Top Stock Picks: Prabhudas Lilladher Recommends 9 Consumer Durable Stocks To Buy

The domestic brokerage firm Prabhudas Lilladher has given an eye on consumer durable space and has picked up Asian Paints for a target price of Rs 3,542, Britannia Industries for a target price of Rs 3,823, Hindustan Unilever for a target price of Rs 2,356, ITC for a target price of Rs 285, Kansai Nerolac Paints for a target price of Rs 675, Mold-tek Packaging for a target price of Rs 793, Restaurant Brands Asia for a target price of 220, Titan Company for a target price of Rs 2,754 and Westlife Development for a target price of Rs 645 as its top stock picks with a buy rating.

According to the brokerage "Indonesia, the largest producer/exporter of palm oil, has announced a ban of palm oil exports. The ban comes as another blow after the surge in oils due to the Ukraine-Russia war. Given that plamoil is 60% of oil imports and Indonesia being the second largest seller, it will push up domestic prices in coming months."

"Palm oil is a key ingredient in major food processing industries, QSRs etc. will impact costs and margins in several consumer companies. FMCG staples majors such as Britannia, Hindustan Unilever, Nestle India and ITC would be amongst the key companies affected directly as a result of the ban and higher prices. We believe the impact would be seen most in categories such as biscuits, noodles, cakes, potato chips, frozen desserts etc. QSR's like Westlife Development and Burger King can also feel the pinch given edible oil usage to cook/fry their patties/fries," Prabhudas Lilladher has said.

"We believe increase in prices of palmoil will further impact the margins in 1QFY23. We expect margins to bottom out in 1HFY23 given inflation across inputs. We don't rule out further cut in margins in 1H23. We expect weak to sideways movement for select consumer stocks in the near term," the brokerage has claimed.

As per the brokerage "India would be amongst the worst affected countries as it is the world's largest palm oil importers which depends heavily on Indonesia & Malaysia. India, the world's leading vegetable oil buyer, imported 14-15 MT, of which palm oil stood at 8-9 MT. Palm oil is the relatively cheaper oil amongst the other edible oils. This move is expected to cause a further price increase in other edible oils such as soyabean oil, sunflower oil etc."

"Inflation in the RM basket has been a long standing problem for the sector and companies have resorted to price/grammage hikes to partially absorb the inflationary impact. This has resulted in margin pressure starting from 3Q22 onwards which is expected to continue further. This new ban would likely keep prices firm to bullish in the near term until such a time the ban gets reversed and global commodity prices become stable," Prabhudas Lilladher has highlighted.

Top Consumer Durable Stocks To Buy As Per Prabhudas Lilladher

Companies	Rating	Target Price In Rs
Asian Paints	BUY	3,542
Britannia Industries	BUY	3,823
Colgate Palmolive	Accumulate	1,664
Dabur India	Accumulate	603
Avenue Supermarts	Accumulate	5,345
Emami	Accumulate	607
Hindustan Unilever	BUY	2,356
ITC	BUY	285
Jubilant FoodWorks	Accumulate	642
Kansai Nerolac Paints	BUY	675
Marico	Accumulate	538
Mold-tek Packaging	BUY	793
Nestle India	Accumulate	19,426
Pidilite Industries	HOLD	2,417
Restaurant Brands Asia	BUY	220
Titan Company	BUY	2,754
Westlife Development	BUY	645
Source: Prabhudas Lilladher. Data as of April 24, 2022