Varun Beverages shares rise 45% this year; Here's what technical and fundamental analysts think will happen next

Shares of Varun Beverages rose about 2% in trade to hit their 52-week high of ₹865.15 in trade on BSE on July 11. It closed with a gain of 0.88% at ₹856.10.

The stock has been witnessing traction of late as it has risen about 45% year-to-date (YTD) so far against a nearly 7% fall in the benchmark Sensex.

Varun Beverages is one of the largest franchisees of PepsiCo in the world outside the USA. As per the company's website, it produces and distributes a wide range of carbonated soft drinks, as well as a large selection of non-carbonated beverages, including packaged drinking water sold under trademarks owned by PepsiCo.

The company signed a co-packing agreement to manufacture ‘Kurkure Puffcorn’ for PepsiCo India Holdings in February 2022, which many analysts believe, will open bigger opportunities for the company in the foods segment.

Fundamentals

The stock has been gaining after the impact of Covid-19 diminished. In the last two years, the company's growth was hit significantly due to the restrictions triggered by the spread of coronavirus.

Independent market expert Kush Ghodasara pointed out that the stock of Varun Beverages has recently outperformed markets as the sales have boosted.

"I expect sales to further improve this quarter as the demand for beverages would go high due to vacations. Secondly, travelling has been picking up on a year-on-year (YoY) basis as the pandemic is fizzling out which would also boost sales of beverages," said Ghodasara.

"They have recently tied up with PepsiCo for Kurkure-puffcorn’s which is their first non-beverage entry. With their plan of reducing debt, rising beverage demand and entrance in the non-beverage market makes their future bright," Ghodasara said.

Technicals

As per Ghodasara, the stock is expected to touch ₹1,030 in the next few months with a stop loss at ₹780.

Santosh Meena, Head of Research, Swastika Investmart pointed out this counter is in a classical uptrend where it is moving in an upsloping channel formation.

"It is breaking out two months of consolidation for a fresh expansion phase where ₹880 is an immediate target while the counter is ready to move in four digits. On the downside, ₹770 should act as a floor for the counter. Momentum indicators are positively poised to support the current strength of the trend," said Meena.

Sneha Seth, Derivatives Research Analyst, Angel One said the overall chart structure looks extremely sturdy on all timeframe charts as this counter has been consistently taking support near the 20 DEMA on the daily chart which is an indication of inherent strength.

"At this juncture, it’s a ‘Stay Put’ candidate according to us; but fresh buying is not advisable considering the risk-reward scenario. We may relook at it if the stock gives any decline towards ₹805-810 and depending on the situation then, it may provide a buying opportunity there. At this juncture, we would refrain from giving any trade set up, rather existing positions can be held by keeping strict stop losses below ₹800," said Seth.

According to a MintGenie poll and an average of 14 analysts has a ‘strong buy’ call on the stock.

Disclaimer: The views and recommendations made above are those of individual analysts or broking firms and not of MintGenie.