Buy Varun Beverages; target of Rs 1100: Motilal Oswal
Motilal Oswal is bullish on Varun Beverages recommended buy rating on the stock with a target price of Rs 1100 in its research report dated January 03, 2021.
January 14, 2021 / 08:53 PM IST
Motilal Oswal's research report on Varun Beverages
Varun Beverages (VBL) is engaged in the manufacture, sale, bottling, and distribution of PepsiCo’s beverages in pre-defined territories in India (27 states and seven Union Territories). Its India operations contributed ~82% to CY19 revenue. The company is also present in Sri Lanka, Nepal, Morocco, Zambia, and Zimbabwe. VBL is PepsiCo's second-largest bottler outside the US and handles over 80% of the cola giant's India business. While its link with PepsiCo provides it with long-term growth sustainability, robust distribution and supply-chain network should improve its market share in newly acquired territories and push volume growth.
We estimate 12%/31% revenue/PAT CAGR over CY19-22E, driven by newly acquired territories and stable operating margin. We value the stock at 30x CY22E EPS of INR36.2 to arrive at our target price of INR1,100. We initiate coverage with a Buy rating.
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