Varun Beverages: MOFSL says Buy stock, shares 4 reasons why VBL may maintain earnings momentum

Brokerage MOFSL has maintained its 'Buy' rating on Varun Beverages Ltd (VBL), stating that the PepsiCo bottler is expected to sustain its earnings momentum. This growth is expected to be driven by expansion in international markets, stable growth in the domestic market, continued capacity and distribution expansion, and increased refrigeration penetration in rural and semi-rural areas.

Following VBL’s March quarter results (Q1), the brokerage has largely maintained its Calendar 2025 and Calendar 2026 earnings estimates. MOFSL values the stock at 55 times 2026 earnings per share, arriving at a target price of Rs 665. “We reiterate our Buy rating on the stock,” the brokerage stated.

For the March quarter, Varun Beverages reported revenue growth of 29 per cent YoY, led by a 30 per cent YoY increase in volume, which was driven by 15.5 per cent organic volume growth and the consolidation of South Africa and DRC operations in the current quarter. Realization per case remained flat YoY at Rs 178.

“VBL maintained its volume growth trajectory in the domestic market and continued expanding internationally, with the integration in South Africa progressing well. Management is confident about its double-digit growth guidance, supported by industry tailwinds and ongoing expansion into new markets through the addition of visi-coolers in both domestic and international markets,” MOFSL noted.

Among key highlights from VBL’s Q1 results, MOFSL said the company expects to sustain double-digit long-term growth and maintain 21 per cent margins in the Indian market. The management believes the Indian beverage market remains largely untapped and continues to expand.

To stay competitive, VBL is ramping up the deployment of visi-coolers amid rising competition.

In the international market, while the integration of the South Africa territory has progressed well, margins remain lower than in India due to a higher share of owned products. Going forward, the company aims to phase out non-profitable products in this market and scale up PepsiCo’s portfolio.

Meanwhile, there is a noticeable consumer shift toward healthier products, including Nimbooz, which is recording 100 per cent YoY growth. Energy drinks have also shown strong traction, remaining the fastest-growing segment, according to MOFSL, citing management commentary.

Overall, the brokerage expects Varun Beverages to report a compounded annual growth of 18 per cent in revenue, 16 per cent in Ebitda, and 26 per cent in PAT over 2025–26.