Varun Beverages rises 3% on strong Q2 results; stock up 26% so far in 2023

Shares of Varun Beverages Limited (VBL) rallied 3 per cent to Rs 832 apiece in Thursday's intra-day trade, after the company's revenue rose 13 per cent year-on-year (YoY) to Rs 5,611 crore in the second quarter of calendar year 2023 (Q2CY23).
 

So far this year, the stock of beverage player surged 26 per cent, as against a 9 per cent jump in the S&P BSE Sensex. Earlier, VBL had scaled to a 52-week high of Rs 873 per share, touched on May 26, 2023.
 

In Q2CY23, the company's consolidated sales volume grew 4.6 per cent YoY, led by strong growth in international markets. Sales volume in India, however, were affected due to unseasonal rains during the quarter.
 

That said, the management remains optimistic about the full year performance despite slower-than-anticipated demand.

Also Read: Varun Beverages Q2 results: Net profit rises 26.2% YoY, revenue up 13.5%
 

"We will continue to capitalise on our position as a key player in the beverage industry and focus on strengthening our capabilities in line with customer preferences. We are confident this approach will translate into sustainable value for all stakeholders," said Ravi Jaipuria, Chairman, VBL.
 

The company's earnings before interest, tax, depreciation, amortisation (Ebitda), meanwhile, gained 20.8 per cent YoY to Rs 1,511 crore in Q2CY23. 
 

Gross margins, too, expanded 196 basis points (bps) YoY to 52.5 per cent, owing to softening of PET (polyethylene terephthalate) chip prices. Profit-after-tax (PAT), further, jumped 25.4 per cent YoY to Rs 1,005 crore in Q2CY23. 
 

Analysts at Motilal Oswal Financial Services reiterated a 'buy' rating on the stock, in an earlier note, sharing a target price of Rs 940 per share.
 

"The company's focus on adjacent categories such as dairy-based beverages, sports drink, energy drink and juices will sustain the strong growth momentum. We expect a revenue/Ebitda/PAT compounded annual growth rate of 17 per cent/19 per cent/26 per cent over CY22-25. We value the stock at 45x Jun’25E earnings per share (EPS)," the brokerage firm added.
 

That apart, the board approved an interim dividend at 25 per cent of face value, that is, Rs 1.25 per share. The total cash outflow would be Rs 162.4 crore.