Emkay Global Financial's research report on Varun Beverages
Q1 EBITDA was 10-15% ahead of Street/our estimates, led by strong traction in India operations and better mix (smaller cases). While traction in star performer Sting continues, VBL is committing capital to future growth drivers [value-added dairy, juice and sports drink]. With improved affordability, VBL remains confident about demand for new products and plans improving supply by leveraging its two new manufacturing capacities in CY24 and its existing distribution/visi-cooler network. The Q1 beat leads to a 1-2% increase in our EPS estimate, but we see scope for a higher 5-7% increase in Street estimates. Sting has seen huge success, with ~500bps incremental contribution to CY19- 22 CAGR of ~23%, in our view. A similar traction in the new products can surprise positively.
Outlook
We maintain BUY on VBL, with revised TP of Rs1,700/share (vs. Rs1,660 earlier), based on unchanged target multiple of 40x.
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