Consumer Sector Check - Brent Prices Seeing Some Uptick: Nirmal Bang

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Nirmal Bang Report

Brent crude prices are seeing an uptick and are now hovering ~$85/barrel. Any further increase could dent margins for the FMCG sector going forward as brent crude remains a key commodity in their raw material basket.

As per data till May 2024, overall vegetable prices (wholesale price index) remained elevated, rising by ~23% YoY, with prices of Tomato/Onion up ~30%/53% YoY. Potato prices jumped by ~58% YoY.

No material increase in barley costs continued to bode well for United Breweries Ltd. and with a strong summer season we expect significant margin expansion for the company.

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

We are structurally positive on Tata Consumer Products Ltd. We have also recently upgraded Dabur India Ltd. as a potential play on rural recovery.

On the discretionary side, we are optimistic about United Breweries and Westlife FoodWorld Ltd., the latter despite weak near term sentiments towards the QSR category.

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Nirmal Bang Consumer-Sector-Update.pdf

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