Analysts Maintain Bullish Stance On Varun Beverages As Loss Narrows
Bottles of Pepsi Cola soft drink are packaged for shipping. (Photographer: Vincent Mundy/Bloomberg)

Analysts Maintain Bullish Stance On Varun Beverages As Loss Narrows

Shares of Varun Beverages Ltd. rose on Wednesday as analysts maintained their 'buy' calls after the quarterly earnings of the bottler and distributor for PepsiCo Inc.

Net loss narrowed to Rs 19.7 crore in the quarter ended December from a loss of Rs 59.3 crore a year earlier, according to its exchange filing. The company attributed it to better business efficiencies, cost cuts and a healthy recovery in international territories.

Net sales rose 9% over a year earlier to Rs 1,330.9 crore in the quarter ended December, according to its exchange filing. That was higher than the Bloomberg consensus estimate of Rs 1,293.5 crore. For the full year 2020, the company's revenue declined by 9.5%.

Ebitda or operating profit rose 49% to Rs 172.2 crore against the estimated Rs 123.6 crore. Margin expanded to 12.9% from 9.5%.

"On the whole, we are on a strong footing, operationally and financially, and remain confident that further stabilisation of the macroeconomic environment will translate into strong growth for us going forward," Ravi Jaipuria, chairman of Varun Beverages, was quoted as saying in the statement.

Analysts expect a recovery in volumes and further deleveraging in 2021.

Shares of Varun Beverages rose as much as 4.9% to Rs 946 apiece on Wednesday—gaining in four of the last five trading sessions. According to Bloomberg data, of the 17 analysts that track the stock, 15 have a 'buy' recommendation, while two suggest 'hold.' The average of 12-month price targets suggests a return potential of 15.6%.

Here’s what analysts had to say on the stock:


  • Maintains 'buy' with a price target of Rs 1,100—a potential upside of 15% from current levels.
  • Management sounded confident on margins despite a recent rise in input prices.
  • 2021 would see further debt reduction as no major capex is planned other than juice capacity expansion.
  • Acquisitions in Africa and South-East Asia remain a focus in the medium term.
  • Newly acquired regions offer a multi-year growth headroom and will help expand return on capital employed.

Kotak Institutional Equities

  • Maintains 'buy' with a price target of Rs 1,100—a potential upside of 15%.
  • Volumes slightly lower than expectations but good profitability overall.
  • Normalisation of volumes, market share gain opportunity in south and west territories, sustained cost savings and financial leverage benefits augur well for strong earnings growth over the next couple of years.
  • Also tightened the slack in the cost structure and a significant portion of these savings are expected to sustain.
  • Tweak margin assumptions and broadly maintain CY21-22 earnings per share estimates.


  • Maintains 'buy' rating.
  • Price target raised from Rs 875 to Rs 1,030—implying an upside of 9%.
  • Faster growth revival in volumes.
  • Margins can throw up a potential surprise.
  • Forecast Ebitda/EPS CAGR of 14%/28% over CY19-22E.
  • Faster-than-expected recovery and improved earnings growth outlook drives multiple revision.

Motilal Oswal

  • Maintains 'buy' rating with a price target of Rs 1,150—an upside potential of 18.6%.
  • Uptick in consumption led to all-round growth.
  • CSD and water segments drive quarterly volumes.
  • Non-carbonated beverage volumes fell 20% YoY to 4 million unit cases, primarily due to a slower uptick in the sale of juices in the domestic market.
  • Expected to deliver strong volume growth across the three product segments as the consumption pattern is improving.
  • Expect strong demand traction over the next few years.
  • Raise CY21 earnings estimates by 21% owing to an increase in Ebitda, lower tax rates.
  • Expect revenue/Ebitda/profit CAGR of 28%/36%/67% over CY20-22.
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