Varun Beverages shares to trade ex-dividend on April 4, what should investors do?

Shares of Pepsico bottler Varun Beverages Ltd will trade ex-dividend from April 4. The company announced an interim dividend of Rs 1.25 per share. The record date for interim dividend is also April 4. Varun Beverages stock rose 3.52% in early deals on BSE today. A total of 0.30 lakh shares of the firm changed hands, amounting to a turnover of Rs 4.33 crore on BSE. Market cap of the firm rose to Rs 1.87 lakh crore. The stock has zoomed 358% in two years and risen 539% in three years.

The stock touched its all-time high of Rs 1560.30 on February 26, 2024 and fell to its 52 week low of Rs 687.50 on April 20, 2023.

The stock delivered 102% returns in a year. It has a high PE ratio of 91.99 compared to the sectoral PE of 102.90.  The price to book ratio of the stock is 28.92

Brokerage KR Choksey has a buy call on the Varun Beverages stock. It has price target of Rs 1,732 on the FMCG stock. 

"The broader soft drinks market, encompassing carbonated soft drinks, juices, and bottled water, sustained growth during the year driven by favourable demographic shifts such as an increasing middle-cast population, and factors such as an increase in disposable incomes, urbanization, improved electricity supply in rural, and better cold storage and distribution capabilities. Due to the augmented realization per case and improved gross margins, Varun Beverages’ EBITDA for CY23 improved by 29.5% YoY to Rs 36,095 Mn, accompanied by an improvement in EBITDA margins by 133 bps to 22.5% in CY23. Net Profit grew at a strong rate of 37.3% YoY, driven by the growth in revenue from operations and improved profit margins," said KR Choksey.

Axis Securities has a target price of Rs 1,550 on Varun Beverages.

Axis Securities said Varun Beverages was expected to continue its strong growth momentum on account of normalcy of operation and market share gains of newly acquired territories post COVID-19 disruptions. It cited 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. Besides, the brokerage pointed out the expansion in VBL's its distribution reach, focus on expanding high-margin Sting energy  drink across outlets coupled with increased focus on expansion of value-added dairy, sports drink (Gatorade) and Juice segment and robust  growth in the International geographies.

Another brokerage Motilal Oswal has a target of Rs  1,600 on the stock.

“We expect Varun Beverages to maintain its earnings momentum, aided by: 1) higher acceptance of newly launched products, 2) increased penetration in newly acquired territories in India and Africa, 3) continued expansion in capacity and distribution reach, 4) growing refrigeration in rural and semi-rural areas, and 5) a scale-up in international operations,” said Motilal Oswal.

“Factoring the strong fundamentals and potential for future growth (expect 21%/22%/28% revenue/EBITDA/PAT CAGR over CY23-26), we retain our BUY rating for the stock. We value the stock at 57x Mar’26E EPS to arrive at a target price of Rs 1,600,” added the brokerage.

Varun Beverages is a beverage company. It operates franchisee of PepsiCo. The company produces and distributes a 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.