Shares of Varun Beverages Ltd look set to cross the Rs 1,000 mark, thanks to a strong growth momentum amid favourable macroeconomic indicators. Interestingly, the Varun Beverages stock is yet to scale the Rs 1,000 mark despite delivering multibagger returns in two and three years. Shares of Varun Beverages zoomed 202% and 518% in two years and three years, respectively.
However, the stock gained 64% in a year and 39.23% in 2023, signaling with decreasing time span, the scrip has delivered lesser returns to investors.
Axis Securities has termed Varun Beverages as its top pick in November. It expects the stock to hit Rs 1050 in year, a 16% upside to the current level.
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Here’s a look at what the brokerage said on the outlook of the stock.
Varun Beverages is expected to continue its strong growth momentum on account of
1) Normalcy of operation and market share gains of newly acquired territories post COVID-19 disruptions
2) The management’s continued focus on the efficient go-to-market execution in acquired and underpenetrated territories as reflected in its recently commissioned Bihar plant operations (it has started gaining market share).
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3) Expansion in its distribution reach to 3.5 Mn outlets in CY23 from 3 million currently.
4) Focus on expanding high-margin Sting energy drink across outlets coupled with increased focus on expansion of Value Added Dairy, sports drink (Gatorade) and Juice segment
5) Robust growth in the international geographies.
Axis Securities is not alone in assigning a target of over Rs 1,000 to the stock.
Shiju Koothupalakkal - Technical Research Analyst, Prabhudas Lilladher said, "The stock has been in consolidation for quite some time with some fluctuations witnessed in between and support maintained near Rs 905 levels. On the upside, a decisive breach above Rs 950 zone is necessary to improve the bias and confirm a breakout to establish some conviction for further rise with next initial target expected till Rs 980 and thereafter Rs 1050 levels if strength sustains. At the same time, a decisive breach below Rs 890 zone shall weaken the bias and anticipate for further slide with next downside target expected till Rs 840-830 levels."
Brokerage firm BoFA Securities raised its price target to Rs 1,030 per share in September-end. The brokerage expects the company to sustain its strong revenue and profit growth despite the volatile macroeconomic environment.
It listed out three drivers that could push growth for Varun Beverages. First was a potential distribution upside. New territories and product lines are also possible growth drivers for the company.
Over the next three years, BoFA Securities expects the firm’s revenue to rise at a Compounded Annual Growth Rate (CAGR) of 19 percent and Earnings per Share (EPS) to grow at a 23 percent CAGR. The projections are higher than the average projections for staples stocks in India, BoFA Securities said.
In the current session, Varun Beverages shares were trading flat at Rs 923.95 against the previous close of Rs 918.55 on BSE. A total of 0.29 lakh shares of the firm changed hands, amounting to a turnover of Rs 2.73 crore on BSE. Market cap of the firm rose to Rs 1.20 lakh crore. The stock has a one-year beta of 1.2, indicating high volatility during the period.
In terms of technicals, the relative strength index (RSI) of Varun Beverages stands at 53.7, signaling the stock is neither oversold nor overbought. Varun Beverages shares are trading higher than the 20 day, 50 day, 100 day, 200 day and lower than the 5 day and 10 day moving averages.
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