Shares of vegetable oil companies traded broadly positive on Thursday, ignoring the impact of Indonesia expanding the scope of its export ban on raw materials for cooking oil to include palm oil raw and refined. The street expects these companies to have greater pricing power in the face of a shortage.
As of 00:16, Ruchi Soya has gained 6.39% and is trading at Rs 1,174 on the NSE, while edible oil giant Adani Wilmar’s stock has lost earlier gains of 2.82% and is currently trading at Rs 829 each on NSE, down 1.37. percent.
Meanwhile, the share price of companies like Gokul Agro Resources also traded in the green, gaining 5% in the morning session alone, taking its current price to 118.55 rupees. Anik Industries, on the other hand, is up 8.27%, taking its current share price to Rs 36.65 on the NSE.
Indonesia holds a virtual monopoly in palm oil, said Shirish Pardeshi, FMCG analyst at Centrum Broking.
“When you look at oil consumption in India, around 45% of the contribution comes from refined, bleached and deodorized (RBD) palm olein and Indonesia is a major source for the world. Statistics indicate that about 45% of Indonesia’s exports are enough for the world,” Pardeshi said. CNBC-TV18.
At 10.5 lakh tonnes per month, India remains one of the biggest importers of edible oil. Indonesia’s palm oil export ban will have a direct impact on India, as the country imports 5-5.5 lakh tons of palm oil every month.
While markets may have priced in the Indonesian ban, consumers will certainly feel the pinch, as palm oil prices have soared 80% year-on-year. It is currently trading at 7,000 ringgit per ton. One Malaysian Ringgit (RM) equals INR 17.56.
What impact will this have on consumers?
Since palm oil is used in the manufacture of many everyday items, such as soaps, hand cleansers, shower gels, etc., an export ban from Indonesia will result in a soaring prices of these basic necessities.
Additionally, people who enjoy dining out may need to loosen their purse strings further as palm oil has always been the preferred cooking medium for hotels, restaurants and canteens (HoReCa), given its availability at low price. As restaurateurs have borne the brunt of rising input costs due to inflation, they may choose to pass on higher palm oil prices to consumers.
How will this impact fast-moving consumer goods companies?
Fast Moving Consumer Goods (FMCG) companies have been reeling from margin pressures and tepid demand headwinds due to inflation for some time now. Further compounding their situation is the challenge around cost pass-through.
Pardeshi believes that even giants like Hindustan Unilever (HUL) and Godrej Consumers will not be spared from the impact of the Indonesian oil ban.
“All the snacking players, from the chip makers, the bakers, the cookies, and of course the by-product that comes in the soaps, the noodles, so the likes of Godrej, HUL will also feel the impact because there’s importers who bring crude palm oil from Indonesia. All the top refiners in India, like Adani Wilmar for that matter, Marico, or even the new player, which is Patanjali – those players will be affected,” he said. he declares.
First post: STI