CLSA raises Marico stock price target to INR511 from INR490

CLSA has raised its price target for Marico Ltd to INR511.00 from INR490.00, while maintaining an Underperform rating, following the company's Q2 FY26 results and updated outlook. Despite Q2 Ebitda growth aligning with consensus but missing CLSA's estimate, and a 3% volume decline in its Parachute portfolio, Marico anticipates double-digit consolidated Ebitda growth for H2 FY26 and 200 basis points of operating margin expansion in FY27, driven by easing copra prices and previous price hikes. This positive forward guidance prompted CLSA to increase its FY26-28 earnings estimates by 1%-7%, justifying the higher price target despite the continued cautious rating.

Analysis

CLSA has increased its price target for Marico Ltd to INR511.00 from INR490.00, yet maintained an "Underperform" rating, signaling a cautious outlook despite potential upside. Marico's Q2 FY26 Ebitda growth of 7% met consensus expectations but fell 15% short of CLSA's internal estimate, indicating some operational underperformance relative to prior analyst projections. The India business achieved 7% volume growth, however, the key Parachute portfolio experienced a 3% volume decline.

Management anticipates significant margin improvement, driven by a 15% decrease in copra prices from their peak, with further easing expected by end of FY26. This commodity price relief, combined with previously implemented 60% price hikes within the Parachute portfolio, is projected to positively impact profitability. The company forecasts double-digit consolidated Ebitda growth for H2 FY26 and at least 200 basis points of operating margin expansion in FY27.

CLSA subsequently raised its FY26-28 earnings estimates for Marico by 1%-7%, reflecting the company's forward guidance and anticipated cost benefits. This upward revision in earnings estimates directly supports the higher price target. However, the sustained "Underperform" rating suggests that while the company's fundamentals are improving, CLSA may still view the stock as overvalued or facing other headwinds not explicitly detailed, relative to its peers or broader market.

Key Decisions for Investors

• Investors should closely monitor Marico's volume growth trends, particularly in the Parachute portfolio, as the 3% decline indicates potential market share challenges despite price hikes.
• Evaluate the sustainability of margin expansion driven by easing copra prices and previous price hikes, as commodity volatility could impact future profitability.
• Consider the "Underperform" rating from CLSA, which suggests that even with improved earnings estimates and a higher price target, the stock may still be considered less attractive relative to its valuation or sector peers.