Varun Beverages, a leading FMCG giant, is known for manufacturing popular beverages and food products such as Pepsi, Mountain Dew, Slice, Cream Bell, Lays, Doritos, and Kurkure. Over the past five years, the company’s stock has provided investors with an impressive 11-time return. This raises the question – is now the right time to buy?
According to domestic brokerage KRChoksey, the outlook for Varun Beverages is positive, with a potential upside of 15.51 per cent for the large-cap stock.
Here are some key reasons why KRChoksey is bullish on this FMCG stock:
Expected Improvement in Realizations: The broker anticipates that the company’s profitability will increase as a result of higher selling prices (realizations) driven by a more favorable product mix and cost efficiencies.
Strong Long-term Growth Potential: KRChoksey’s report highlights Varun Beverages’ strong market position, projecting significant growth in net revenue, EBITDA, and adjusted PAT over the next few years, with impressive CAGR figures of 25.7 per cent, 27.9 per cent, and 32.1 per cent, respectively.
Focus on Future Earnings: Despite a disappointing Q1CY24 volume, the brokerage has adjusted its valuation based on CY25E earnings rather than CY24E, emphasizing the company’s potential for future growth.
KRChoksey has reaffirmed its ‘buy’ rating on Varun Beverages, setting a one-year target price of Rs 1,732 for the company’s shares.
On May 15, 2024, Varun Beverages closed at Rs 1,499.40, as reported by NSE. Comparatively, the Nifty50 has seen a return of 94.62 per cent over the last five years, while the Nifty FMCG index has recorded returns of 86.93 per cent during the same period.
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