Varun Beverages Ltd. share price target

Varun Beverages recent declared its Q4CY17 & CY17 results. The last quarter of the year was strong footed on the back of volumes growth. Net revenues grew by 21.4% & 3.7% to `527crs. & `4003crs. in Q4 & CY17 respectively. EBITDA for Q4 de-grew by 14% on a YO-Y basis to `22.5crs. while CY17 EBIDTA grew by 5% to `835.8 crs. Margins contracted by170 bps in Q4 to 4.3% while CY17 margins expanded by30 bps to 20.9%. Given the seasonality in the business, Q4 is a loss quarter for the company. PAT for CY17 increased by...

ICICI Securities Ltd | Retail Equity Research Revenues witnessed growth of 21.4% to | 527.4 crore (I-direct estimate | 495.3) led by volume growth from territory acquisition in MP, Odisha earlier this year. The company also acquired territory in Bihar, Jharkhand and Chhattisgarh during the quarter Operating profit declined to | 22.5 crore against | 36.3 crore in the corresponding quarter. Q4 is seasonally weak for the company as volumes of carbonated beverages decline substantially during...

(post GST shock) and benefits from recently acquired new territories (inorganic growth). Current valuations (PER of 33.2x and EV/EBITDA of 12.9x CY19E) are attractive given strong EPS growth and ROE expansion. Our TP of Rs902 is based on EV/EBITDA of 17x...

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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...