Motilal Oswal's research report on Varun Beverages
CY24 was a transformative year for Varun Beverages Limited (VBL), marked by strong growth, global expansion, and unwavering sustainability commitments. The company continued its upward trajectory, strengthening its market leadership in India and internationally, all while maintaining operational excellence and a futureready approach. Let us dive into the key highlights from the past year. Despite facing short-term headwinds from unfavorable weather and weakened consumption trends, VBL achieved ~12%/23% YoY volume growth in the domestic market/consolidated basis, driven by deeper market penetration. Revenue/EBITDA increased 28%/31%, with EBITDA margins expanding 100bp to 23.5% in CY24. VBL expanded its manufacturing footprint with a total capex of INR26b, commissioning three new greenfield facilities in Supa (Maharashtra), Gorakhpur (Uttar Pradesh), and Khordha (Odisha) in India. Additionally, the company invested INR6b in a new greenfield facility in the Democratic Republic of Congo (DRC).
Outlook
Factoring in strong fundamentals and potential for future growth, we build in 18%16%/27% revenue/EBITDA/PAT CAGR over CY24-26 and reiterate our BUY rating for the stock. We value the stock at 55x Mar’27E EPS to arrive at a TP of INR680.
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