Goldman Sachs expects rising oil prices to have a smaller impact on the restaurant industry, while cost pressures are more significant for contract manufacturers, sportswear, and trendy toys

Goldman Sachs published a research report on the impact of rising oil prices on consumer companies. The bank's sensitivity analysis shows that the profit margins in the dining industry are relatively less affected due to lower exposure to the costs of petroleum by-products. However, original equipment manufacturers (OEMs), sportswear, and trendy toy companies have higher cost exposure and may face more significant cost pressures. The correlation between the prices of different key raw materials and changes in oil prices varies, and companies with higher profit margins should exhibit greater resilience in operating profits.

In terms of cost pass-through, theoretically, the increased costs for OEMs can be borne by brands, but there may be a time lag in price changes. Additionally, when demand is weak, some OEMs may choose to share part of the costs to gain market share. For sportswear companies, the bank believes that gross margin trends depend more on discounts and other factors, but the current market environment may limit companies' ability to pass costs onto consumers. As for trendy toys, large companies like Pop Mart (09992.HK) and Miniso (09896.HK) should have bargaining power with suppliers in the short term. The bank believes that the popularity of IP and products will determine the pricing power of brands, and product diversification will also help offset the impact.

The bank notes the need to pay attention to the indirect effects of rising oil prices, especially on end-market demand. The dining companies covered by the bank are relatively less affected due to their average transaction value and essential nature, with positive signs in both demand and pricing observed year-to-date. However, trendy toys and clothing are discretionary consumption rather than necessities, and weakening end-market demand may lead to revenue pressure and cost-sharing. For OEMs, brands will also be more cautious in placing orders during fluctuations in raw material prices. Nevertheless, brands and products in an upward cycle within different sectors will be more resilient