Varun Beverages shares pip Bikaji Foods, Hatsun Agro, KRBL in market cap, returns; what’s next?

Shares of Varun Beverages Ltd have outshined peers in returns over a period of one year, three years and five years. Shares of the PepsiCo bottler have delivered multibagger returns of 108%, 467% and 610% to their shareholders in one year, three years and five years, respectively. The FMCG stock classified under the food processing industry has major peers such as Hindustan Foods, KRBL, Bikaji Foods International and Hatsun Agro.  

Shares of basmati rice producer KRBL have zoomed 75% and 64.22% in one year and three years, respectively. However, during the five-year period, the stock is down 29.59%.  

Similarly, Hindustan Foods stock has delivered 58%, 450% and 651% returns in one, three and five years, respectively. Bikaji Foods stock, which was listed on November 16 last year is down 6% this year.  

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

Shares of Hatsun Agro Product also could not match the returns Varun Beverages stock has delivered over five years. Hatsun Agro stock has delivered 11.25%, 110% and 78% returns in one, three and five years, respectively.  

Interestingly, the combined market capitalisation of peers (Rs 45,456 crore) falls short of that of Varun Beverages (Rs 1.05 lakh crore) .  

Market cap of Hatsun Agro stands at Rs 20,652 crore and Hindustan Foods is valued at Rs 6146 crore on BSE. KRBL and Bikaji Foods have market caps of Rs 8391 crore   and Rs 10,267 crore, respectively.  

ALSO READ: Varun Beverages fixes record date for stock split; shares fall after two sessions

 

In the current session, Varun Beverages stock fell 2.37% to Rs 808 against the previous close of Rs 827.65 on BSE. At 11:44 am, the stock fell 1.81% to Rs 812 on BSE. Market cap of the firm fell to Rs 1.05 lakh crore. A total of 1.35 lakh shares of the firm changed hands, amounting to a turnover of Rs 11.09 crore on BSE.   

In terms of technicals, the relative strength index (RSI) of Varun Beverages stands at 58.2, 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 lower than the 5 day, 20 day, 50 day, 100 day and 200 day moving averages.  

Kotak Institutional Equities has raised its share price target on Varun Beverages to Rs 875 from Rs 795 earlier, implying 44 times estimated June 2025 earnings per shares.  

The brokerage which finds the stock fairly-priced, said the 112 per cent rally that the multibagger Varun Beverages saw in a year was led by the PepsiCo bottler's top-notch execution and consistent earnings upgrades. It noted that 2023 consensus EPS estimate for Varun Beverages is up 50 per cent-plus in the past 12 months.  

That said, Kotak sees the earnings upgrade cycle could pause for now, owing to milder-than-usual summers and unseasonal rains in North India. It has downgraded Varun beverages by a notch to 'ADD' from 'Buy' but raised its fair value on the stock to Rs 875 from Rs 795,  as it sees modest upside in the short term. 

Varun Beverages is among the top picks of Axis Securities and assigned a 15% upside target to the stock ahead of the ex-split date of June 15.  

The brokerage believes that Varun Beverages is consistently outperforming its peers in the last several quarters despite volatile environment. 

Going ahead Varun Beverages is expected to perform well on account of 

1) Normalcy of operation and market share gains of newly acquired territories post-COVID-19 disruptions 

2) 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) 

3) Expansion in its distribution reach to 3.5 Mn outlets in CY23 from 3 Mn currently 

4) Focus on expanding high-margin Sting energy drink across outlets coupled with an increased focus on the expansion of Value-added Dairy, sports drink (Gatorade), and Juice segment 

5) Robust growth in the International geographies.  

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." 

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 held, two additional shares were issued by the company.    

Shares of the FMCG major traded ex-split on bourses on June 15. 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.    

Varun Beverages reported a stellar 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. 

Also read: Ashok Leyland shares extend gains, jump 7% today to trade near one-year high; here's what brokerages say