Multibagger stock Varun Beverages climbs nearly 4% after strong Q3 results; CLSA sees 23% upside

Shares of Varun Beverages Limited (VBL) ended over 3 per cent higher at Rs 1347.45 in Tuesday’s trade (February 6), a day after posting strong performance in the October-December period.

At day's high, shares of the Gurugram-based company scaled 3.67 per cent  per cent to  Rs 1350 per share on the BSE.

Varun Beverages, which follows the calendar year as its financial year, in the December-ended quarter posted a 76.35 per cent increase in consolidated net profit to Rs 143.76 crore on the back of growth in revenue from operations and improved profit margins. It, however, stood at Rs 81.52 crore during the same period a year ago.

Revenue from operations at the Pepsi India bottler also logged a double-digit increase of 21 per cent on year to Rs 2,730.98 crore during the quarter as against Rs 2,257.20 in the corresponding quarter last fiscal.

Revenue from operations was "driven by volume growth in both India and international markets," said the company in an earnings statement.

In 2023, the consolidated sales volume of VBL "grew 13.9 per cent to 912.9 million cases" led by a double-digit growth in both Indian (13 per cent growth) and international (18 per cent growth) markets, it added.

On the results, VBL Chairman Ravi Jaipuria said, "Despite the abnormally high unseasonal rains in the peak season, we are pleased to conclude CY2023 on a strong note. We witnessed a healthy double-digit volume growth in both Indian and international markets." 

Brokerages view on VBL after Q3 results

Global brokerage Jefferies has retained its buy call on the stock and has raised the target from Rs 1450 to Rs 1480. The brokerage noted that VBL ended the year 2023 on a high despite a seasonally low December quarter. Further, it highlighted that debt levels at the beverage company have increased as capex continues to remain high. Nevertheless, the US-based brokerage likes the ‘growth mindset; of the company which is set to expand capacity by 45% for CY24. 

Another global brokerage CLSA also maintained its ‘buy’ on the counter with a raised target of Rs 1600, implying a potential upside of 23 per cent.