Large-cap stocks are currently rewarding their shareholders with spectacular returns, driven by their impressive performance in the March quarter. A recent addition to this list was Varun Beverages, one of the largest franchisee of PepsiCo in the world (outside USA).
The company's shares, which were trading at ₹1,146.25 apiece on January 30, have seen a remarkable upward trend, surging by an impressive 44.30% to reach a record high of ₹1,654 apiece during Thursday's trade. This recent surge in the company's shares has resulted in a stunning 656% gain over the past five years.
Since its market debut in 2016, the stock has delivered an astounding return of 1130%, spiking from ₹130.56 apiece to its last trading price of ₹1,606.40. The stock has been creating new record highs with each passing day since it reported stellar performance in the March quarter.
For Q1CY23, the company delivered robust all-around performance, exceeding analysts' estimates. On May 02, it reported a 62% rise in its consolidated net profit to ₹439 crore for the March-ending quarter as against a net profit of Rs. 271 crore in the same quarter of last year, driven by high growth in revenue from operations, improvement in margins, and transition to a lower tax rate in India.
The company's sales volumes in India grew by 24.7% in Q1CY23 to 224.1 million cases from 179.7 million cases in Q1CY22, supported by strong demand across regions in India. Its revenue surged 33% YoY to ₹3,893 crore in Q1, aided by strong volume growth and higher realization.
The company's net realization per case stood at ₹174, up 10% YoY, primarily due to selective price hikes during Q1CY22 and a higher mix of high-margin Sting energy drink.
Meanwhile, the company's board has approved a stock split in the ratio of 1:2, subject to the approval of equity shareholders. The existing equity shares of the company, which have a face value of Rs. 10 each, will be split into two equity shares with a face value of Rs. 5 each, fully paid-up.
Going forward, domestic brokerage firm Axis Securities believes that Varun Beverages is expected to continue its strong growth momentum due to several factors. These include the normalization of operations and market share gains in newly acquired territories following COVID-19.
The management’s continued focus on the efficient go-to-market execution in acquired and underpenetrated territories as reflected in its recently commissioned Bihar plant operations (it has started gaining market share).
Expansion in its distribution reach to 3.5 million outlets in CY23 from 3 million currently, a focus on expanding high-margin Sting energy drink across outlets coupled with an increased focus on the expansion of the value-added dairy, sports drink (Gatorade), and juice segments, and robust growth in international geographies, according to Axis Securities.
ICICI Securities, on the other hand, believes that the company has likely gained market shares across segments in Q1-CY23. The company has added multiple growth engines, such as the launch of Sting, which accounts for approximately 10% of its net sales.
"Introduction of dairy products with higher realizations and similar margins, and steady investments in capex and visi coolers," said the brokerage firm.
Varun Beverages is the second-largest bottling company of PepsiCo's beverages in the world outside the United States. The company produces and distributes a wide range of carbonated soft drinks (CSDs), as well as a large selection of non-carbonated beverages (NCBs), including packaged drinking water sold under trademarks owned by PepsiCo.
15 analysts polled by MintGenie on average have a 'strong buy' call on the stock.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.
