Equal Weight on Varun Beverages, target price Rs 700: Axis Securities

Axis Securities has an equal weight call on Varun Beverages with a target price of Rs 700. The current market price of Varun Beverages is Rs 617.8. Varun Beverages, incorporated in 1995, is a Large Cap company with a market cap of Rs 209076.21 crore, operating in the FMCG sector.

Varun Beverages' key products/revenue segments include Beverages, Other Operating Revenue, Other Services for the year ending 31-Dec-2023.

Financials

For the quarter ended 30-09-2024, the company has reported a Consolidated Total Income of Rs 4828.93 crore, down -33.31% from last quarter Total Income of Rs 7240.89 crore and up 24.17% from last year same quarter Total Income of Rs 3889.02 crore. The company has reported net profit after tax of Rs 628.92 crore in latest quarter.

The company's top management includes Mr.Ravi Kant Jaipuria, Mr.Varun Jaipuria, Mr.Raj Pal Gandhi, Mr.Rajinder Jeet Singh Bagga, Mr.Abhiram Seth, Mr.Anil Kumar Sondhi, Ms.Sita Khosla, Dr.Ravi Gupta, Ms.Rashmi Dhariwal. Company has APAS & Co as its auditors. As on 30-09-2024, the company has a total of 325 Crore shares outstanding.


Investment Rationale
Varun Beverages is poised to sustain its strong growth momentum, driven by several strategic factors: 1) The successful acquisition of BevCo, whichstrengthens its market presence in South Africa and DRC; 2) Expansion of its snacks portfolio beyond India, with a focus on markets such as Zimbabwe and Zambia; 3) A continued push to expand its distribution network, particularly in rural areas; 4) The commissioning of various reenfield and brownfield facilities, boosting manufacturing capacity and market coverage while optimizing transportation costs; and 5) The expansion of its high-margin Sting energy drink and a greater focus on value-added dairy products, sports drinks (Gatorade), and juice offerings. These initiatives are anticipated to underpin the company's long-term growth trajectory and enhance profitability. Axis Securities expects the revenue/EBITDA/ PAT to grow at 23%/27%/30% CAGR over CY23-26E.

Promoter/FII Holdings
Promoters held 62.66 per cent stake in the company as of 30-Sep-2024, while FIIs owned 24.18 per cent, DIIs 4.93 per cent.