ICICI Direct recommended hold rating on Varun Beverages with a target price of Rs 1040 in its research report dated May 10, 2019.
ICICI Direct's research report on Varun Beverages
Revenues grew 24.1% to Rs 1359.1 crore led by 12.3% overall volume growth and 11.8% realisation growth mainly due to a change in product mix in favour of juices and higher realisations from international operations. EBITDA increased 26.5% to Rs 218.4 crore while operating margins improved 29 bps to 16.1% driven by 85 bps & 101 bps improvement in gross margins and employee expenses to sales, respectively. Led by strong operating profit growth, net profit more than doubled to Rs 40 crore.
As volume growth picks up in new territories and the company participates in the manufacturing segment of Tropicana, the EBITDA margin is expected to improve to 18.7% in CY21E. On earnings visibility and expected improvement in return ratios, we increase our target price to Rs 1040/share.
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