Buy Varun Beverages; target of Rs 1200: ICICI Direct

ICICI Direct is bullish on Varun Beverages has recommended buy rating on the stock with a target price of Rs 1200 in its research report dated May 04, 2021.

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// else // $ (‘#toptitleTXT’).html(tickTxt+typevar+’already exists in your watchlist’); // //} } //$ (‘.accdiv’).html(”); //$ (‘.accdiv’).html(appndStr); } }, //complete:function(d){ // if(typparam1==1) // { // watchlist_popup(‘open’); // } //} }); }); } else { var disNam =’stock’; if($ (‘#impact_option’).html()==’STOCKS’) disNam =’stock’; if($ (‘#impact_option’).html()==’MUTUAL FUNDS’) disNam =’mutual fund’; if($ (‘#impact_option’).html()==’COMMODITIES’) disNam =’commodity’; alert(‘Please select at least one ‘+disNam); } } else { AFTERLOGINCALLBACK = ‘overlayPopup(‘+e+’, ‘+t+’, ‘+n+’)’; commonPopRHS(); /*work_div = 1; typparam = t; typparam1 = n; check_login_pop(1)*/ } } function pcSavePort(param,call_pg,dispId) { var adtxt=”; if(readCookie(‘nnmc’)){ if(call_pg == “2”) { pass_sec = 2; } else { pass_sec = 1; } var url = ‘//www.moneycontrol.com/mccode/common/saveWatchlist.php’; $ .ajax({url:url, type:”POST”, //data:{q_f:3,wSec:1,dispid:$ (‘input[name=sc_dispid_port]’).val()}, data:{q_f:3,wSec:pass_sec,dispid:dispId}, dataType:”json”, success:function(d) { //var accStr= ”; 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ICICI Direct’s research report on Varun Beverages

Varun Beverage (VBL) reported a strong set of results with 33.7% revenue growth led by 33% volume growth. However, consolidated organic volume growth was 24.7% in Q1CY21. The strong growth was led by low base quarter as well as a sharp recovery in out of home activity. Carbonated drinks, juices & water have been consumed largely ‘on the go’. VBL sold 151 million cases during the quarter. Realisation per case improved slightly by 0.6% to 148 per case mainly on account of a change in product mix. Out of total volumes, 70% comprise carbonated drinks CSD, 7% juices & 23% water. Gross margins contracted 294 bps mainly due to change in product mix & sharp increase in PET resin prices. Operating profit increased 41% to Rs 381 crore. With the 300 bps saving in employee spends & 77 bps savings in overhead spends, the company was able to improve its operating margins by 86 bps to 17%. PAT increased 127.7% to Rs 136.8 crore. Adjusting for one-off spend in base quarter, PAT growth was 25.1%

Outlook

We value the stock at 20x CY22 EV/EBITDA with a target price of Rs 1200/share (earlier target price Rs 965) and revise our recommendation from HOLD to BUY.

For all recommendations report, click here

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