Rs 257 to Rs 1,608: This FMCG stock turned into multibagger in three years; more upside ahead?

Shares of Pepsico bottler Varun Beverages have delivered 522% returns in three years. The FMCG stock, which closed at Rs 257 on July 9, 2021 rose to Rs 1608 in early deals on Thursday. In comparison, the benchmark Sensex has gained 52% during the period. Varun Beverages shares were trading flat at Rs 1597.55 on Thursday against the previous close of Rs 1599.10 on BSE. The stock touched its all-time high of Rs 1673.70 on June 19, 2024.

A total of 0.19 lakh shares of the firm changed hands, amounting to a turnover of Rs 3.01 crore on BSE. Market cap of the firm stood at Rs 2.07 lakh crore. The stock zoomed 273% in two years and rose 1013% in five years.

In terms of technicals, the relative strength index (RSI) of Varun Beverages stands at 54.4, signaling the stock is trading neither in the overbought and nor in the oversold zone. Varun Beverages shares stand lower than the 5 day, 10 day, 20 day but higher than the 30 day, 50 day 100 day, 150 day and 200 day moving averages.

Here’s a look at the outlook and price targets of the FMCG stock.

Jigar S. Patel, senior manager of equity research, Anand Rathi said, “From a technical perspective, the daily RSI indicator has given reversed from 55 levels, indicating a potential shift in momentum, and presenting an attractive buying opportunity. Consequently, traders are advised to consider buying Varun Beverages within the range of Rs 1,600-1,615, with an anticipated upside target of Rs 1,685, with a stop-loss placed at Rs 1,560 based on a daily closing price.”

Nuvama Institutional Equities expects the firm to report a strong performance in Q2. It has assigned a price target of Rs 1865 to the stock.

“We reckon Varun Beverages will turn in a very strong Q2CY24 (25% LTL volumes growth, reported 30% likely) benefiting from the harsh summer and soft base. CY23 volume/value growth of 14%/22% was strong too. India volumes grew 13% in CY23. VBL sustained double-digit volume growth via proactive portfolio expansion (Sting) and greater aggression in the Dairy, Hydration and Juice segments,” said Nuvama.

“We continue to watch out for the impact of the competitive heat from Campa Cola (aggressive ads during Cricket World Cup, although its impact on VBL is currently limited). We are raising the target valuation to 65x (from 60x), yielding an increased price target of Rs 1,865 (earlier Rs 1,687); maintain ‘BUY’,” the brokerage added.

Global brokerage CLSA is bullish on Varun Beverages and raised its price target stating that higher affordability of its products and increasing market size is helping driving growth.

CLSA has maintained its 'Buy' call on the stock with a price target of Rs 1,977 per share, higher by around 20 percent.

The brokerage said the increased affordability of Varun Beverages' offerings, new territories and products will help the PepsiCo bottler sustain growth.

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.