Varun Beverages: why CLSA is bullish on this hot cold drink stock

Over the past year, Varun Beverages shares have jumped over 100 percent.

Top brokerage CLSA has retained its bullish view on Varun Beverages and increased price target, stating that higher affordability of its products and increasing market size is helping driving growth.

CLSA has reiterated its 'Buy' call on the stock, bumping up the target price to Rs 1,977 per share, higher by around 20 percent.

The brokerage said the increased affordability of Varun Beverages' offerings, new territories and products will help the PepsiCo bottler sustain growth.

Follow our live blog to catch all the updates

Additionally, certain soft drinks and energy drinks from Varun Beverages are becoming comparable to tea, coffee and fruit juices on the pricing front. Along with the affordability, the deeper distribution is aiding market penetration, keeping CLSA positive on the company.

The international brokerage said Varun Beverages' acquisitions could keep the growth engine humming. Last quarter, it completed the acquisition of The Beverage Company (BevCo) in South Africa, to focus on the African market.

CLSA has raised the target multiple on Varun Beverages from 48x to 59x.

Varun Beverages posted a revenue of Rs 4,398 crore for the quarter ended March, reporting an on-year growth of 11 percent. The net profit for the quarter jumped 25 percent to Rs 537.2 crore. The beverage major follows a January-December calendar year format.

Over the past year, Varun Beverages shares have jumped over 100 percent, more than doubling investors' wealth. In comparison, Nifty 50 index has gained around 25 percent during this period.