Synopsis: Motilal Oswal maintains a Buy on Varun Beverages with 35% upside, backed by strong global growth, acquisitions, and expansion, while new segments like dairy and alcohol will scale up gradually.
This Large-cap FMCG stock, engaged in manufacturing, bottling, and distributing PepsiCo’s carbonated soft drinks and non-carbonated beverages across India and international markets, jumped 2.10 percent after Motilal Oswal gave a Buy target of Rs. 550, which has an upside potential of 35.30 percent.
With a market capitalization of Rs. 1,39,342.29 crores, the share of Varun Beverages Limited has reached an intraday high of Rs. 415.05 per equity share, rising nearly 2.10 percent from its previous day’s close price of Rs. 406.50. Since then, the stock has retreated and is currently trading at Rs. 412 per equity share.
What is the News?
Motilal Oswal, a prominent brokerage firm, has recommended a “Buy” call on Varun Beverages Limited with a target price of Rs. 550 per share, indicating an upside potential of 35.30 percent from its previous day’s close price of Rs. 406.50 per equity share.
Motilal Oswal remains positive on Varun Beverages and noted that CY25 was a muted year for Varun Beverages due to heavy rainfall, which impacted demand. Volume growth stood at 8 percent overall and just 2 percent in India, while realisations remained flat. Despite this, the brokerage believes the company’s long-term growth story remains intact, supported by retail expansion, improved electrification, and stronger cold chain infrastructure.
The company is evolving from a beverage bottler into a broader consumer distribution platform. It is expanding into new segments like dairy and alcohol, with a Carlsberg partnership in Africa, while also strengthening backward integration through visi-cooler manufacturing and commissioning four new plants.
International business continues to be a key growth driver. Its volume contribution rose to 31 percent in CY25 from 21 percent in CY20, with revenue share at 38 percent, delivering a strong 35 percent CAGR. Operating cash flow also improved to ₹39.4 billion from ₹34.4 billion, reflecting solid execution.
Looking ahead, Motilal Oswal expects revenue and EBITDA to grow at 13 percent CAGR and profit at 16 percent CAGR over CY25–27, driven by expansion and strong execution.
Recent Acquisitions:
Varun Beverages has announced that its South Africa-based subsidiary, Bevco, will acquire a 100 percent stake in Crickley Dairy for about Rs. 131 crore, subject to approvals. This deal is part of the company’s plan to expand beyond beverages into new categories like dairy and juice-based products. Overall, this acquisition will help Varun Beverages diversify its product portfolio and strengthen its presence in the South African market.
Alcohol Segment:
Varun Beverages has entered the alcohol segment through a distribution partnership with Carlsberg in Africa, marking its first step into this new category. The company is also setting up its first greenfield plant for this business, which is expected to be ready by the end of next year, showing a gradual but structured expansion approach.
However, management has indicated that investments in this segment will remain limited initially. As a result, the alcohol business is unlikely to contribute meaningfully to earnings in the near term, with revenues expected to build gradually over the next few years as operations scale up.
Company Overview:
Varun Beverages Limited (VBL) was founded in 1995 and is an Indian multinational in the food and beverage sector and the key bottling partner of PepsiCo across India and several international markets. It manufactures, bottles, and distributes a large share of PepsiCo’s soft drinks, water, and non-carbonated beverages, making it one of the largest PepsiCo franchisees worldwide outside the US.
Recent Quarter Results:
Coming into financial highlights, Varun Beverages Limited’s revenue has increased from Rs. 3,689 crore in Q3 FY25 to Rs. 4,204 crore in Q3 FY26, which has grown by 13.96 percent. The net profit has also grown by 32.65 percent from Rs. 196 crore in Q3 FY25 to Rs. 260 crore in Q3 FY26.
Varun Beverages Limited’s revenue and net profit have grown at a CAGR of 27.44 percent and 53.7 percent, respectively, over the last five years.
In terms of return ratios, the company’s ROCE and ROE stand at 19.7 percent and 16.2 percent, respectively. Varun Beverages Limited has an earnings per share (EPS) of Rs. 8.98, and its debt-to-equity ratio is 0.13x.
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