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Shares of Varun Beverages rose more than 5% in early trade on January 16 after Jefferies maintained a “buy” rating on the stock.
The global research firm maintained its ‘buy’ call on the stock with a price target of Rs 1,540 per share, representing an upside of more than 28% from the current market price.
According to the research firm, the stock is down 20% from its recent peak and is trading at 40 times CY23E P/E. It expects the company to enjoy industry-leading revenue and earnings growth.
“Return on capital employed (RoCE) is expected to expand this year. Execution is top-notch, with attractive industry opportunities. Management guides for double-digit mid-term volume growth,” it said.
According to the research firm, soft drinks are a huge market in India, but their per capita consumption is low compared to developed and developing markets. Varun Beverages’ management expects the strong industry momentum to continue, with double-digit volume growth in the medium term. We established 11-12% India volume growth in CY23-24E, the fastest growth in our coverage,” it said.
Varun Beverages was quoted at Rs 1,203.10 on the BSE at 10:19 am, up Rs 68.30, or 6.02%. It touched an intraday high of Rs 1,204.55 and an intraday low of Rs 1,138.50.
Varun Beverages has a strong track record in 2022, with a growth of over 120%. The stock has outperformed the Nifty FMCG index. Since the company went public in 2016, it has brought positive returns to shareholders yearly.
Last month, the company overtook Godrej Consumer Products Ltd to become India’s sixth-largest FMCG company by market capitalisation.
It entered the mutual fund (MF) sector list of large companies after solid share price gains in the last six months of 2022 (CY22). The Association of Mutual Funds of India (Amfi) publishes a reclassified list of stocks every six months. Stocks with a Total Market Capitalisation (MCap) Rank between 1 and 100 are classified as Large Cap, those between 101 and 250 are classified as Mid Cap, and those with a Rank of 251 and below are classified as Small Cap.
