The Current Market Price (CMP) of Varun Beverages (VBL) is Rs. 949. Emkay Global has estimated a Target Price for the stock at Rs. 1150. The stock is expected to offer a 21.2% upside, in 1 year.
|Current Market Price (CMP)||Rs. 949|
|Target Price||Rs. 1150|
|1 year return||21.20%|
Despite Covid-led challenges, VBL placed ~25,000/40,000 visi-coolers in CY20/CY21. New innovations are well supported by a strong marketing push ahead of the CY22 season, which we believe should lead to strong 26% revenue growth in CY22. The company’s revenue growth stood healthy at 26%. Intl. geos contributed ~25%/30% to revenue/PAT in CY21 vs. 21%/0% contribution in CY19. The strong performance was led by Zimbabwe (30% PAT contribution), while Morocco/SL/Zambia saw a PAT turnaround in CY21. Nepal saw a PAT loss of Rs. 0.3bn in CY21 due to a tax penalty.
Comments by Emkay Global
Emkay Global commented, “Our channel checks suggest double-digit volume growth for VBL in Q1CY22, in line with trends in recent quarters. Further, a strong marketing push (refreshed Pepsi – more fizz), portfolio expansion into lemon-based drinks (40% of industry) and continued traction in ‘Sting’ should boost growth; we expect revenue/EBITDA growth of 26/35% in CY22. VBL is better placed to combat inflation through light-weighting of PET bottles by 6-15%, PET stocking ahead of the crude spike and price hike in select SKUs.”
About the company
Varun Beverages is the second largest franchisee in the world (outside US) of carbonated soft drinks (“CSDs”) and non-carbonated beverages (“NCBs”) sold under trademarks owned by PepsiCo. 7UP, Mirinda Orange, Mirinda Lemon, Mountain Dew, 7UP Nimbooz Masala Soda, 7UP Revive, Evervess Soda are the major brands of the company. An increase in CWIP due to new facilities in Bihar/J&K and stocking of PET helped VBL keep net debt flat at Rs. 30bn in CY21. However, VBL expects to pare down debt by ~40% in CY22.
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