Varun Beverages Ltd. (VBL) is one of the largest franchisees of PepsiCo globally. It is valued at Rs 85,000 crore and is involved in the production and distribution of a broad range of carbonated soft drinks, non-carbonated soft drinks, and packaged drinking water. Pepsi, Mirinda, Mountain Dew, and Tropicana Juices are some of the top brands sold by the company. 

The shares of the beverage company fell as much as 5.86% to Rs 1,266.85 during the first half of the trading session on Thursday. However, the stock regained some of its losses and closed at Rs 1,306.15 per share, down 2.94% for the day. 

In the last 12 months, the stock has surged giving a multi-bagger gain of 107% to its investors. Thus Rs 1,00,000 invested a year ago in the company would have become Rs 2,07,000 by now, resulting in profits of Rs 1,07,000 for the investors. 

The management of the company is bullish on the Indian soft drinks market as it expects substantial growth led by a multitude of factors such as fast urbanization, rising income & expenditure levels, rural development, and electrification. 

The analysts at the domestic brokerage firm Sharekhan by BNP Paribas opinionated, “Management was optimistic about achieving strong revenue growth in the upcoming season as inventory created for the summer season has already been exhausted. This might lead to higher volume growth compared to the company’s near aspiration in Q1CY2023 and Q2CY2023.” 

The company has plans to expand its capacity by 30% and distribution capabilities by 10% in the near future. Along these lines, the brokerage anticipates a revenue and PAT growth of 18% and 25% over the CY2022-CY2024E period. 

Multiple brokerage firms have initiated positive ratings on the stock of VBL with varied price targets. 

Among them, the analysts at Motilal Oswal Financial Services have provided a ‘buy’ call with a target of Rs 1,620 on the stock. This translates into a potential upside of 24% for the investors. 

Written by Vikalp Mishra