Varun Beverages Ltd. share price target

We met the management of Varun Beverages (VBL) to understand the business of the company and its growth outlook. VBL is the one of the largest franchisees of PepsiCo globally (ex-US) for production and distribution of carbonated soft drinks (CSDs) and non-carbonated beverages (NCBs) sold under trademarks owned by PepsiCo. The company enjoys more than 25 years of strategic association with PepsiCo (since 1990), has expanded its territories to 17 states (mainly North and North East India), two union territories in India; Nepal, Sri Lanka,...

Consolidated volume grew 5.4% YoY (in line) with 4% YoY volume growth in India and 9.4% YoY in international business. Carbonated Soft Drinks (CSD) volume grew 4.7% YoY, but juices volume was flat and water grew 11% YoY. EBITDA at Rs 1.85 bn grew 6% YoY.

Consolidated net sales declined 2% as volumes declined 6%, while EBITDA and PAT grew 3% and 21%. In the peak summer quarter, India volumes declined 6% despite a low base due to GST-led disruptions and a weak summer. OPM up 137 bps YoY at 29.4% as other expenses declined 300 bps YoY.

We met the management of Varun Beverages (VBL) to understand the business of the company and its growth outlook. VBL is the one of the largest franchisees of PepsiCo globally (ex-US) for production and distribution of carbonated soft drinks (CSDs) and non-carbonated beverages (NCBs) sold under trademarks owned by PepsiCo. The company enjoys more than 25 years of strategic association with PepsiCo (since 1990), has expanded its territories to 17 states (mainly North and North East India), two union territories in India; Nepal, Sri Lanka,...

Consolidated net sales grew 1% YoY, aided by ~2% volume growth. Volume in CSD declined 4% YoY, was flat in juices and grew 36% in water. EBITDA margin expanded 198 bps YoY to 15.2% as gross margin expanded 313 bps YoY to 54.3%.

Company Overview: Varun beverage is bottler and largest distributer of PepsiCo outside USA, the company is promoted by Ravi Jaipuria. The company is associated with PepsiCo since 1990. VBL has distribution rights of CSD & NCBs for north and east India, also company has acquired rights to sell PepsiCo products in Sri Lanka, Nepal and some African countries. VBL also has franchise for distribution of Ole brand for Sri Lanka. The company is having 562(sales more than 5 lac liters) primary distributors in India and 415 distributors in international operations. VBL has turnover...

Varun Beverages (Varun) is the one of the largest franchisees for PepsiCo globally (ex-US) in production and distribution of carbonated soft drinks (CSDs) and non-carbonated beverages (NCBs) sold under trademarks owned by PepsiCo. The company has been associated with PepsiCo since 1990 and has expanded its presence to 17 states and two union territories in India, Nepal, Sri Lanka, Morocco, Mozambique and Zambia with an estimated annual production capacity of 3,43.8 crore litre in India and 99.2 crore litre in international production facilities....

accounts 44% of PepsiCo India's revenues (2) In 2015, VBL acquired PepsiCo Post Eq. Paid up Capital: `182.0cr India's business in few states which in our opinion has better profitability (3) The...

Demonstrated ability to grow Sales Volumes: The Company has been associated with PepsiCo since the 1990s and has over two and half decades consolidated its business association with PepsiCo, increasing the number of licensed territories and sub-territories covered by it, producing and distributing a wider range of PepsiCo beverages, introducing various SKUs in its portfolio, and expanding its distribution network. Its demonstrated ability to grow PepsiCo product sales has led to PepsiCo India / PepsiCo Inc. and / or the PepsiCo International Entities licensing additional territories to the company, including those that were earlier directly operated by PepsiCo or by third-party bottlers....