Varun Beverages share price: Buy Varun Beverages, target price Rs 1,200: Axis Securities


Axis Securities has buy call on Varun Beverages with a target price of Rs 1200. The current market price of Varun Beverages Ltd. is Rs 1110.

Varun Beverages, incorporated in the year 1995, is a Large Cap company (having a market cap of Rs 48278.86 Crore) operating in FMCG sector.

Varun Beverages key Products/Revenue Segments include Beverages, Other Operating Revenue, Other Services for the year ending 31-Dec-2020.

Financials

For the quarter ended 31-03-2022, the company has reported a Consolidated Total Income of Rs 2835.98 Crore, up 63.44% from last quarter; Total Income of Rs 1735.19 Crore and up 26.23% from last year same quarter. Company has reported net profit after tax of Rs 271.09 Crore in latest quarter.

Investment Rationale
Axis Securities’ notes that Varun Beverages’ resilient business model would allow it to record healthy growth in CY22 as it is seeing a robust uptick in the consumption peak season (hoping there is no Covid-19 led disruption during the summer season for the first time since the acquisition of south-west territories 2 years back).

The summer season in the domestic market has begun well for VBL, and as it enters the peak months, the brokerage anticipates higher demand, better capacity utilization across all plants and greater reach across established and underpenetrated markets. In addition, with expanding vaccine coverage and improved mobility, OOH consumption has recovered strongly and in-home consumption is also sustaining its growth momentum.

Although volatile RM continues to pose near-term margin pressure (the management has undertaken advance stocking for the summer season to counter RM inflation), VBL remains confident of delivering healthy volume growth in the medium to longer-term and maintain ~21% EBITDA margin guidance for CY22. Factoring in these attributes in estimates for CY23/24E, the brokerage arrives at a revised TP of Rs 1,200/share (Rs 1,080/share earlier), valuing it at 36x Mar-24E EPS.

Promoter/FII Holdings
Promoters held 64.89 per cent stake in the company as of 31-Mar-2022, while FIIs owned 21.03 per cent, DIIs 7.21 per cent.

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