One of the largest franchisees of PepsiCo, Varun Beverages’ shares zoomed 6.4% after the company reported a 150% increase in its net profit year-on-year (YoY). The company’s shares reached an intraday high of ₹ 1,300.00 apiece and were trading at ₹ 1,295.00 apiece at 11:28 AM on the National Stock Exchange (NSE).
The beverage manufacturer posted a 150.14% year-on-year increase in its consolidated net profit after tax at ₹ 81.52 crores for the quarter that ended on December 31, 2022, against ₹ 32.59 crores reported in the corresponding quarter of the previous year.
Varun Beverages revenue from operations increased by 27.89% to 2257.20 crores in the October to December quarter of 2022, against 1764.94 crores in the corresponding quarter last year.
Kotak Institutional Equities has increased the fair value of the stock to ₹ 1,500.00 from ₹ 1,200.00 earlier. The given target indicates an upside of 15.83% as compared to the share price of ₹ 1295.00.
Motilal Oswal Securities said that the company posted robust revenue growth fuelled by strong volume growth and higher realization. It added that Varun Beverages’ gross margin improved by 90 bpd YoY despite the inflationary raw material environment aided by a higher realization and early stocking of raw materials.
“We largely maintain our CY23/CY24 earnings estimates and reiterate our Buy rating on the stock with a target of Rs 1,550,” it said. The given target translates to an upside of 19.69% as compared to the share price of ₹ 1295.00.
Varun Beverages is a key player in the beverage industry and one of the largest franchisees of PepsiCo in the world. It produces and distributes a range of carbonated soft drinks, non-carbonated drinks and packaged water sold under trademarks owned by PepsiCo. Some of the brands produced and sold by Pepsico include Pepsi, Seven-up, Mirinda Orange, Mountain Dew, Tropicana Juices and so on.
Varun Beverages is a large-cap company with a market capitalization of ₹ 73,365 crores. The company has an excellent return on equity of 32.62% and an ideal debt-to-equity ratio of 0.76. Its shares were trading at a price-to-earnings (P/E) ratio of 53.00, which is higher than the industry average of 34.92, indicating that the stock might be overvalued. It could also mean that investors are willing to pay a higher price for the company’s future earnings.
Written by Simran Bafna
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