Over 1,000% return in 5 years; popular FMCG large-cap stock poised to rise, here’s what brokerage says

FMCG giant Varun Beverages manufactures beverages and food products such as Pepsi, Mountain Dew, Slice, Cream Bell, Lays, Doritos, and Kurkure. The company’s stock has rewarded investors with over an 11-time return in the last five years. Should you buy it now?

Domestic brokerage KRChoksey is bullish on the large-cap stock with an upside potential of 15.51 per cent.

Here are some key reasons why the brokerage is bullish on this FMCG stock:

Expected Improvement in Realizations: The broker believes the company's profitability will improve due to higher selling prices (realizations) driven by a better product mix and cost efficiencies.

Strong Long-term Growth Potential: In the report, KRChoksey highlighted VBL's strong market position and expected net revenue, EBITDA, and adjusted PAT to grow significantly over the next few years, with a CAGR of 25.7 per cent, 27.9 per cent, and 32.1 per cent, respectively.

Focus on Future Earnings: While acknowledging that its Q1CY24 volume is disappointing, the brokerage has lowered its valuation based on CY25E earnings rather than CY24E.

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KRChoksey reaffirms ‘buy’ rating on Varun Beverages – Check out target

KRChoksey has recommended buying Varun Beverages shares for a one-year target price of Rs 1,732.

VBL Shares vs Nifty Indices

On May 15, 2024, NSE reported that VBL closed at Rs 1,499.40. Meanwhile, Nifty50 has seen a 94.62 per cent return over the last five years, while the Nifty FMCG index has recorded 86.93 per cent returns in the same time frame. The stock's PE ratio is 102.69.