Varun Beverages shares to trade ex-split today; what should investors do?

Shares of FMCG major Varun Beverages Ltd will be in focus as they will trade ex-split on bourses today. The board of the firm fixed June 15, 2023 as the ‘Record Date’ for determining entitlement of equity shareholders for the purpose of sub-division / split of existing equity shares. On June 5, the firm fixed record date for subdivision of shares.   

In the previous session, Varun Beverages stock fell after three days of gain. The stock slipped to Rs 1602 intraday against the previous close of Rs 1616.55 on BSE.  Later, the stock ended 0.13% lower at Rs 1614 on BSE. In a year, the stock has zoomed 109.41% and gained 22% in 2023. Market cap of the firm stood at Rs 1.04 lakh crore. A total of 0.99 lakh shares of the firm changed hands, amounting to a turnover of Rs 16.11 crore on BSE.   

In terms of technicals, the relative strength index (RSI) of Varun Beverages stands at 52.6, signaling the stock is neither oversold nor overbought. The stock has a one-year beta of 0.8, indicating low volatility during the period. Varun Beverages shares are trading higher than the 50 day, 100 day and 200 day moving averages but lower than 5 day and 20 day moving averages.   

Watch: Varun Beverages share price jumps 6% on stock split; should you buy? See what analysts say

On May 2 this year, the board of Varun Beverages decided to split its shares in the proportion of 1:2. For every existing share an investor holds, two additional shares will be issued by the company.   

Varun Beverages, a franchisee of PepsiCo, said that the split was being done to enhance the liquidity of the company's shares and to encourage the participation of small investors.    

The stock split is likely to be completed in two months from the date of approval of the company's shareholders. Record date for the stock split will be determined once approval of shareholders is obtained.    

Abhijeet from Tips2trades said, "Varun Beverages looks sideways to bearish with strong resistance at Rs 1657 on the Daily charts. A daily close below support of Rs 1550 could lead to lower target of Rs 1460 in the near term." 

Vaishali Parekh, Vice President - Technical Research, Prabhudas Lilladher said, "The stock has formed a higher bottom formation pattern on the daily chart, taking support at 1550 levels, has indicated a decent recovery to signify strength, and has the potential to rise further in the coming days. The RSI has indicated a trend reversal to signal a buy, and with improving volume activity witnessed, we recommend a buy in this stock for an upside target of Rs 1700 while keeping a stop loss of Rs 1550." 

Kaustubh Pawaskar, DVP Fundamental Research, Sharekhan by BNP Paribas said," Varun Beverages Ltd (VBL)’s growth visibility has improved tremendously in the last five years with the addition of new territories in the domestic market and expansion in the international markets. Driven by pan India expansion of new product launches, finding a foothold in more unique markets coupled with capacity expansion and market share gains, we expect VPL to deliver a solid 25% CAGR in EPS over CY2022-24E. The company’s cash flows and return profile is expected to improve substantially in the coming years. The stock has seen a strong run-up in the last three months and hence upside risk is limited. We have a Neutral rating on the stock and would advise investors to invest at a better entry point." 

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Varun Beverages reported a strong set of earnings for the quarter ended March 2023. The company follows the January-December format to report earnings. Net profit in Q1 climbed 69 percent year-on-year to Rs 429 crore. Operating profit or EBITDA climbed 50 percent to Rs 798.1 crore.    

EBITDA margin in the March quarter rose 170 basis points year-on-year to 20.5 percent.   

Revenue rose 38 percent to Rs 3,893 crore on a year in year basis. Revenue growth was led by robust volume growth and an increase in net realisations. Sales volumes climbed 24.7 percent to 224.1 million cases, led by strong demand across India. Realisations in Q1 climbed 10.4 percent year-on-year to Rs 173.7 per case due to price hikes and improvement in energy drink mix of smaller SKUs.

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