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ICICI Securities Report
Highlights:
Varun Beverages Ltd. posted continued buoyant margin performance of led by lower input prices, higher realisation and benefits of strategic cost-saving initiatives undertaken,
international business strengthened further, following the acquisition of BevCo (South Africa and surrounding region) and agreement signed for manufacturing of snacks from May 2025 in Morocco market,
moderate volume growth (+4.4% YoY) in domestic business despite delayed Holi, and
timely commissioning of three greenfield production facilities ahead of favorable (summer) season.
The company is prudently expanding its domestic as well as international businesses which may maintain high growth rates. Backward integration, capacity expansion and operating leverage provide margin tailwinds.
We remain positive on Varun Beverages' strong business outlook but current valuations seem stretched. We maintain Hold rating on the stock with a revised discounted cash flow-based target price of Rs 1,420 (earlier: Rs 1,335).
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