Varun Beverages Ltd. share price target

During Q1CY25, VBL’s total revenue increased 28.9% YoY (+50.9% QoQ) to INR 55,669 Mn., which was above our estimates (+16.5%) driven by sharp beat of 20. 4% in CSD segment volumes. Consolidated sales volume grew by 30.0% YoY to 312 Mn cases from 240 Mn cases, driven by strong organic volume growth of 15.5% YoY in India and inorganic volume contributions from South Africa and DRC (Democratic Republic of the Congo).

With a 25% upside potential from the CMP, we maintain our BUY rating on the stock.

VBL reported a strong and largely in-line quarter. India revenue growth was better at ~18% (vs expectation of ~15%), helped by ~16%/2% growth in volume/realization.

Quarterly Update Q1CY25

CY24 was a transformative year for Varun Beverages Limited (VBL), marked by strong growth, global expansion, and unwavering sustainability commitments.

We initiate coverage on Varun Beverages Ltd. with a “BUY” rating. We like the company for its demonstrated execution capabilities in India, further headroom for distribution expansion in India, continued territorial expansion in Africa, international margin improvement and strengthening ties with PepsiCo.

Varun Beverages Limited (VBL) delivered a robust performance in CY24, driven by organic volume expansion, an improved product mix, and contributions from recent acquisitions. Consolidated sales volume grew by 23.2% YoY, while net realization per case increased by 1.3% YoY, leading to a 24.7% YoY rise in revenue and a 25.3% YoY growth in PAT.

• For Q4CY24, VBL’s total revenue increased 39.8% YoY (-22.6% QoQ) to INR 38,176 Mn, beating our estimates.
• The consolidated sales volume grew by 38.1% to 215 Mn cases from 155 Mn cases on a YoY basis. This includes 43.0 Mn cases from South Africa and 7.8 Mn cases from DRC during the current quarter.

We maintain our BUY rating on the stock.

Varun Beverages (VBL) reported a revenue growth of 38% YoY in 4QCY24, led by volume growth of 38% YoY, which was majorly driven by the volume addition from South Africa and the Democratic Republic of Congo (DRC).

Varun Beverages Limited (VBL), one of PepsiCo's largest franchisees, has announced the acquisition of full ownership in two African beverage companies: SBC Tanzania and SBC Beverages Ghana. VBL has acquired 100% control of SBC Tanzania for INR 13,040 Mn and SBC Ghana for INR 1,270 Mn.

VBL's long-term outlook remains positive and with 23% upside potential from CMP we maintain a BUY rating on the stock.

VBL has approved SPA to acquire 100% stake in SBCT/SBCG, which own manufacturing/distribution rights for NARTD beverages in Tanzania and Ghana.

Takeaways: (1) Varun (VBL) has aggressively ramped up production (operating at maximum utilisation) at its recently commissioned DRC facility, due to strong demand. It plans to scale up production capacity at DRC in a phased manner.

VBL showcased a healthy performance in Q3CY24 results, which outperformed our estimates across the board.
Consolidated revenue stood at INR 48,047 Mn, grew by 24.1% YoY, outperformed our estimate by 3.6%.

With an 18% upside potential from the CMP, we maintain our BUY rating on the stock

Quarterly Update Q3CY24

VBL showcased a robust performance in Q2CY24 results, which outperformed our estimates across the board.
Net revenue of INR 71,969 Mn, excluding excise duty (+28.3% YoY, +66.7% QoQ), outperformed our estimates.

Quarterly Update Q1FY25