The beverage industry in India is a robust sector, projected to reach over $72 billion by 2027 for alcoholic beverages alone. The non-alcoholic segment is expected to generate $20 billion in revenue during the same period, showcasing diverse consumer preferences and significant growth potential across various beverage categories.
With a market capitalization of Rs 1.82 lakh crore, the shares of Varun Beverages Ltd were trading at Rs 562.05 per share, decreasing around 3 percent as compared to the previous closing price of Rs 578.95 apiece.
Brokerage Recommendations:-
Citi, a well-known brokerage firm globally has maintained a buy call on the Beverages stock with a target price of Rs 800 apiece, indicating a potential upside of 42 percent from Monday’s price of Rs 562.05 per share, Moneycontrol reported.
Rational:-
As per the brokerage, the company has a strong market presence in India and significant growth opportunities in the soft drinks sector. Furthermore, the brokerage expected PepsiCo’s go-to-market (GTM) activities and capacity to establish new product categories have been important drivers of its growth.
Additionally, Varun Beverages is expected to benefit from its expanding geographic reach, including access to new territories in Africa.
Financial Condition:-
Examining the company’s financial performance, revenue magnified by 28 percent from Rs 5,611 crore in Q1FY24 to Rs 7,197 crore in Q1FY25, but during the same time frame, net profit zoomed significantly by 25 percent from Rs 1,005 crore to Rs 1,262 crore.
Strategic Initiatives:
The company expanded its partnership with PepsiCo to exclusively franchise “Simba Munchiez” snacks in Zimbabwe and Zambia, with production beginning by 2025. Additionally, it started commercial production of carbonated soft drinks and packaged water at a new greenfield facility in the DRC, tapping into high-growth markets.
Capex plan:-
The company plans to spend approximately ₹12,000 million in H1 2024 and earmark an additional ₹6,000 million for CY2025. Total capex for CY2024 is expected to reach ₹36,000 million, focusing on expansions in India and Africa, with ₹25,000-₹26,000 million planned for new production facilities in CY2025.
Management Guidance:-
Management is confident in achieving double-digit growth for CY2024, driven by strong demand in India and strategic expansions in Africa. They recognize the challenges in international markets like Zimbabwe due to the shift to zero sugar products but remain optimistic about recovery and growth opportunities.
Stock Split:-
The company recently announced that it will split its shares. In a regulatory filing, the company stated that its board has approved this decision to divide each Es 5 share into multiple shares with a new face value of Rs 2 each.
Company profile:-
Varun Beverages Limited (VBL) operates a PepsiCo franchise. The company makes and sells carbonated soft drinks (CSDs) as well as a wide variety of non-carbonated beverages (NCBs), including bottled drinking water offered under PepsiCo brands.
Written by:- Abhishek Singh
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