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ICICI Securities Report
The freight cost (approximately 400 basis points of net sales) has increased sharply post increase in diesel prices and global skim milk powder (SMP) prices increased almost 10% in February 2021 versus December 2020.
We believe higher global SMP prices will result in higher exports of SMP from India and the milk procurement prices in India may also move upwards.
Reopening of the economy has led to higher demand for value added products. The demand from hotel-restaurant-cafe is also rising.
Our channel checks also suggest minor increase in milk procurement prices in December 2020-February 2021.
Dairy companies have not raised prices post February 2020 and we do not model them to raise prices till Q1 FY22.
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