“Stronger recovery would result from Varun Beverages' effort in extending the distribution network in acquired territories in South/West and driving utilisation levels,” says Antique Broking in a recent report. Subsequently, the brokerage forecasts the company’s revenue and volume to deliver a compound annual growth rate (CAGR) of 25 per cent each during CY20-22.
Earnings before interest, tax, depreciation, and amortisation (Ebitda) jumped close to 50 per cent YoY to Rs 172 crore versus the expectation of Rs 124 crore, while the margin expanded by 350 basis points to 12.9 per cent, aided by sustained cost savings. With most of these benefits seen continuing in the quarters to come, the margin is likely to sustain at the current elevated levels, according to the company.
also reduced its debt on books to Rs 3,000 crore as of December 2020, from Rs 3,240 a year ago. With no major capex requirement in the near term, CY21 may see a further debt reduction. Market share gains and continued traction in international operations are other key tailwinds for the stock, say experts.
On Monday, even as the markets were weak, shares of Varun Beverages hit an all-time high of Rs 1,075 intraday, before ending with gains of 5.4 per cent. However, the sharp appreciation in the stock does not offer a favourable risk-reward. Investors are, therefore, advised to accumulate the stock on the decline.