Hold Varun Beverages; target of Rs 500: ICICI Securities

ICICI Securities research report on Varun Beverages

Despite rising competitive intensity and lower volumes, Varun Beverages (VBL) delivered better-than-expected Q2CY25 profitability due to better control on overheads and favourable currency movement in the Africa market. Consolidated revenue/ volume declined 2%/ 3% YoY due to unseasonal rain in India (India revenue/ volume declined 9%/ 7% YoY). International business supported the overall performance, which remained resilient with 15% volume growth. Management remains optimistic on volume recovery in H2 (supported by a low base in India) and margin improvement on the back of operational efficiencies. That said, we remain cautious given the rising competitive intensity, which could restrict the medium-term performance. Maintain HOLD.

Outlook

We maintain HOLD with a revised DCF-based TP of INR 500 (previously INR 470) as we roll forward to Jun’27. At our target price, VBL’s implied P/E would be 48x/40x CY26/CY27E. Key risks: Steep rise in competitive pressures and faster-than-expected recovery in urban and rural economies.