Mumbai – Equirus Securities has advised investors to maintain 'LONG' ratings on 13 Fast-Moving Consumer Goods (FMCG) and consumer-staples stocks, despite a challenging raw material environment marked by broadening commodity inflation in the second quarter of FY27. The brokerage noted that the raw material situation has “rotated rather than eased,” with new cost pressures emerging.
While some relief has come from a sequential correction in crude-linked inputs, this has been largely negated by renewed inflation in key commodities such as sugar, menthol, cocoa, and coffee. Equirus's September 1 industry update highlighted that companies with higher exposure to these specific ingredients are likely to face increased cost pressures, whereas those with cereal-weighted portfolios might be relatively better positioned.
Key Commodity Price Movements
- Sugar: Prices have escalated significantly, up 19% year-on-year and 20% quarter-on-quarter. This poses a direct impact on sectors like biscuits, confectionery, malted beverages, and carbonated soft drinks.
- Palm Oil: Saw a 21% increase year-on-year.
- Menthol: Experienced a sharp rise of 33% year-on-year and 21% sequentially.
Conversely, crude oil prices declined 10% sequentially, though they remain 38% higher year-on-year. Similarly, HDPE prices fell 18% sequentially but were still up 30% year-on-year. Equirus emphasized that the overall raw material tailwind is becoming less broad-based, making individual commodity movements critical for assessing relative margin performance among companies.
Equirus's 13 'LONG'-Rated Stocks
Equirus Securities has maintained its 'LONG' rating on the following companies, detailing their specific commodity exposures and target prices:
- Britannia Industries: Rated 'LONG' with a target price of Rs 6,477. Exposed to sugar, palm oil, and milk.
- Godrej Consumer Products: Rated 'LONG' with a target price of Rs 1,293. Affected by crude-linked inputs and packaging materials.
- Tata Consumer Products: Rated 'LONG' with a target price of Rs 1,385. Significant exposure to tea, coffee, and cocoa, which have seen renewed inflation.
- Marico: Rated 'LONG' with a target price of Rs 954. Key raw material exposures include edible oils like groundnut, mustard, soya, and sunflower oil, all showing year-on-year inflation.
- Emami: Rated 'LONG' with a target price of Rs 509.
- Jyothy Labs: Rated 'LONG' with a target price of Rs 250. Exposed to palm oil, palm fatty acid, and crude-linked input costs.
- Mrs. Bectors Food Specialities: Rated 'LONG' with a target price of Rs 280. Affected by sugar, palm oil, wheat, and dairy-related inputs.
- United Spirits: Rated 'LONG' with a target price of Rs 1,582.
- Procter & Gamble Hygiene and Health Care: Rated 'LONG' with a target price of Rs 12,168. Menthol is a key commodity, with prices up 33% year-on-year.
- Bikaji Foods International: Rated 'LONG' with a target price of Rs 735.
- Zydus Wellness: Rated 'LONG' with a target price of Rs 606.
- Safari Industries: Rated 'LONG' with a target price of Rs 1,941. Exposed to polypropylene and PVC prices, up 26% and 16% year-on-year, respectively.
- CCL Products (India): Rated 'LONG' with a target price of Rs 1,511.