Buy Varun Beverages; target of Rs 576: Deven Choksey

Deven Choksey's research report on Varun Beverages

In Q3CY25, consolidated revenue stood at INR 48,967 Mn., up 1.9% YoY (-30.2% QoQ), sharply below our estimates, as the overall volumes were impacted by early onset of monsoons and erratic rain patterns in India. EBITDA stood flat YoY (-42.6% QoQ) at INR 11.474 Mn., below our estimates, led by subdued volume offtake in domestic business. EBITDA margin contracted by 53 bps YoY (-505bps QoQ) to 23.4%. Net profit stood at INR 7,412 Mn (-43.7% QoQ/+19.6% YoY), in line with our estimates, driven by operational efficiencies, higher other income (+510.4% YoY), and lower interest cost (-61.9% YoY).

Outlook

We have revised our outlook to factor in softer domestic volumes impacted by extended monsoons, higher input costs from in-house production rampup, and delayed contribution from new category launches. We have rolled forward our valuation basis to Sept’27 estimates. We value VBL at 47.0x Sept-27 EPS ,implying a target price of INR 576.

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