Shares of Varun Beverages jumped over 3% to the day’s high of Rs 1,350 on the NSE on Tuesday following the company’s strong December quarter earnings and positive stock reviews by a clutch of top brokerages. Jefferies and Nuvama reiterated their buy ratings while Kotak Institutional Equities recommended an add view.

VBL which follows the January-December calendar reported its Q42023 profit after tax (PAT) jump by 76% year-on-year (YoY) to Rs 143.80 crore with revenue growth in the October-December quarter at 21% YoY to Rs 2,667.70 crore. The Earnings Before Interest, Taxes, Depreciation and Amortisation (EBITDA) was higher by 36% YoY to Rs 418.30 crore.

Here’s what brokerages recommended.

Jefferies: Buy | Target: Rs 1,480

Jefferies has maintained a buy view on Varun Beverages and hiked the price target to Rs 1,480 from an earlier target of Rs 1,450. Its Q3 performance was a huge contrast to every other FMCG company, Jefferies said as the company ended the year on a high in a seasonally low quarter.

However, the debt levels have swelled as capex continues to stay high, the US brokerage said, though it lauded the “growth mindset” of the company which is set to expand capacity by 45% for CY24.

Nuvama: Buy | Target: Rs 1,492

Calling VBL an oasis of growth, Nuvama raised its target multiple to 55X Q1CY26 PE, yielding a revised target of Rs 1,492 versus Rs 1,031 earlier even as it retained a ‘Buy’ view.The company reported yet another stellar quarter with a 15% EBITDA beat while volumes surged 18% YoY, the brokerage said in a note.Net debt increased to Rs 4,700 crore from CY22 at Rs 3,400 crore given the capacity expansion.

“Where volume growth for consumer staples/SSSG for most discretionary companies remains muted, VBL is an exception. While Campa
Cola entry is a monitorable in the upcoming season, there are multiple growth levers via products and distribution expansion, which can sustain the growth. We also consolidate South Africa operations,” Nuvama said.

Kotak Equities: Add | Target: Rs 1,400

Kotak has reiterated an ‘Add’ rating on the stock for a revised fair value of Rs 1,400 from an earlier target of Rs 1,250, estimating a 27% EPS CAGR. The brokerage opines that the stage is now set for the company to witness strong CY2024.

VBL’s volume and value growth was aided by broad-based growth across India/overseas. Stellar run of Sting helped VBL defy the consumption slowdown in India, it said.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)

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