Shares of Varun Beverages Ltd surged 11% in the last three sessions as an extended summer season is expected to push demand for the Pepsico bottler in the near term. A note by brokerage Citi Research says Varun Beverages stock is likely to record a strong rally in the next 90 days due to earnings boost as the summer season advances, and also due to benefits from recent business acquisitions in Africa. The brokerage said the recent correction was 'overdone' and the risk-reward is currently favourable over medium to long-term.
It is worth mentioning that the stock is still down 18.15% this year despite the three day rally of 11%.
Another brokerage JM Financial has maintained its 'Buy' rating on the stock with a target price of Rs 675 per share. According to the brokerage, the recent correction was ‘overdone’, and ‘prevailing market pessimism’ should be an opportunity to buy more shares of the company.
Brokerage firm DAM Capital has assigned a 'Buy' rating on Varun Beverages. It expects an upside of 32% from the previous closing price with a target of Rs 670 per share on the stock.
According to the brokerage, the recent correction offers an attractive buying opportunity for investors looking for sustainable earnings growth and market leadership in the fast-growing beverage sector.
The company is likely to see a strong near-term demand with an extended and more intense summer, says DAM Capital.
In the current session, Varun Beverages stock ended 4.95% higher at Rs 532.50 on BSE. A total of 6.68 lakh shares of the firm changed hands, amounting to a turnover of Rs 35.21 crore. With the current leg of rally, the stock has risen 27% form its 52 week low of Rs 419.40 on March 3 this year.
The multibagger stock slipped 17% in six months but risen 102.23% in two years. In terms of technicals, the relative strength index (RSI) of Varun Beverages stands at 52.9, signaling the stock is trading neither in the overbought nor in the oversold zone. Varun Beverages shares are trading higher than the 5 day, 10 day, 20 day, 30 day, 50 day but lower than the 100 day, 150 day and 200 day moving averages.
The stock has a beta of 0.8, indicating very low volatility in a year.
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.