Marico, Godrej Consumer Products and Dabur may report 10-20 per cent revenue growth in Q2 FY27, but higher commodity costs could weigh on profitability, ICICI Direct says
India’s fast-moving consumer goods (FMCG) sector is expected to report mixed performance in the September quarter of FY27, with resilient demand supporting double-digit revenue growth for several companies even as rising commodity prices weigh on operating profitability, according to ICICI Direct Research.
The brokerage said Marico, Godrej Consumer Products and Dabur could report year-on-year revenue growth of 10-20 per cent in Q2 FY27. Volume growth is expected to remain in the high single digits to low double digits, indicating a relatively stable domestic demand environment despite below-normal monsoon conditions and inflationary pressures.
However, the brokerage expects earnings before interest, taxes, depreciation and amortisation (EBITDA) growth to trail revenue growth for most companies covered in its report, as higher input costs erode operating margins.
Crude Prices To Pressure Margins
ICICI Direct identified the increase in crude oil and crude-derived product prices, alongside higher costs of other key inputs, as a major challenge for home care and personal care companies. The pressure is expected to affect profitability during the September quarter and could continue into the second half of FY27.
Marico is expected to be an exception, with the brokerage anticipating an improvement in EBITDA. The outlook reflects a correction in copra prices and a shift towards products with higher margins, which could help offset inflationary pressures elsewhere in its business.
Rural Demand Faces Risks
The brokerage cautioned that below-normal rainfall across several parts of India could affect agricultural output and moderate rural demand in the coming quarters. A further increase in food inflation could also weigh on urban consumption, adding uncertainty to the demand outlook.
ICICI Direct expects elevated input prices to continue putting pressure on FMCG margins in the second half of FY27. Against this backdrop, the brokerage said it continues to prefer food companies within the FMCG sector, identifying Nestlé India as a preferred choice.
The outlook suggests that while sales growth could remain healthy for several companies, the ability to manage commodity inflation will be a key determinant of profitability in the coming quarters.
