Q1 EBITDA was 11-19% higher than our/Street estimates, led by an 8-10% revenue beat and high margins. Topline grew 26%, led by 19%/6% volume/realization growth. A 430bps RM spike was offset by operating leverage, leading to 180bps EBITDA margin gains. VBL expects growth momentum to continue thanks to a strong demand environment and its investments in the distribution channel. VBL does not expect gross margins to decline further in CY22, led by sufficient PET reserves and sugar prices remaining range-bound. Net debt remained flat at Rs31bn but VBL expects a ~40% reduction in CY22. With strong growth trends in Zimbabwe, VBL plans to invest ~USD15mn to expand capacity in CY22. Total capex is expected to be relatively lower in CY22 vs. Rs8.5bn in CY21.
OutlookWe raise EPS estimates by 5-7% on the Q1 beat. Sustained momentum strengthens our confidence in VBL’s ability to achieve our higher-than-consensus estimates. Retain Buy with a revised Jun’23 TP of Rs1,230 (based on 33x Jun’24 EPS vs. 34x Mar’24 earlier).
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