Varun Beverages Ltd. share price target

In May'19, VBL acquired the franchisee rights to seven states Gujarat, parts of Maharashtra, parts of Karnataka, parts of Telangana, parts of Andhra Pradesh, Kerala, and Tamil Nadu in South and West India from PepsiCo. Prior to the acquisition, PepsiCo's market share had dropped over CY16-19 and penetration levels in the region were low. The management aims to improve distribution and penetration levels in the region. However, its expansion plans were hampered due to the onset of the COVID-19 outbreak....

Sharp volume growth on strong recovery and lower base Motilal Oswal values your support in the Asiamoney Brokers Poll 2021 for India Research, Sales, Corporate Access and...

At CMP, the stock trades at 14.7x EV/EBITDA CY23E which is attractive in our view. Maintain a BUY rating with a revised TP of Rs 900/share. Key Risks to our call are a) Resurgence of covid-19 cases, b) Likelihood of the 3rd wave and consequent lockdowns, and c) Sudden spike in RM prices.

Varun Beverage Limited (VBL) is the second largest franchisee in the world (outside US) of carbonated soft drinks (CSDs) and non-carbonated beverages (NCBs) sold under PepsiCo's trademarks.

With the increase in crude prices, PET resin prices have also gone up sharply in the last three months. Further, we expect sugar prices to increase ~15% in next one year. We believe these commodity prices would remain firm for a prolonged period of time, which would require certain amount of price hikes. However, we believe it would not be easy to take prices hikes given aggressive competition. Hence, we believe operating margins would remain under pressure. We expect 19.8%, 20.1% operating margins for CY021E,...

Varun Beverages (VBL) reported a strong operating performance on the back of higher volume growth across the Carbonated Soft Drinks (CSD) and NonCarbonated Beverages (NCB) segments. Volumes increased 32% YoY to 151m unit-cases. This was primarily led by an increase in out-of-home...

While VBL is covered on key RMs (PET resin and manageable inflation in Sugar) we do tweak our estimates a shade to factor in lower margins in CY21/22 and revise our TP to Rs. 1,200/share (earlier Rs. 1,230) given near term growth challenges. Retain BUY.

Based on the above themes we recommend the following stocks: ICICI Bank, SBI, Equitas SFB, Federal Bank, Bharti Airtel, HCL Tech, Tech Mahindra, Varun Beverages, Relaxo Footwears, Amber Enterprises, Camlin Fine Science, Minda Industries, Steel Strip Wheels. Lupin & ACC

Aggressive volumes push in summer to drive recovery, growth VBL suffered 13.7% volume decline in CY20 due to pandemic induced lockdown at the peak summer season. With the considerable increase in out of home activity & fully operational HORECA channel, VBL looks to push volumes aggressively in CY21 summer season. It has launched convenient SKUs & new products in last two quarters to propel demand for CSD. The company launched lemon fruit juice based drink under Mountain Dew' brand in February 2021. We expect 14.4% CAGR revenue growth during...

At CMP, stock trades at 12.6x EV/EBITDA which is attractive in our view and we value stock at 15x to arrive at our target price. Retain BUY and TP of Rs. 1085/share.