Consumer Sector Check - Barley, Oil, Vegetable Prices Softening QoQ: Nirmal Bang

Nirmal Bang Report

Further month-on-month and QoQ decrease in Barley prices and no major increase in glass prices are likely to drive significant gross margin expansion for United Breweries Ltd. in Q4 FY24.

Anticipation of a good wheat crop, if the current weather conditions sustain, will render relative stability (on YoY basis) in wheat prices. This, along with monthly and sequential decline in sugar prices (although elevated YoY), is expected to be beneficial for Britannia Industries Ltd. in the coming quarters.

While there has been significant decline in wholesale price index tomato, potato and onion prices on both month-on-month and QoQ basis, these costs remain substantially elevated on a YoY basis, which is likely to have implications for quick service restaurant companies.

Our top picks:

On a one-year forward basis, we continue to remain bullish on Gillette India Ltd. and Britannia Industries.

We are structurally positive on Tata Consumer Products Ltd. On the discretionary side, we are optimistic on United Breweries Ltd. (which we upgraded to ‘Buy’ in our Q2 FY24 result update note followed by a detailed company update note in Nov-23) and Westlife Foodworld Ltd. (despite weak near term sentiments towards the QSR category).

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