Varun Beverages shares rise 121% from 52-week low; more upside likely?

Varun Beverages shares rise 121% from 52-week low; more upside likely?

Varun Beverages share price today: In the current trading session, Varun Beverages stock touched an intraday high of Rs 1237, rising 1.06 per cent against the previous close of Rs 1224.70 on BSE.

Varun Beverages shares have zoomed 98.54% in a year but lost 6.88% in 2023. Varun Beverages shares have zoomed 98.54% in a year but lost 6.88% in 2023.

Shares of Varun Beverages have zoomed 121% from their 52 week low hit last year. Varun Beverages stock, which hit a yearly low of Rs 557.51 on February 24, 2022 closed at Rs 1232 today, translating into a rally of 120.98 per cent or Rs 674 during the period. However, Varun Beverages shares lost 20% from their record high in a month recently, leaving investors puzzled about the outlook of the multibagger stock. Varun Beverages stock, which hit at an all-time high of Rs 1432 on December 12, 2022 fell to a low of Rs 1135 on January 13 this year, translating into a loss of 20.74 per cent or Rs 297 during the period.  

The correction came after the World Health Organization (WHO) on December 13,2022 issued guidelines to raise taxation on sugar sweetened beverages. WHO said that a 10 per cent tax induced price hike could reduce the purchase of sugar sweetened beverages by 16 per cent. 

“Any increase in GST/cess could adversely impact the consumption of carbonated drinks and other beverages. It is important to note that 40 per cent tax is already levied on carbonated soft drinks,” ICICI Securities said in a note. 

Profit-booking from record high levels also led to the recent correction in the stock of Pepsico India bottler. 

However, the stock has recovered marginally from the January 13 level.  

In the current trading session, Varun Beverages stock touched an intraday high of Rs 1237, rising 1.06 per cent against the previous close of Rs  1224.70 on BSE. Shares of Varun Beverages have been gaining for the last five sessions. In a year, the stock has zoomed 98.54% but lost 6.88% in 2023. Market cap of the firm rose to Rs 77,992 crore. A total of 0.27 lakh shares of the firm changed hands, amounting to a turnover of Rs 3.31 crore on the BSE.  

In terms of technicals, the relative strength index (RSI) of Varun Beverages stands at 44, signaling the stock is neither oversold nor overbought. The stock has a one-year beta of 0.7, indicating low volatility during the period.  Varun Beverages shares are trading higher than the 5 day, 100 day and 200 day moving averages but lower than 20 day and 50 day moving averages.  

Here’s a look at what analysts said about the prospects of Varun Beverages stock after the one year rally and the subsequent correction. 

Nagaraj Shetti, Technical Research Analyst, HDFC Securities sees more correction on the Varun Beverages counter in the near future. “Varun Beverages stock has been in a strong uptrend over the last one year. The formation of higher tops and bottoms on the weekly chart was signaling a buy on dips opportunity for the stock price in the past. Currently, the stock price has formed an important top reversal pattern at Rs 1432 levels in the last month and has started with decent downward correction. Having formed an important top reversal, we expect VBL to correct further in the coming weeks. The next lower supports of around Rs 1100-1050 could provide base for the stock price to witness upside bounce from the lows,” said Shetti 

Om Mehra, Equity Research Analyst at Choice Broking said, “The stock has increased in value from  Rs 560 to  Rs 1440 levels in 2022. Throughout this uptrend, the stock has not shown any meaningful corrections. On weekly charts, the stock has consistently displayed a higher high, higher low structure. The stock has declined after reaching new all-time highs of 1440 and has held up well against the initial support, which is located at 1110 levels. RSI is currently trading at a comfortable level of 40, indicating that a recovery from support levels can be sustained. The stock faces immediate resistance between 1250 and 1275, which corresponds to the 50 and 20 day exponential moving averages. Varun beverages have the potential to reach record highs and trend upward if they maintain above the indicated resistance. When the stock rebounded from its first support level of 1110, the MFI indicator struck a low of 20, and then it rose to 26, indicating that the stock can go further in the direction of all-time high levels. With a medium-term target price of 1400, we recommend buying VBL at the CMP of Rs 1207. “ 

Jitendra Upadhyay, Sr. Equity Research Analyst, Bonanza Portfolio said, “The concentration on dairy beverages and juices, as well as the diversification of its new product offering into rural and semi-rural areas, are projected to provide good EBITDA growth. Future return ratios ought to be strongly influenced by this.” 

Commenting on the business performance of Varun Beverages, Vinit Bolinjkar, Head of Research, Ventura Securities said, “An expansion in the distribution was seen, which was earlier impacted by Covid. Additionally their new product, Sting energy has been a strong growth driver for VBL with volumes for than doubling YoY in CY22. This brand now contributes more than 10% to the topline. There is a strong tailwind in the India’s non-alcoholic beverages market and this market is expected to grow to INR 1.47 lakh crores by 2030, growing at CAGR of 8.7%. “      

Laxmikant Shukla, Technical Research Analyst, YES Securities said, “After making a high of Rs 1432 on Dec 12, 2022, stock has fallen and made a swing low of Rs 1122 in Jan 2023. Afterwards, the stock is continuously forming higher highs and higher lows in the last few trading sessions and successfully closed above 100 days SMA. Beside this, the stock has been trading above its lower band of Bollinger from the last three days. Hence, we expect positive trend in the stock from here on. Trader can look to buy the stock in the range of Rs 1215-1200 for potential target of Rs 1390 levels. One can place a stop loss below Rs 1120.” 

Ravi Singhal, CEO, GCL said, “Good product mix and high margin helped Varun Beverages to help maintain growth. The stock looks good for a target of Rs 1500.  

Abhijeet from Tips2trade said, "Varun Beverages has a strong support at Rs 1,148 on the daily charts. A close above the resistance of Rs 1195 should lead to a decent recovery till Rs 1294-1380 in the near term." 

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Published on: Jan 20, 2023, 1:38 PM IST
Posted by: Tarab Zaidi, Jan 20, 2023, 1:34 PM IST