Sugar is a key raw material for several consumer categories, including biscuits, confectionery, chocolates and carbonated soft drinks. A sustained rise in sugar prices could therefore put pressure on margins, particularly for companies with high exposure to sugar-intensive products.
Among the companies covered by brokerage firm Goldman Sachs, Britannia Industries is likely to face the biggest impact from higher sugar prices.
The brokerage said Britannia has a relatively high dependence on sugar and palm oil as a proportion of its input costs, while its large share of price-point packs could make it harder to fully pass on higher costs to consumers.
Nestle India and Varun Beverages (VBL) are also likely to see some impact from higher sugar prices. However, Goldman Sachs believes the effect could be better mitigated in the case of these companies.
Goldman Sachs has a ‘Neutral’ rating on Britannia Industries with a price target of ₹6,000 per share.
The brokerage also has a ‘Neutral’ rating on Nestle India, with a target price of ₹1,575 per share.For Varun Beverages, Goldman Sachs remains more positive with a ‘Buy’ rating and a price target of ₹550 per share.
