Varun Beverages shares extend gains by 5% on bullish views as street hopes of strong summer demand

Pepsi

Shares of Varun Beverages jumped nearly 5 percent on March 18 after multiple brokerages issued bullish calls for the stock in anticipation of strong summer demand, extending the rebound from its 52-week low seen on March 3 by nearly 27 percent.

The stock had fallen nearly 38 percent from its record high of Rs 681 per share.

Citi Research

A Citi note said the share price of Varun Beverages may see a strong surge in the next 90 days due to earnings boost, as the summer season advances, and also due to benefits from recent business acquisitions in Africa. Citi said the recent correction was 'overdone' and the risk-reward is currently favorable over medium to long-term.

JM Financial

JM Financial has maintained its 'Buy' rating on the stock with a target price of Rs 675 per share, implying an upside potential of nearly 27 percent from current market price. The brokerage added that the recent correction was ‘overdone’, and ‘prevailing market pessimism’ should be an opportunity to buy more shares of the company.

DAM Capital

DAM Capital has maintained its 'Buy' rating on the shares of Varun Beverages, while keeping a target price of Rs 670 apiece, implying an upside potential of nearly 26 percent from the current market price. In its note, DAM Capital said the extended and hotter summer, along with a 20 percent on-year capacity expansion is set to drive strong near-term demand.

KR Choksey

KR Choksey too has kept a 'Buy' rating on the stock with a target price of Rs 657 per share. This implies an upside potential of over 23 percent from the current market price. "Varun Beverages Limited (VBL) delivered a robust performance in CY24, driven by organic volume expansion, an improved product mix, and contributions from recent acquisitions," the brokerage said.

Asit C Mehta

Asit C Mehta initiated coverage on Varun Beverages with a 'Buy' rating. "We like the company for its demonstrated execution capabilities in India, further headroom for distribution expansion in India, continued territorial expansion in Africa, international margin improvement and strengthening ties with PepsiCo. Industry tailwinds and VBL’s expanding reach to aid growth in India VBL already contributes 90% of PepsiCo’s beverage volume in India, as it holds the franchise rights for almost all sub-territories in the country," the brokerage said in its note.

CLSA

Earlier in March, CLSA had upgraded Varun Beverages to a 'high conviction' Outperform, from earlier 'Outperform' rating, but mildly trimmed its target price to Rs 770 per share from Rs 802 earlier. The latest target price however indicates an upside of almost 45 percent from the current market price. The risk-reward is extremely compelling, CLSA added, despite rising competition in the space.