Varun Beverages shares: Despite 23% fall in a month, stock can breach record high, here's why  

Shares of Varun Beverages Ltd, which has slipped 23% in a month are set for a bounce back, according to global brokerage CLSA. The brokerage has upgraded its rating on Varun Beverages to a 'high conviction outperform' from 'outperform'. However, it marginally trimmed its price target on the stock to Rs 770 from the previous Rs 802 per share. This amounts to a 70% upside potential from the previous close despite the price target cut. The stock hit a record high of Rs 682.84 on July 29, 2024. 

In the previous session, Varun Beverages stock fell to its 52 week low of Rs 419.40 on BSE. Stock of the PepsiCo bottler fell 1.30% to Rs 451 today against the previous close of Rs 456.95. 

Market cap of the PepsiCo bottler fell to Rs 1.54 lakh crore. A total of 0.53 lakh shares of the firm changed hands, amounting to a turnover of Rs 2.37 crore. The multibagger stock fell 20% in a year but zoomed 68% in two years. 

In terms of technicals, the relative strength index (RSI) of Varun Beverages stands at 36.2, signaling the stock is trading neither in the overbought nor in the oversold zone. Varun Beverages shares are trading lower than the 5 day, 10 day, 20 day, 30 day, 50 day, 150 day and 200 day moving averages. 

The stock has a beta of 0.8, indicating very low volatility in a year. 

CLSA said the risk-reward for the stock is very compelling even assuming an impact due to rising competition within the beverage market.

CLSA said the current pricing scenarios signal a 5% bear case downside for the company's Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) and a 6.2% bear case downside to its Earnings Per Share (EPS) estimates for calendar year 2025.

Varun Beverages' capex as a percentage of sales rose in the 2023 calendar year and CLSA sees the capex intensity to now ease.

Ameya Ranadive Chartered Market Technician, CFTe, Sr Technical Analyst, Stoxbox said, "Varun Beverages Ltd has witnessed a sharp breakdown, currently trading at Rs 435, with heavy volumes confirming the selling pressure. The stock has decisively breached key support levels, and the short-term trend remains weak. A wait-and-watch approach is advisable rather than bottom-fishing at current levels. Confirmation of stabilization, either through a price consolidation or bullish divergence in momentum indicators, is necessary before considering fresh positions. Until then, the risk of further downside remains. Traders should monitor volume activity and any signs of trend reversal before making a decision."

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.