Shares of Varun Beverages Ltd gained 5% in early deals after the Pepsico bottler reported a 22% rise in net profit for the September 2024 quarter. Earnings in the last quarter met street estimates. Nuvama has reduced its price target to Rs 688 post Q3 earnings.
"Planned QIP proceeds of Rs 7,500 crore shall be utilised for debt reduction, acquisitions and capacity expansion in India. Retain 'BUY', but we are cutting the target P/E from 65x to 60x to factor in the disruption from Campa Cola to Varun Beverages' India volumes and the high base in Q4CY24 of 19%. This yields a revised target price of Rs 688 (earlier Rs 741)," said Nuvama.
ICICI Securities has maintained its hold call on the Varun Beverages stock with a price target of Rs 606. "Maintain HOLD with a DCF-based unchanged target price of Rs 606 (adjusted for the 2:5 stock split; implied P/E of 62/49x CY25/26E)," said the brokerage.
"We model Varun Beverages to report revenue and PAT CAGRs of 21.8% and 24.8%, respectively, over CY23-26E. While we remain positive on the company's strong growth prospects, we believe its current valuation is stretched," added ICICI Securities.
Net profit climbed to Rs 628.82 crore in Q3 of this fiscal against Rs 514 crore in the September 2023 quarter. Revenue from operations in Q3 climbed 25.3% to Rs 4932 crore against Rs 3937.7 crore in the corresponding period of the previous fiscal.
EBITDA rose 30.5% in Q3 to Rs 1,151 crore from Rs 882.1 crore in the Q3 of previous fiscal.
The Board of Directors also approved the proposal for raising of funds by way of issuance of equity shares for an aggregate amount not exceeding Rs 7,500 crore through QIP subject to receipt of approval of equity shareholders of the company.
Varun Beverages follows a calendar year of reporting (January to December).
In the current session, the stock rose 5.16% to Rs 625 on BSE. A total of 1.78 lakh shares of the firm changed hands, amounting to a turnover of Rs 10.98 crore. Market cap of the firm rose to Rs 2 lakh crore.
Varun Beverages is a beverage company. It operates franchisee of PepsiCo. The company produces and distributes a range of carbonated soft drinks (CSDs), as well as a large selection of non-carbonated beverages (NCBs), including packaged drinking water sold under trademarks owned by PepsiCo.