Britannia, Tata Consumer, Marico: What should investors do as commodity inflation rise

Equirus Securities has maintained its 'LONG' rating on 13 FMCG and consumer-staples stocks, even as the raw-material environment turns less favourable with inflation broadening across several key commodities. The list included Britannia Industries Ltd, Godrej Consumer Products Ltd, Tata Consumer Products, Marico, Emami, Jyothy Labs, Mrs. Bectors Food Specialities, United Spirits, Procter & Gamble Hygiene and Health Care, Bikaji Foods International, Zydus Wellness, Safari Industries and CCL Products (India).

In its September 1 industry update, Equirus said the raw-material environment had "rotated rather than eased" in the second quarter of FY27. While the sequential correction in crude-linked inputs is providing some relief, this is being partly offset by renewed inflation in sugar, menthol, cocoa and coffee. The brokerage said cereal-weighted portfolios remain relatively better placed, while companies with higher exposure to sugar, specialty ingredients and coffee could face greater cost pressures.

Among the key inputs, sugar has emerged as a major concern, with prices up 19 per cent year-on-year and 20 per cent quarter-on-quarter. Equirus said this could directly affect biscuits, confectionery, malted beverages and carbonated soft-drink bottlers. Palm oil prices were up 21 per cent year-on-year, while menthol prices rose 33 per cent year-on-year and 21 per cent sequentially.

At the same time, crude prices were down 10 per cent sequentially, although still 38 per cent higher year-on-year. HDPE prices declined 18 per cent sequentially but remained 30 per cent higher year-on-year. Equirus said the overall raw-material tailwind is becoming less broad-based, making individual commodity movements increasingly important for relative margin performance.

Equirus' 13 LONG-rated stocks

Britannia Industries: Equirus has a LONG rating on the stock with a target price of Rs 6,477. The company remains exposed to sugar, palm oil, milk and other key inputs.

Godrej Consumer Products: The brokerage has maintained LONG with a target price of Rs 1,293. Crude-linked inputs, packaging materials and other commodities remain relevant to its raw-material basket.

Tata Consumer Products: Equirus has a LONG rating with a target price of Rs 1,385. The company's exposure to tea, coffee, cocoa and other beverage inputs comes as several of these commodities have seen renewed sequential inflation.

Marico: The brokerage has maintained LONG with a target price of Rs 954. Marico's key raw-material exposures include edible oils, with groundnut, mustard, soya and sunflower oil prices showing year-on-year inflation.

Emami: Equirus has retained its LONG rating and set a target price of Rs 509.

Jyothy Labs: The brokerage has maintained LONG with a target price of Rs 250. Jyothy Labs is among the companies exposed to palm oil, palm fatty acid and crude-linked input costs in Equirus' commodity tracking.

Mrs. Bectors Food Specialities: Equirus has a LONG rating and target price of Rs 280. The company is exposed to sugar, palm oil, wheat and dairy-related inputs tracked in the report.

United Spirits: The brokerage has maintained LONG with a target price of Rs 1,582.

Procter & Gamble Hygiene and Health Care: Equirus has retained its LONG rating with a target price of Rs 12,168. Menthol is among the key commodities highlighted for the company's input basket, with prices up 33 per cent year-on-year.

Bikaji Foods International: The brokerage has a LONG rating with a target price of Rs 735.

Zydus Wellness: Equirus has maintained LONG with a target price of Rs 606.

Safari Industries: The brokerage has retained its LONG rating with a target price of Rs 1,941. Safari Industries is among the companies exposed to polypropylene and PVC prices, which were up 26 per cent and 16 per cent year-on-year, respectively.

CCL Products (India): Equirus has maintained LONG with a target price of Rs 1,511.

Equirus has set a target price of Rs 509 for Emami, Rs 250 for Jyothy Labs, Rs 280 for Mrs. Bectors Food Specialities, Rs 1,582 for United Spirits, Rs 12,168 for Procter & Gamble Hygiene and Health Care, Rs 735 for Bikaji Foods International, Rs 606 for Zydus Wellness, Rs 1,941 for Safari Industries and Rs 1,511 for CCL Products (India).