Varun Beverages down 6%, at 52-wk low after Q4: Should you buy, sell, hold?

Varun Beverages recommended a final dividend of Rs 0.50 per share. The 'Record Date' is yet to be fixed by the Board of Directors of the Company

Varun Beverages share price: Fast moving consumer goods (FMCG) company Varun Beverages share price dropped as much as 6.46 per cent to hit a fresh 52-week low of Rs 513.10 per share, on Tuesday, February 11, 2025.

 

The fall in Varun Beverages share price came despite the company posting a healthy set of results in the fourth quarter of year ended December 31, 2024 (Q4CY24). 

 

Varun Beverages’ profit climbed 40.3 per cent year-on-year (Y-o-Y) to Rs 185.1 crore in Q4CY24, from Rs 131.9 crore in Q4CY23. The revenue (less excise duty) soared 38.3 per cent Y-o-Y to Rs 3,688.8 crore Q4CY24, from Rs 2,667.7 crore a year ago.

 

 

At the operating level, earnings before interest, tax, depreciation and amortisation (Ebitda) climbed 38.7 per cent Y-o-Y to Rs 579 crore, from Rs 418.1 crore a year ago. Ebitda margin remained flat Y-o-Y at 15.7 per cent.

 

The company also recommended a final dividend of Rs 0.50 per share. The ‘Record Date’ is yet to be fixed by the Board of Directors of the Company.

 

Meanwhile, here’s what top brokerages said about Varun Beverages post Q3 results.

 

Motilal Oswal | Buy | Target: Rs 680

 

Motilal Oswal analysts highlighted that Varun Beverages reported a 38 per cent Y-o-Y revenue growth in Q4CY24, driven by a 38 per cent Y-o-Y volume increase, primarily from South Africa and the Democratic Republic of Congo (DRC). Excluding these volumes, organic volume growth stood at around 5 per cent. Realisation remained flat Y-o-Y at Rs 172 per case. 

 

However, the company ended the year strongly, with healthy volume growth in India (~11 per cent) and international expansion (through acquisitions and greenfield capacity). The management has guided for continued double-digit volume growth domestically and a majorly higher growth rate internationally. Given this, analysts have maintained their CY25/CY26 earnings estimates.

 

JM Financial | Buy | Target: Rs 675 (Previously:Rs 725)

 

Analysts at JM Financial stated that Varun Beverages Q4CY24 earnings were below expectations, mainly due to weaker-than-expected performance in the international business. While India’s business sales growth exceeded forecasts, the international business underperformed, with lower realisations and margins, resulting in a miss on consolidated sales and Ebitda. 

 

The management remains confident about double-digit volume growth in India and believes that competition is at lower price points where PepsiCo products are not competing. 

 

Following a Q3 miss, analysts reduced their CY25/26E by 4-7 per cent, but still expect a 26 per cent earnings CAGR over CY24-26E, underpinned by strong execution, large opportunities, and a net debt-free status. Key risks identified include competitive pressure in India and execution in Africa.

 

Emkay | Buy | Target: Rs 800

 

Emkay analysts noted that the company's Q4 Ebitda was largely in-line, with revenue growing by 38 per cent, aided by 9-10 per cent organic growth in both the India and international businesses, alongside the consolidation of the DRC/South Africa businesses. 

 

Despite increasing competition in India, VBL remains confident about delivering double-digit volume growth, supported by investments in capacity and distribution expansion, new product innovations (Sting Gold/Jeera), and a strong start to CY25. The South Africa acquisition is progressing well with a 12.5 per cent volume growth in CY24. The management did not indicate any margin pressure in India, while international margins are expected to improve due to backward integration and better channel mix. 

 

With the company now net debt-free and ample capex resources, analysts are optimistic, though risks from aggressive pricing strategies remain a concern.

 

Morgan Stanley | Overweight | Target: Rs 674

 

Morgan Stanley analysts reportedly reaffirmed their volume and margin guidance for CY25, noting that growth momentum remains strong heading into Q1CY25. They mentioned that management has not observed any impact from Campa’s competition in India, as the market already had 20 per cent share from B-brands priced lower than Pepsi. Distribution expansion, with a target of reaching 4 million outlets, remains a key growth driver, and the market size is large enough to accommodate new competition.

 

Citi | Buy | Target: Rs 750 (Previously: Rs 800)

 

According to reports, Citi analysts indicated that Varun Beverages' Q4CY24 performance was in-line with expectations and that growth drivers remain intact. They maintained a strong outlook for India’s business growth, which continues to show promising signs.