Shares of Varun Beverages Ltd have surged 24% from their 52-week low in ten trading sessions. The multibagger stock, which fell to a 52-week low of Rs 419.40 on March 3 this year, rose to a high of Rs 522.45 in the current session on BSE. Varun Beverages stock has risen for the third straight session today. It rose 3% intraday to Rs 524.75 in the current session. Market capital of the firm rose to Rs 1.75 lakh crore.
Brokerage firm DAM Capital has assigned a 'Buy' rating on Varun Beverages. It sees an upside of 32% from the previous closing with a price target of Rs 670 per share on the stock.
According to the brokerage, the recent stock price 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.
The brokerage expects the PepsiCo bottler to clock a 19% compound annual growth rate (CAGR) in sales over CY24-26E. The growth is expected to be led by a 16% rise in sales volume during the same period.
DAM Capital also expects company's earnings per share (EPS) to grow at a faster pace, with a 26% CAGR, signaling improved profitability and operational efficiency.
A total of 0.96 lakh shares of the firm changed hands, amounting to a turnover of Rs 5.37 crore. The multibagger stock fell 20% in six months but climbed 96.66% 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 but higher than the 50 day, 100 day, 150 day and 200 day moving averages.
The stock has a beta of 0.8, indicating very low volatility in a year.
Jefferies has maintained its 'buy' stance on Varun Beverages and raised its target price to Rs 715.
The global brokerage believes the stock correction is overdone and sees the current valuation as attractive, given Varun Beverages’ growth potential. A strong summer season is expected to act as a key short-term catalyst.
Global brokerage CLSA has upgraded its rating on Varun Beverages to a 'high conviction outperform' from 'outperform'. However, it marginally trimmed its price target to Rs 770 from the previous Rs 802 per share.
CLSA said the risk-reward for the stock is very compelling even assuming an impact due to rising competition within the beverage market.
KR Choksey has assigned a price target of Rs 657 on the VBL stock.
Justifying its bullish stance behind the stock, the brokerage said the company is driving capacity expansion, product diversification, and international growth, targeting higher margins through backward integration and general trade while sustaining double-digit growth across beverages, snacks, and new markets such as Ghana and Tanzania with strong financial backing and sustainability initiatives.
"We expect Revenue/EBITDA/Adj. PAT to grow by 22.1%/23.2%/27.9% CAGR over CY24-26E. We apply a P/E multiple of 52.0x on CY26E EPS of INR 12.6, resulting in a target price of Rs 657/share," said KR Choksey.
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.