Buy Varun Beverages, target price Rs 1050: Axis Securities

Axis Securities has buy call on Varun Beverages with a target price of Rs 1050. The current market price of Varun Beverages Ltd. is Rs 900.75.

Time period given by analyst is one year when Varun Beverages Ltd. price can reach defined target.

Varun Beverages Ltd., incorporated in the year 1995, is a Large Cap company (having a market cap of Rs 39187.33 Crore) operating in FMCG sector.


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


Financials
For the quarter ended 30-09-2021, the company reported a Consolidated Total Income of Rs 2477.37 Crore, down -1.20 % from last quarter Total Income of Rs 2507.45 Crore and up 37.17 % from last year same quarter Total Income of Rs 1806.11 Crore. Company reported net profit after tax of Rs 257.90 Crore in latest quarter.

Investment Rationale
The brokerage revises CY20-23E estimates and now expect VBL to register Revenues/EBITDA/PAT CAGR of 21%/27%/57% respectively. This growth will be driven by 1) Strong execution in under-serviced South and West territories (penetrating in semi-urban/rural areas with better refrigeration infra and VC placements), 2) Distribution (aggressive primary distributor addition) led market share gains, 3) Debt reduction, 4) Greenfield Capex and expansion in new international geographies, and 5) Positive cash flow generation. It raises TP to Rs 1,050/share valuing it at 18x EV/EBITDA multiple its CY23 estimate.

Promoter/FII Holdings
Promoters held 64.89 per cent stake in the company as of 30-Sep-2021, while FIIs owned 21.72 per cent, DIIs 6.78 per cent.