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Axis Securities
Varun Beverages (Buy)
Target: ₹1,200
CMP: ₹1001.90
Varun Beverages (VBL) performance in Q1CY21 was an all-round beat to our and consensus estimates with healthy volume growth in domestic and international markets. Commentary on demand recovery sustaining in April (peak season) with minimal supply chain challenges and rural continuing to grow ahead of urban were key positives.
Overall consol revenues at ₹2,241 crore grew 34 per cent y-o-y (our estimate – ₹1,983 crore), on the back of 34 per cent/26 per cent surge in India/international volumes y-o-y at 126 million cases/25 million cases. Total volumes at 151 million cases were up 34 per cent y-o-y.
Overall realisations at ₹148/case was 0.6 per cent higher y-o-y owing to higher contribution from CSD and Juices yoy. Besides, its 2 years organic volume growth stood at 11.7 per cent which is healthy albeit aided by a low base.
However, a surge in Covid-19 cases could impact near term volumes. While VBL is covered on key RMs (PET resin and manageable inflation in Sugar), we do tweak our estimates a shade to factor in lower margins in CY21/22 and revise our TP to ₹1,200/share (earlier ₹1,230) given near term growth challenges.
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