ICICI Securities research report on Varun Beverages
Varun Beverages (VBL) Q1CY25 performance was marginally ahead of our estimates with revenue/ EBITDA/ PAT growing by 29%/ 28%/ 33% driven by 30% volume growth. Despite increase in competitive intensity, India business performance was resilient with revenue growth of 18% driven by 15.5% volume growth. We note that, the pricing action in CSD to fight competition and unseasonal rain in select geographies could marginally impact the performance in 2QCY25. However, over the long term, the performance would be driven by strong execution and new product launches.
Outlook
In international business, South Africa is scaling up well with 13% volume growth over the last 4 quarters and margin improvement (14% from 10.5% at the time of acquisition) driven by scaling down of non-profitable products. We remain positive on VBL’s strong business outlook but its current valuations seem stretched. Maintain HOLD.
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