Buy Varun Beverages; target of Rs 1850: Motilal Oswal

Motilal Oswal's research report on Varun Beverages

Varun Beverages (VBL) reported a revenue growth of 29% YoY in 2QCY24, led by volume growth (up 28% YoY). This was primarily driven by a domestic volume growth of 23% YoY due to increased capacity and a strong summer season. However, international volume was flat due to the portfolio transition to zero sugar in Zimbabwe. Realization was flat YoY at INR179/case. Management guided a double-digit volume growth in the domestic market going forward, while international market (mainly Zimbabwe) would rebound to a healthy volume growth from 3QCY24. We largely maintain our CY24/CY25/CY26 earnings estimates. We reiterate our BUY rating on the stock with a TP of INR1,850.

Outlook

We largely maintain our CY24/CY25/CY26 earnings estimates. We value the stock at 60x Sep’26E EPS to arrive at our TP of INR1,850. We reiterate our BUY rating on the stock.