On Tuesday, March 4, brokerage company CLSA increased Varun Beverages Ltd.’s rating and forecast a nearly 70% increase in the stock‘s value from the previous day’s closing price.
Varun Beverages Shares Poised for 70% Surge as CLSA Adds to High-Conviction List
CLSA improved Varun Beverages’ rating to “high conviction outperform” but reduced its price objective to ₹770 per share from ₹802 before. The 70% upside potential remains despite the price target reduction.
The firm stated that the stock’s risk-reward ratio is highly appealing, especially after accounting for the impact of increased competition in the beverage sector.
CLSA stated in its note that current pricing scenarios suggest a 5% bear case downside for the company’s Earnings Before Interest, Tax, Depreciation, and Amortization (EBITDA) and a 6.2% bear case downside for its Earnings Per Share (EPS) forecasts for calendar year 2025.
Varun Beverages’ capex as a proportion of sales peaked in the calendar year 2023, and CLSA anticipates that capex intensity will now decline.
The brokerage stated that the company’s total addressable market is quite huge and continues to grow, and that soft drink consumption in the nation has a significant upside potential.
Even yet, CLSA has reduced its 2025-2027 calendar year profit predictions by 4% – 5% to reflect increased competition.
Varun Beverages’ December quarter revenue rose 38% to ₹3,689 crore over the previous year. Its net profit increased 40% to ₹185 crore. The company’s EBITDA increased by 39% to ₹580 crore, with a stable EBITDA margin of 15.7%.
The business suggested a final dividend of ₹0.5 for the fiscal year ending December 31, 2024. The board of directors has yet to set a record date for this.
Of the 26 analysts that cover the stock, 23 have a ‘buy’ recommendation and three have a ‘hold’ rating.
Varun Beverages closed the previous trading session 4.64% higher at ₹456.3 per share. It has declined by 29.89% this year.
