PepsiCo & Coke earnings indicate tailwinds for Varun Beverages: Jefferies

PepsiCo saw double-digit volume growth in India while Coke clocked 10 percent volume growth in its Asia Pacific unit

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Both PepsiCo and Coca-Cola have highlighted strong volume growth in their beverage portfolio in India for the March quarter, during their global results conference calls and this is a positive for Varun Beverages, believes brokerage firm, Jefferies.

PepsiCo saw double-digit volume growth in India, which enabled 15 percent volume growth in its AMESA (Africa, Middle East and South Asia) unit. Coke clocked 10 percent volume growth in its Asia Pacific unit, led by India, China and Australia. If volumes are growing for growth, it only indicates that the entire cola market in India is expanding.

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“The companies seem to be excited about India and expanding distribution. Coke, for example, added 40,000 coolers ahead of the season (summer). We expect Varun Beverages to also add similar numbers annually in the medium term,” the Jefferies report stated.

Pepsi bottler Varun Beverages will report its March quarter earnings on May 2. The company is expected to report  40-50 percent growth in EBITDA and earnings, accompanied by volume growth of 20 percent.

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At 11:15 am, the stock was trading at Rs 1,458 on the NSE, just above the flatline. In 2023 so far, it has gained over 9 percent. Jefferies’ target price of Rs 1,540 on the stock indicates a 7 percent upside from the current market price.

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