Varun Beverages hits 52-week high on BofA Securities ‘buy’ call

BofA has raised the target price to Rs 1,030 a share, saying it estimates 19 percent CAGR revenue in next three years

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Varun Beverages, one of the largest franchisees of PepsiCo globally, hit a 52-week high of Rs 972.90 on September 26, buoyed by high volume trade and a positive brokerage outlook.

Nearly 29 lakh shares exchanged hands against a monthly average of 15 lakh.

A “buy” call for the beverage maker’s stock from the Bank of America (BofA) Securities seemed to have contributed to the upward move. Seeing a further upside from the current price levels, the foreign brokerage raised the target price for the share to Rs 1,030.

“We expect strong growth and profitability to be sustained by the company despite a volatile macro environment. Over 3 years’ period, we estimate a compound annual growth rate revenue at 19 percent and earnings per share at 23 percent,” the foreign brokerage said.

This forecast is higher than India staples average. Expansion in new territories and product lines are possible incremental drivers, it said.

At 11.45 am, Varun Beverages was quoting at Rs 972.45 on the National Stock Exchange (NSE), up Rs 46.45, or 5.02 percent. The stock is up nearly 45 percent in year-to-date terms.

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In the June quarter, the company reported a 13.23 percent year-on-year (YoY) increase in revenue from operations at Rs 5,611 crore. Net profit increased 25.31 percent YoY to Rs 1,005 crore. The operating profit margins for the quarter expanded by 200 basis points on a yearly basis to 27 percent.

Varun Beverages is in the business of manufacturing, bottling, and distributing a wide range of beverages, including carbonated soft drinks, non-carbonated beverages, packaged drinking water, and energy drinks.

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