Consumer Staples - High Inflation Due To Supply Chain Woes, Ukraine Crisis Weigh On Earnings: Yes Securities

BQ Prime's special research section collates quality and in-depth equity and economy research reports from across India's top brokerages, asset managers and research agencies. These reports offer BQ Prime's subscribers an opportunity to expand their understanding of companies, sectors and the economy..Although most managements had expected commodity prices to come off over the next three months during Q4FY21 earnings calls, that scenario has not played out with inflation resurfacing again in commodity prices post Russia‐Ukraine crisis and series of commodity export bans by Indonesia and other countries. The key reasons for the same are ‐ 1) China’s complete zero Covid policy leading to lockdowns and manufacturing and supply chain disruptions 2) Shortage of containers for logistics 3) Packaging costs have been on the rise as prices of crude oil are moving upwards and All these reasons put pressures on margins front. Most companies have already taken a series of price hikes in last couple of quarters while further inflationary pressures will require more price hikes in H1FY23. In our view, even at the risk of ongoing rural slowdown and fall in Urban demand due to muted consumer sentiment, we expect companies to keep up with price hikes to protect their margins as they have already upped marketing and distribution investments. In this backdrop, we expect the staples basket to underperform in the near term given multiples remain elevated and advise being stock specific. We retain our preference for ITC, Marico in large‐caps and Emami among mid‐caps where we find further scope for rerating and hence outperformance over peers..DISCLAIMER This report is authored by an external party. BQ Prime does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of BQ Prime. Users have no license to copy, modify, or distribute the content without permission of the Original Owner.

Consumer Staples - High Inflation Due To Supply Chain Woes, Ukraine Crisis Weigh On Earnings: Yes Securities

Consumer Staples - Elevated inflation Due To Supply Chain Woes, Russia‐Ukraine Crisis Continue To Impact Earnings: Yes Securities

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