Varun Beverages shares rebound 94% from 52 week low; Rs 1,200 price target in sight?    

Shares of Varun Beverages Ltd have recovered 94% from their 52-week low this year. The beverages stock, which fell to a 52-week low of Rs 550 on February 3, 2023, rose to a high of Rs 1,067.95 in Friday’s session, delivering 93.99% returns during the period. Varun Beverages stock is a multibagger with returns of 259% and 443% in two and three years, respectively.

The stock has gained 56% in a year and 60.75% in 2023.

In the previous session, Varun Beverages shares ended flat at Rs 1067.95 against Thursday’s close of Rs 1076.35 on BSE. A total of 0.23 lakh shares of the firm changed hands, amounting to a turnover of Rs 2.50 crore on BSE. Market cap of the firm fell to Rs 1.20 lakh crore. The stock has a one-year beta of 0.1 , indicating very low volatility during the period.

Brokerage Elara Capital has raised Varun Beverages' target price to Rs 1180 from Rs 1065

After a visit by the brokerage to the Varun Beverages plant in Nuh, Gurgaon, the Elara Capital said it would stick to its estimates for CY24–25 and reiterate 'Accumulate' with a higher target price of Rs 1,180 from Rs 1,065 as it assigns 48x (from 45x) CY25E P/E, given a roll-forward and 45% increase in capacity over CY22.

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"We estimate Varun Beverages, to post an earnings per share compound annual growth rate (EPS CAGR) of 21.5% during CY23-25 which is highest amongst our coverage universe," the brokerage said.

Brokerage Motilal Oswal Securities valued Varun Beverages at 47 times 2025 EPS and suggested a target of Rs 1,090 on the stock

It expects Varun Beverages to maintain its earnings momentum, led by increased penetration in newly acquired territories in South and West India, higher acceptance of newly launched products, continued expansion in capacity and distribution reach and growing refrigeration in rural and semi-rural areas. It also expects a scale-up in Varun beverages' international operations.

Axis Securities has assigned a target price of Rs 1200 to the stock.

“We believe 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), 3) Expansion in its distribution reach to 3.5 Mn outlets in CY23 from 3 Mn 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 and 5) Robust growth in the International geographies,” said the brokerage.

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 over the next three years. The projections are higher than the average projections for staples stocks in India, said the brokerage.

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.

In terms of technicals, the relative strength index (RSI) of Varun Beverages stands at 60.7, signaling the stock is neither oversold nor overbought. Varun Beverages shares are trading higher than the 5, day 20 day, 50 day, 100 day, 200 day and lower than the 5 day and 10 day moving averages.

Disclaimer: Business Today provides stock market news for informational purposes only and that should not be construed as an investment advice. Readers are encouraged to consult with a qualified financial advisor before making any investment decisions.

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