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What is the story about?
Shares of Varun Beverages Ltd. will continue to remain in focus on Wednesday, July 29, after the PepsiCo bottler reported a mixed June quarter, prompting varied reactions from brokerages.
While the company's India volume growth missed expectations, most analysts remained constructive on the long-term outlook, citing resilient margins, strong international growth and attractive valuations following the sharp correction in the stock.
Varun Beverages reported India volume growth of 14.4% during the quarter, well below Street expectations of over 20%. Management attributed the slowdown to weather-related disruptions in April, noting that volume growth remained above 20% in other months since the season began in March.
Revenue rose 21% year-on-year to ₹8,650.5 crore, marginally ahead of CNBC-TV18 estimates. EBITDA increased 17% to ₹2,344 crore, although it came in slightly below expectations. EBITDA margin narrowed 90 basis points to 27.1%, while gross margin improved 44 basis points to 55%, aided by a favourable international business mix, early raw material stocking and a higher contribution from low- and no-sugar beverages.
International operations remained a bright spot, with volumes benefiting from the Twizza acquisition in South Africa. Beverage realisations improved 1.2% on a consolidated basis, supported by stronger pricing in overseas markets.
Chairman Ravi Jaipuria said the company remains well positioned to deliver sustained and profitable growth, backed by adequate capacity, an expanding product portfolio, strong partnerships and a wide distribution network.
How brokerages reacted
Kotak Institutional Equities upgraded the stock to 'Buy' with a target price of ₹530. The brokerage described the quarter as mixed, highlighting weaker-than-expected India volume growth and pressure on international margins due to product mix and higher depreciation.
However, it pointed to stable domestic realisations, resilient India EBITDA margins and robust growth in international operations as key positives.
CLSA retained its 'High Conviction Outperform' rating with a target price of ₹629. It believes the stock's sharp post-results correction was excessive, noting that EBITDA and profit were broadly in line despite higher packaging and transportation costs.
CLSA also expects competitive pressures to ease and sees continued benefits from production efficiencies and distribution expansion.
JPMorgan maintained a 'Neutral' rating with a target price of ₹530. The brokerage said management addressed several investor concerns but cautioned that weather disruptions and competitive intensity at lower price points remain near-term challenges. It expects domestic volume growth to remain the key catalyst for the stock.
Citi reiterated its 'Buy' rating but lowered its target price to ₹580 from ₹640. The brokerage said investor concerns continue to centre on whether India's growth trajectory has structurally slowed amid rising competition.
However, Citi remains positive on the long-term opportunity, citing low category penetration and signs that competitive intensity could gradually moderate.
Of the 28 analysts that have coverage on Varun Beverage, 24 of them have a 'Buy' rating, while four have a 'Hold' recommendation on the stock.
Varun Beverages shares ended 7.5% lower at ₹429.50 on Tuesday following the earnings announcement, taking the stock's decline in 2026 so far to 13%.
While the company's India volume growth missed expectations, most analysts remained constructive on the long-term outlook, citing resilient margins, strong international growth and attractive valuations following the sharp correction in the stock.
Varun Beverages reported India volume growth of 14.4% during the quarter, well below Street expectations of over 20%. Management attributed the slowdown to weather-related disruptions in April, noting that volume growth remained above 20% in other months since the season began in March.
Revenue rose 21% year-on-year to ₹8,650.5 crore, marginally ahead of CNBC-TV18 estimates. EBITDA increased 17% to ₹2,344 crore, although it came in slightly below expectations. EBITDA margin narrowed 90 basis points to 27.1%, while gross margin improved 44 basis points to 55%, aided by a favourable international business mix, early raw material stocking and a higher contribution from low- and no-sugar beverages.
International operations remained a bright spot, with volumes benefiting from the Twizza acquisition in South Africa. Beverage realisations improved 1.2% on a consolidated basis, supported by stronger pricing in overseas markets.
Chairman Ravi Jaipuria said the company remains well positioned to deliver sustained and profitable growth, backed by adequate capacity, an expanding product portfolio, strong partnerships and a wide distribution network.
How brokerages reacted
Kotak Institutional Equities upgraded the stock to 'Buy' with a target price of ₹530. The brokerage described the quarter as mixed, highlighting weaker-than-expected India volume growth and pressure on international margins due to product mix and higher depreciation.
However, it pointed to stable domestic realisations, resilient India EBITDA margins and robust growth in international operations as key positives.
CLSA retained its 'High Conviction Outperform' rating with a target price of ₹629. It believes the stock's sharp post-results correction was excessive, noting that EBITDA and profit were broadly in line despite higher packaging and transportation costs.
CLSA also expects competitive pressures to ease and sees continued benefits from production efficiencies and distribution expansion.
JPMorgan maintained a 'Neutral' rating with a target price of ₹530. The brokerage said management addressed several investor concerns but cautioned that weather disruptions and competitive intensity at lower price points remain near-term challenges. It expects domestic volume growth to remain the key catalyst for the stock.
Citi reiterated its 'Buy' rating but lowered its target price to ₹580 from ₹640. The brokerage said investor concerns continue to centre on whether India's growth trajectory has structurally slowed amid rising competition.
However, Citi remains positive on the long-term opportunity, citing low category penetration and signs that competitive intensity could gradually moderate.
Of the 28 analysts that have coverage on Varun Beverage, 24 of them have a 'Buy' rating, while four have a 'Hold' recommendation on the stock.
Varun Beverages shares ended 7.5% lower at ₹429.50 on Tuesday following the earnings announcement, taking the stock's decline in 2026 so far to 13%.
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