distribution quality, especially in rural areas. This initiative will allow us to improve range selling and drive market share gains. The first benefits will manifest in volume growth, particularly in value-added hair oils. We'll also see improved market penetration for our core products in rural markets, essential for scaling our growth in key segments.

Question 5: What's the competitive environment in Value-Added Hair Oils (VAHO) and how has it changed?

Answer: The competitive intensity remains, particularly at the lower end of the market; however, we focus on the mid and premium segments. Our strategy prioritizes ATL investments to drive category growth and maintain brand leadership. We're confident that market share will improve as we continue to invest in quality distribution and innovation, particularly through our SETU initiative.

Question 6: What are your thoughts on the international business growth, specifically in Bangladesh and MENA?

Answer: Our international business is performing well with Bangladesh showing resilience and growth in premium segments. MENA has also demonstrated significant opportunity for market share and profitability improvements. We remain bullish about sustained growth regardless of fluctuations in crude oil prices, focusing on leveraging product diversification and premiumization.

Question 7: Could you clarify the recent increase in A&P spend and whether it is targeted more towards Foods and Digital brands?

Answer: Our A&P spending is designed to strengthen our core and support our diversification strategy. While the recent growth in A&P is notable, it must be seen in the context of long-term brand equity. We're committed to investing in core segments without compromising future growth. Efficiency improvements are underway to ensure A&P effectiveness while continuing to support our growth initiatives.

Each response reflects our strategic intent and outlook, aiming for robust growth despite inflationary pressures and competitive dynamics in the consumer goods market.