Dairy Sector - Extended Lockdown (If Any) May Arrest Increase In Milk Procurement Prices: ICICI Securities
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ICICI Securities Report
If the Omicron-led lockdown extends for more than a month, it may impact hotel-restaurant and out-of-home consumption. Lower demand, but stable supply of milk may result in lower milk procurement prices for dairy players. It will allow dairy companies to generate YoY margin expansion in Q4 FY22.
While an Omicron-led lockdown may arrest increase in milk procurement prices, we believe milk procurement prices will steadily go up in medium term considering increase in animal feed prices.
Global skim milk powder prices are inching upwards and freight costs in India are also rising, but we note, most private dairy companies have not yet raised selling prices and we do not model them to raise prices in Q4 FY22.
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