KUALA LUMPUR (March 11): CGS-CIMB Research has maintained its “overweight” rating of consumer staples and said it expects consumer staples stocks to face intensified margin pressure from the surge in commodity prices, further exacerbated by the Russia-Ukraine war.

In a note on Thursday (March 10), the research house said among the consumer staple names, it believes that Nestlé (Malaysia) Bhd, Fraser & Neave Holdings Bhd (F&N), Power Root Bhd and Kawan Food Bhd have the biggest exposures to rising commodity prices.

The research house gathered that consumer staples companies expect the current high commodity prices to hit their profit margins.

As such, it said raising selling prices to pass on at least some of these costs could help to mitigate the impact.

“We understand that all the consumer staples companies under our coverage have progressively raised their product prices throughout the fourth quarter of 2021 (4Q21) to 1Q22.

“However, any further increase in selling prices will likely be gradual and only happen in the second half of 2022 to ensure products remain affordable, in our view.

“We think investors should look for discretionary names with high gross profit margins and minimal exposure to commodity prices — Berjaya Food Bhd, Bonia Corp Bhd and InNature Bhd,” it said.