Dairy stocks face margin squeeze in CY26
Dairy companies including Dodla Dairy and Hatsun Agro Products are likely to witness margin pressure in calendar year 2026 (CY26) due to rising input costs, according to ICICI Securities. The brokerage highlighted that milk procurement prices have surged by ₹3–4 per litre in Q4FY26, driven by a weaker-than-expected flush season, higher butter exports, lower domestic inventories of butter and skimmed milk powder (SMP), and expectations of a strong summer.
It warned that procurement inflation is outpacing realisation growth, as companies have delayed passing on price hikes to protect demand, leading to pressure on gross margins in Q4FY26 and potentially Q1FY27. To safeguard profitability, ICICI Securities estimates that dairy firms will need to implement price hikes of ₹4–5 per litre by the end of Q1FY27.
The report maintains an ‘Add’ rating on Dodla Dairy and Hatsun Agro Products, while assigning a ‘Hold’ rating to Heritage Foods, valuing stocks using the DCF methodology with WACC and target growth assumptions of 10–13% and 3–6%, respectively.
It also noted that state elections in April–May 2026 may delay price increases by both private players and cooperatives. Additionally, rising packaging costs due to crude-linked inputs and higher freight expenses—typically 3–4% of sales—are expected to intensify margin pressure, especially if crude prices remain elevated amid West Asia tensions and rupee depreciation.
The brokerage further pointed out that increased butter exports have tightened domestic supply, with some companies shifting from net sellers to net buyers, signalling a tighter milk market environment.
Source : Dairynews7x7 21st March, 2026 Read full article here
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