New plastic waste management rules to benefit ITC and hit Nestlé and Britannia: Kotak Equities
The new regulations, which could put India ahead of the global league in dealing with the plastic waste problem, will increase packaging costs for consumer staples company Kotak. Meanwhile, plastic recyclers such as Ganesh, EPL, Uflex, and Innovative packaging companies such as ITC will be the main beneficiaries of the implementation of the new rules.
India plans to implement mandatory regulations on recycling and reuse of recycled content for plastic packaging producers, importers and brand owners in a phased manner starting in 2025. The new rules are part of the Plastic Waste Management (Amendment) Rules 2022 (PWM), which aims to create a circular plastics economy and boost the secondary plastics market by enacting new norms to address the growing concerns about plastic pollution. .
Kotak believes that Colgate and Nestle will be the most affected of the companies covered, as the regulations will have a greater impact on the food and oral care sectors and products that require the use of transparent packaging that requires high-quality recycled plastic packaging materials. It trades at a premium of 40-50% compared to pure plastic.
Packaging costs for companies in the consumer staples sector range from 5% to 13% of sales, and given their unique value proposition, their exposure to plastics is high. Dabur reported the highest packaging costs at 12.5% of standalone sales in FY2023.
Kotak recommends:
Britannia Industries: Add |Target: Rs 5,225 | Upside: 10%Colgate Palmolive: Decrease | Target: Rs 2,425 | Cons: 13%Nestlé: Extra | Target: Rs 2,550 | Upside potential: 4%
ITC: Add | Target: Rs 460 | Upside potential: 5%
Also Read: Marico Q4 Results: Consolidated PAT increased 5% YoY to Rs 320 crore.
(Disclaimer: Recommendations, suggestions, views and opinions provided by experts are their own and do not represent the views of The Economic Times.)
