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Our consumer discretionary universe will be negatively impacted by increases in key commodity prices, followed by a sharp 30% qoq increase in crude oil prices in Q4 FY22. Major feedstocks such as titanium dioxide, vinyl acetate monomer, aluminum, high density polyethylene and low density polyethylene witnessed upward movement in the range of 9% to 48% yoy.

Our cover companies have already implemented price increases of 15-20% by nine months – FY22 to offset higher raw material prices. Due to the recent rise in raw material prices, companies will have to implement a new round of price increases.

We believe there is limited scope to fully pass on commodity inflation, given the significant price hike that has already been implemented.

That’s why we’re reviewing our earnings, EBITDA margin and earnings estimates.

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This post Audit of the Consumer Discretionary Sector – Assessing the Impact of an Increase in Commodity Costs: ICICI Direct

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