Target price, current market price and business performance
The current market price (CMP) of Varun Beverages is Rs. 749. Hem Securities has estimated a target price for the stock at Rs. coming year. It is a large cap company with a market capitalization of around Rs. 71427.72 crores.
|Stock market outlook|
|Current market price (CMP)||Rs.749|
|Potential return over 1 year||20.00%|
|Stock price at 52-week high||Rs. 805.60|
|52 week low price||Rs.472.67|
Revenues, EBITDA and PAT of Varun Beverages Ltd. grew by 26%, 39% and 98% respectively, driven by robust volume growth of 18.7% thanks to the early onset of summer. Its volume sales stood at Rs. 17.97 crore cases. The revenue contribution of CSD, Juice and PDW was 70%, 7.2% and 22.8% respectively. Management thinks margins should stay in the 20% to 22% range as they have enough inventory of PET and sugar, so no challenge on that front and concentrate prices are stable as well.
Comments from Hem Securities: Benefits and Risks of Stocks
The company’s management expects a robust performance in the coming quarters, driven by strengthening demand, a solid distribution network and the success of new products. According to management, demand has been robust in new product segments such as Sting, Value Added Dairy and Tropicana. However, growth has been limited due to capacity constraints (currently 100% utilization).
According to Hem Securities, “Management has been focused on improving distribution. This is the first year since it has increased distribution and the same is delivering results. The company is already experiencing accelerated growth in the South and West India CSD volumes increased by 18.5% YoY to 12.6 Crore unit cases due to growth in out-of-home consumption, which was driven by the recovery in offices and an increase in travel activity.RCN volumes increased by 18% year-on-year to 1.3 Crore cases on the back of robust growth and growing acceptance of the new Sting and Tropicana launches. jumped 20.6% year-on-year to 4.1 crore unit cases on higher growth in the international segment. We expect healthy revenue, EBITA and PAT growth of 15%, 20% and 35% in the years to come .”
Varun Beverages Ltd. is the second largest franchisee in the world (outside the United States) of carbonated soft drinks (“CSD”) and non-carbonated beverages (“NCB”). The company has entered into an agreement for the manufacture of Kurkure Puffcorn for PepsiCo India Holdings Private Limited under its network of copackers. The company has aggressively installed visi-coolers to ensure volume growth in the coming months and meet demand. PepsiCo CSD brands sold by the company include Pepsi, Diet Pepsi, Seven-Up, Mirinda Orange, Mirinda Lemon, Mountain Dew, Seven-Up Nimbooz Masala Soda, Evervess Soda, Duke’s Soda and Sting. PepsiCo NCB brands sold by the company include Tropicana (100%, Essentials & Delight), Tropicana Slice, Tropicana Frutz, Seven-Up Nimbooz, Gatorade and Quaker Oat Milk as well as packaged drinking water under the Aquafina brand. In addition, the company has also secured the Ole brand franchise of PepsiCo products in Sri Lanka. She has been associated with PepsiCo since the 1990s.
The stock above was selected from the Hem Securities brokerage report. Investing in stocks presents a risk of financial loss. Investors should therefore exercise caution. Greynium Information Technologies, the author, and the brokerage are not responsible for any losses caused as a result of decisions based on the article.