Varun Beverages shares rebound 75% from 52-week low, here's what brokerages say

Shares of Pepsico bottler Varun Beverages have risen 75% from their 52-week low in a year. The multibagger stock, which touched its 52-week low of Rs 331.28 on October 26, 2023 was trading at Rs 578 level today. In comparison, Sensex climbed 25.42% in a year. In the current session, the stock was trading 1.67% lower at Rs 578.25 on BSE. 

A total of 6.77 lakh shares of the firm changed hands, amounting to a turnover of Rs 39.31 crore. Market cap of the firm fell to Rs 1.87 lakh crore.

In terms of technicals, the relative strength index (RSI) of Varun Beverages stands at 37.4, signaling the stock is trading neither in the overbought nor in the oversold zone. Varun Beverages shares stand lower than the 5 day, 10 day, 20 day, 30 day, 50 day, 100 day, 150 day and 200 day moving averages.

The near term weakness in Varun Beverages can be attributed to profit booking in the FMCG stock. The stock is down 12% in two weeks and lost 11% in three months. In a week, the FMCG stock has declined 5%. 

Global brokerage firm HSBC has initiated coverage on the stock with a 'Buy' call. It has assigned a price target of Rs 780 per share.

Varun Beverages controls 90% of PepsiCo's India bottling volume in a market with low soft drink penetration, compared to a fragmented Coca-Cola system. The firm is the second-largest soft drink bottler in India, holding 28% of the carbonated soft drink (CSD) market share. Coca-Cola’s fragmented bottling system is larger, with a 55% market share, said HSBC.

Another brokerage house Citi is bullish on the prospects of Varun Beverages. The company has strong market position in India and growth opportunity in soft drinks.

It has assigned a price target of Rs 800 to the multibagger stock. 

Varun Beverages will likely benefit from expanding geographic reach, the brokerage said adding that Revenue/EPS to grow at 23%/29% CAGR over CY23-26E.

Varun Beverages reported a 26 per cent year-on-year (Y-o-Y) rise in net profit to Rs 1262 crore in Q2. The company follows the January-December financial year. 

Revenue climbed 28 per cent to Rs 7197 crore in Q2 from Rs 5611.4 crore in the year-ago period. 

EBITDA climbed 32% to Rs 1,991 crore for the second quarter of the calendar year 2024.

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.