Varun Beverages Share Price Gains As Q3 Margin Expansion Keeps Analysts Bullish

Varun Beverages Ltd.'s share price experienced a 5% increase on Wednesday, as its margin expansion in the September quarter, coupled with strong international volume growth, prompted analysts to raise bullish calls.

Net profit and revenue rose 22% and 25% year-on-year in the third quarter of calendar year 2024, beating analysts' estimates. The company's focus on operational efficiencies led to a 117-basis-point increase in Ebitda margins, now standing at 24%.

Despite heavy rainfall impacting operations, India’s sales volume still managed to grow by 5.7%, while international volumes expanded organically by 7.9%.

CLSA said Varun Beverages remains its top pick in consumer staples and maintained an 'outperform' rating on the stock, with the target price lifted from Rs 786 to Rs 827, an upside of 40% over the last closing price. It noted VBL is expanding volume in India, driven by improving affordability, increasing distribution, and new product launches.

Jefferies rated it 'buy' and raised the target price from Rs 720 to Rs 750, an upside of 30%. It said smart margin expansion allowed the earnings beat; besides, India volume growth appeared reasonable.

Morgan Stanley maintained 'overweight' with a target price of Rs 674 target, a likely 13% upside.

The company's plan to raise Rs 7,500 crore via QIP was also well received by analysts.