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The stock market saw a significant rise in the shares of Varun Beverages, a prominent bottler of PepsiCo products in India. The company's shares have witnessed a remarkable 75% surge from their 52-week low, reaching a trading price of Rs 578. This surge is particularly noteworthy considering the Sensex's 25.42% climb in the same period.
The recent performance of Varun Beverages has attracted the attention of several brokerages, with HSBC initiating coverage of the stock and issuing a 'Buy' call, setting a price target of Rs 780 per share. This positive outlook is driven by the company's strong market position in India, where it controls 90% of PepsiCo's bottling volume. Furthermore, Varun Beverages holds a substantial 28% market share in the carbonated soft drink (CSD) sector, positioning it as the second-largest soft drink bottler in the country.
Another brokerage house, Citi, shares a similar sentiment, expressing bullishness regarding Varun Beverages' prospects. They highlight the company's strong market position and its growth potential within the soft drink industry. Citi has assigned a price target of Rs 800 to the multibagger stock, anticipating continued growth driven by expanding geographic reach and a projected 23%/29% CAGR for revenue and earnings per share, respectively, over the period from 2023 to 2026.
The recent financial results of Varun Beverages support the positive outlook. The company reported a 26% year-on-year rise in net profit for the second quarter, reaching Rs 1262 crore. Revenue also saw a significant increase, climbing 28% to Rs 7197 crore, compared to the previous year. EBITDA for the quarter exhibited robust growth, climbing 32% to Rs 1,991 crore. These results are a testament to the company's successful operations and its ability to capitalize on market opportunities.
The positive outlook and growth prospects for Varun Beverages are further strengthened by the relatively low soft drink penetration in India, compared to other markets. This suggests significant potential for future expansion and growth within the country. The company's strong market position, its commitment to innovation, and its consistent financial performance make it an attractive investment prospect for those seeking exposure to the growing Indian FMCG sector.
Source: Varun Beverages shares rebound 75% from 52-week low, here's what brokerages say