Varun Beverages hits new high, gains 4% on healthy Q3 results

In Q3CY23, Ebitda margins improved by 79 bps to 22.8 per cent Y-o-Y driven by higher gross margins and operational efficiencies

Shares of Varun Beverages, the largest franchisee of PepsiCo in the world (outside USA), hit a new high of Rs 983.90, as they gained 4 per cent on the BSE in Tuesday's intraday trade after the company reported a healthy 30 per cent jump in profit after tax (PAT) at Rs 514.1 crore in the September quarter (Q3CY23), driven by growth in revenue from operations and improvement in margins.

The stock surpassed its previous high of Rs 979.15 touched on September 29. In comparison, the S&P BSE Sensex was down 0.26 per cent at 64,789 at 10:33 AM.

Revenue from operations grew 21.8 per cent year-on-year (Y-o-Y) to Rs 3,870.52 crore on the back of double digit volume growth. Consolidated sales volumes grew 15.4 per cent to 220 million cases compared to 190 million cases in Q3CY22, led by double-digit growth in both Indian & International markets.

Earnings before interest, taxes, depreciation, and amortisation (Ebitda) margins improved by 79 bps to 22.8 per cent Y-o-Y driven by higher gross margins and operational efficiencies.

Varun Beverages produces and distributes a wide range of carbonated soft drinks (CSDs) as well as a large selection of non-carbonated beverages (NCBs), including packaged drinking water sold under trademarks owned by PepsiCo.

PepsiCo CSD brands, produced and sold by VBL, include Pepsi, Pepsi Black, Mountain Dew, Sting, Seven-Up, Mirinda Orange, Seven-Up Nimbooz Masala Soda, and Evervess. PepsiCo NCB brands produced and sold by the company include Slice, Tropicana Juices (100 per cent and Delight), Seven-Up Nimbooz, Gatorade as well as packaged drinking water under the brand Aquafina.

Analysts at Motilal Oswal Financial Services expect Varun Beverages to maintain its earnings momentum, aided by increased penetration in newly acquired territories in South and West India, higher acceptance of newly launched products, continued expansion in capacity and distribution reach, growing refrigeration in rural and semi-rural areas, and a scale-up in international operations.