Easing Of Crude, Palm Oil Prices Augurs Wells For FMCG, Paint Companies: Motilal Oswal
The downward momentum in crude and crude derivatives and palm oil prices augurs well for Pidilite, GCPL, HUL and paint companies.
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Motilal Oswal Report
We have analysed price movements of key commodities in Q4 FY23 so far and identified companies from our coverage universe that could benefit or be impaired by such price movements.
The crude oil price has been easing for the last three quarters after being on the boil since the start of the Russia-Ukraine conflict. It is at the lowest level since the beginning of CY22, declining the most in March 2023 (down 31.5% YoY).
However, it historically remains at elevated levels. The crude oil price is currently hovering at $72-75/barrel of oil, down 45% from its all-time high of $134/bbl.
Palm oil is a key raw material for soap companies and, to some extent, food players. Both Malaysian palm oil and Palm Fatty Acid Distillate remained flat QoQ after a sharp correction recently from all-time high levels (down 49% and 61% respectively).
The Malaysian palm oil price has inched up 5.9% month-on-month in March 2023 to myr4,083/million tonne, while the PFAD price has remained flat month-on-month at $707/million tonne.
With the sharp correction in few key commodities such as crude oil and palm oil, we expect companies to pass on the benefits to consumers; some of them have already started to do so.
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