Near monopoly in PepsiCos India business ............................................................ 7 Improving mix in line with long-term strategy ...................................................... 12 More room for growth in soft-drink segment ....................................................... 15 Newly acquired territories to drive growth .......................................................... 19 Beverage Industry ................................................................................................ 21 SWOT analysis ..................................................................................................... 25 Expect EBITDA CAGR of 15% to ~INR22b over CY19-22E ....................................... 25 Valuation and view .............................................................................................. 29...

Varun Beverages Ltd (VBL) is the 2nd largest franchisee for PepsiCo in the world (outside USA). It manufactures Carbonated Soft Drinks - Pepsi, Mountain Dew, Seven Up, Mirinda; Non Carbonated Beverages - Tropicana Slice, Tropicana Frutz; and Bottled water Aquafina.

Realization and Cost Savings Helped Drive Growth: Volumes continue to be robust in rural and semi urban India, which helped sustain overall volume dip to only 4percent despite significantly lower on the go consumption.

With encouraging revival on MoM basis and healthy growth in International business with season on the anvil, and sustenance of cost optimization benefits we raise our EPS estimates by 4-14% over CY20-22E. At CMP, stock trades at 9.3x EV/EBITDA which is attractive in our view

With a sharp fall in PET resin prices & stable sugar price, we expect gross margin expansion of 72 bps in CY21. Moreover, cost rationalisation measure would lead to operating margin expansion of 124 bps in CY21. VBL expects these cost cutting measure to remain permanent. The management has guided 21% operating margin for CY21. Further, we believe juices & CSD contribution would increase, going forward, as the company would be able to generate more margin considering its new Juice plant has already been commissioned. VBL would be re-launching milk based beverages in CY21...

Although Varun Beverages Limited (VBL) performance in Q2CY20 was below our estimates on topline/bottomline the commentary on demand recovery and market share gains was positive. Sales volumes in June '20 was +75% YoY with July much better than June.

Valuation and Risks: Since its listing in Nov 2016, VBL has historically traded consistently within its avg1 year forward PE of 47x. Given the pandemic and economic downturn, we factor in the risk regarding longevity of the economic troubles and value the stock at a discount of ~ 10% (40x) from its 1 year forward PE since listing on CY21E EPS of Rs. 20.8 and recommend BUY'.

Varun Beverage management indicated that the business is seeing good recovery from the lows noticed during the last week of March when the lockdown hit the nation. We note that VBLs utilization levels have more than doubled MoM in May to 65% levels from 30% recorded in April 2020.

Varun Beverages (VBL) reported 23.3% revenue growth in Q1CY20E led by 26.2% volume growth. The volume growth is largely attributable to consolidation of south & west geographies after acquisition in 2019. However, on a like-to-like basis, the company saw 9.3% volume decline in the quarter. India business saw 13.7% volume decline largely due to loss of sales in last 10 days of March. Despite January-February seeing double digit volume growth, 31% decline in March severely impacted the quarter. Gross margins improved 280 bps largely due to a sharp decline in PET chip prices....

Although Varun Beverages Limited (VBL) performance in Q1CY20 was better than our estimates on topline/bottomline we note that Q2CY20 (~40% sales) could be severely impacted given the rapidly evolving situation on ground and sharp impact of 10 days lockdown on organic volumes which declined by 13.7%

We are initiating coverage on Varun Beverages Limited (VBL) with a BUY recommendation and a Target Price of Rs. 804, which implies 29% upside from the current levels. Looking beyond the lockdown period caused byCOVID-19, VBL to witness a relatively faster recovery in earnings growth

Cash flows from acquired territories in FY21E to reduce debt VBL's domestic sales volumes in Q4CY19 were at 62 mn cases with organic growth of 10% YoY on account of increase in distribution in under penetrated rural regions. For CY19, total sales volumes were up 44.9% YoY to 493 million cases compared to 340 million cases in 2018. Overall organic volume growth for CY19 was at 17.2% supported by robust performance in India (organic growth 13.1%) as well as international territories (organic growth 34%). We expect revenue CAGR of 12% in CY19-21E. We believe...

Healthy business growth in domestic, international markets VBL's domestic sales volumes in Q3CY19 were at 98 million (mn) cases with organic growth of 17.5% YoY on account of increase in distribution in under penetrated rural regions. Its international volumes were at 26 mn with organic growth of 27% driven by double digit growth in all overseas operations expect Zambia. Volume contribution from acquired territories were at 32 mn cases. With the recent acquisition, capacity utilisation for VBL was at 60% against erstwhile 70%, which gives tremendous scope for...

Sowing for Future Thirst:VBLs optimistic approach of continuous expansion in highly under-penetrated areas has created its presence in 5 overseas territories

Varun Beverages Ltd. declared its Q2CY19 results recently. Net Revenues grew by 37% YoY to `2811crs. led by robust volume growth of 43.3%. EBITDA for Q2CY19 grew by 37% on a YoY basis to `788crs. Margins expanded by 10 bps to 28%. PAT for Q2CY19 increased by 32% YoY to `405crs. This was on the back of robust volume growth in international operations. VBL now account for 80%+ of PepsiCo India's beverage sales volumes in India...

Varun Beverages reported revenues at | 2810.5 crore, up 36.5%, led by 43.3% overall volume growth on the back of acquisition of south and west sub-territories from PepsiCo that contributed for two months in the quarter. The India organic volume growth of 18.5% has been led by extended summer and the peak season demand. International volume growth of 34.2% on account of healthy growth in Morocco and Zimbabwe. Despite the integration of low margin South & West territories, EBITDA increased 37.1% to | 787.8 crore and the company has been able to maintain its operating...

Varun Beverages (VBL) made an announcement on bonus shares on June 17, 2019. The ratio was one bonus share for every two equity shares i.e. 1:2. The record date for the same is July 27, 2019 while the ex-date for the same is today i.e. July 25, 2019. Consequently, Varun Beverages' share price, as per yesterday's closing price, has adjusted to | 600/share from | 900/share....

Net Revenues grew 24% YoY to `1359crs. led by robust volume growth of 12.3%. EBITDA grew by 27% YoY to `218crs while EBITDA margins expanded by 30bps to16.1%. PAT for Q1CY19 increased by 103% YoY to `40crs. VBL now accounts for ~80%+ of PepsiCo India's beverage sales in India from 51% earlier. The company has also expanded its presence...

VBL has been delivering robust volume growth aided by territory acquisition and distribution rights for Tropicana. Non-carbonated (NCD) and bottled water segments now contributes more than 29% of total volumes vs. <15% share in CY16. In CY18, sales volume for Tropicana juices grew 57% YoY and contributed ~6% to total sales volumes. With the launch of NCB's like Masala Nimbooz, Tropicana Fruitz, 7 Up Revive & Sting, VBL can establish its leadership position in the NCD segment, going forward. VBL's ongoing capex plan of | 450 crore for the production of both Tropicana and Gatorade...

Varun Beverages Ltd. declared its Q4CY18 results recently. Net Revenues grew by 49% YoY to `786crs. led by robust volume growth of 40%. EBITDA for Q4CY18 grew by 46% on a YoY basis to `48crs. Margins merely contracted by 10bps to 6.1%. Net loss for Q4CY18 decreased by 1.7% YoY to `71.5 crs. VBL now account for 80%+ of PepsiCo India's...