Marico stock price target raised to INR800 by UBS on strong Q1 growth

UBS has raised its price target on Marico Ltd (MRCO) to INR800 from INR770, maintaining a Neutral rating, following the company's robust Q1FY26 performance. Marico significantly exceeded market expectations, reporting a 23.3% year-over-year consolidated revenue increase, 4.6% EBITDA growth, and an 8.6% rise in PAT. This strong quarter was driven by 9% domestic volume growth and 19% constant currency international business growth, demonstrating resilience despite inflationary pressures.

Analysis

UBS has raised its price target for Marico Ltd. to INR800.00 from INR770.00, affirming a 'Neutral' rating following a robust Q1FY26 performance that surpassed market forecasts. The company reported a significant 23.3% year-over-year growth in consolidated revenue, supported by a 9% rise in domestic volume and 19% growth in the international business in constant currency. However, this top-line strength contrasts with more modest bottom-line expansion, as EBITDA increased by only 4.6% and PAT by 8.6%, indicating substantial margin compression. This pressure is likely attributable to the noted inflation in copra prices. Segment analysis reveals strong pricing power, particularly in the Parachute brand, which saw revenue jump 31% despite a 1% volume decline. Similarly, Saffola and the Value Added Hair Oil segments delivered strong value growth of 28% and 13% respectively, driven by a combination of price hikes and mid-single-digit volume increases. The 'Neutral' rating, despite the strong revenue beat and target price lift, suggests that concerns around profitability and input cost headwinds are tempering the otherwise bullish outlook.

Key Decisions for Investors

• Investors should closely monitor Marico's gross and EBITDA margins in subsequent quarters, as the significant lag between strong revenue growth and weaker profitability growth points to persistent cost pressures.
• Evaluate the sustainability of the company's pricing power, as the ability to drive revenue growth of over 20% while core volumes grow in the single digits may face resistance if consumer sentiment weakens.
• Despite the positive price target revision, the maintained 'Neutral' rating from UBS suggests the market may have already priced in the strong top-line performance, warranting a cautious approach until there is clear evidence of margin recovery.