Buy Varun Beverages; target of Rs 620: Motilal Oswal

Motilal Oswal's research report on Varun Beverages

2QCY25 was a muted quarter for Varun Beverages (VBL) as its revenue declined 2% YoY due to the early onset of monsoon in the peak summer months of India. Consolidated volumes declined by ~3% YoY (India volumes down 7.1% YoY while international volumes up 15%). Despite temporary headwinds in the domestic market, VBL reported an EBITDA margin expansion of ~80bp YoY, led by operating efficiencies and healthy growth in the international markets (led by volume growth, positive currency movement in Africa territories; and increased operational efficiencies).

Outlook

We largely maintain our CY25/CY26 earnings estimates and introduce CY27 estimates. We expect a CAGR of 15%/14%/19% in revenue/EBITDA/PAT over CY25E-27. We value the stock at 54x CY26E EPS to arrive at a TP of INR620. We reiterate our BUY rating on the stock.