The shares of Varun Beverages Ltd are in focus after the leading brokerage firm HSBC has given an upside potential of 46 percent from its current level. In this article, we will discuss more about this in detail.
With a market capitalization of Rs 1,56,329 crores, the shares of Varun Beverages Ltd (VBL) are currently trading at Rs 462 per share, down by 32.3 percent from its 52-week high of Rs 682.84 per share. Over the past five years, the stock delivered a return of 662 percent.
Hong Kong and Shanghai Banking Corporation (HSBC) assigned a Buy call on Varun Beverages with a target price of Rs 670 per share, citing an upside potential of 46 percent from Thursday’s closing price of Rs 458.40.
The brokerage said that the recent 29 percent drop in Varun Beverages’ share price this year seems to be over. While there are worries about a possibly weak second quarter due to unexpected weather changes and rising competition, they believe these issues don’t fully explain the big fall in the stock price.
Right now, the stock is trading at a 20 percent lower valuation compared to other companies in the Consumer Packaged Goods (CPG) sector, which makes it a good buying opportunity.
They also pointed out that the company is doing well in many ways, such as better profit margins, rapid expansion in African countries, a stronger product mix, and a good supply and distribution network. All these things are expected to help the company perform better in the future.
Financial Highlights
VBL reported a consolidated revenue of Rs 5,567 crores in Q1 FY25, up by 29 percent from its Q1 FY24 revenue of Rs 4,317 crores. It reported a net profit of Rs 731 crores in Q1 FY25, up by 33.4 percent from its Q1 FY24 profit of Rs 548 crores. However, Q2 may not maintain this growth momentum.
The stock delivered an ROE and ROCE of 22.49 percent and 24.85 percent, respectively, and is currently trading at a P/E of 56.12x as compared to its industry peers of 80.25x.
Varun Beverages Limited is one of the largest bottlers for PepsiCo, and oversees several different products in its portfolio, such as soft drinks (Pepsi, 7UP, Mountain Dew), juices (Tropicana, Slice), water (Aquafina), and snacks (Lay’s, Doritos, Kurkure), among others. Varun operates in India and overseas in international markets such as Sri Lanka, Nepal, and parts of Africa. Varun has a firm foundation.
Written by Satyajeet Mukherjee
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