Varun Beverages share price jumps 3% as CLSA upgrades stock to ‘high conviction outperform’; sees potential upside 70%

Varun Beverages share price have sharply bounced in the last two sessions gaining around 8%. Analysts believe that the bounce may extend towards ₹500 with strong support now seen around ₹445. Varun Beverages share price today opened at ₹456.15 apiece on the BSE, the stock touched an intraday high of ₹471.75 per share and an intraday low of ₹448.60 apiece.

Riyank Arora, Technical Analyst, Mehta Equities Ltd highlighted that Varun Beverages share price has given a good breakout above its immediate resistance mark of 460 and managing to hold well above the same. With the volumes rising and charts of majority FMCG and consumption stocks being positive, we expect the stock to pick momentum towards 500 and above levels. A strict stoploss should be kept below the major support at 440 mark on the stock.

According to media reports, Hong Kong-based brokerage CLSA has raised its rating on soda bottler Varun Beverages to a 'high conviction' outperform, up from its previous 'outperform' designation. However, the brokerage slightly reduced its target price for the soda company to ₹770 per share, down from ₹802.

The brokerage believes the risk-reward is highly attractive, even with increasing competition in the market. This suggests a potential gain of nearly 70 percent. Current pricing trends indicate there could be a five percent EBITDA decline for CY25. Additionally, capital expenditures as a percentage of sales reached their highest point in CY23, leading CLSA to anticipate a reduction in capex intensity in the future.

Q3 Results

Varun Beverages announced a 36% increase in consolidated net profit, reaching ₹195.64 crore for the December quarter of 2024, attributed to volume growth and enhanced margins. The company, which operates on a calendar year for its financial reporting, had recorded a net profit of ₹143.76 crore during the October-December period last year, according to a regulatory update from Varun Beverages.

Revenue from operations for the fourth quarter rose to ₹3,817.61 crore, compared to ₹2,730.98 crore in the same period of the previous fiscal year. The "EBITDA saw a growth of 38.7% to ₹579.97 crore, up from ₹418.29 crore," the company stated in its earnings release. Total expenses were reported at ₹3,607.43 crore, down from ₹3,862.25 crore previously.

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