Synopsis:
Varun Beverages was in focus after strong Q1FY26 results prompted analysts like Goldman Sachs and CLSA to revise their target prices, highlighting margin strength and global business performance.
One of India’s largest beverage companies was in the spotlight during today’s trade after analysts assigned fresh target prices for the stock following the announcement of Q1FY26 results by the company.
With the market capitalization of Rs. 1,76,604 crore, the shares of Varun Beverages Ltd were trading at Rs. 522, up by 2 percent from its previous day’s close price of Rs. 512.15 per equity share.
What’s the news?
Following the announcement of Q1 results of Varun Beverages Ltd, the analysts have assigned fresh targets for the company. Goldman Sachs has maintained its ‘Buy’ rating on the stock and raised the target price from Rs. 590 to Rs. 610, with an upside of 16.86 percent from CMP of Rs. 522.
According to Goldman Sachs, Varun Beverages Q2CY25 margins exceeded expectations, and the company’s strong international performance helped its consolidated results surpass projections. A weak summer caused India’s volumes to drop, but H2CY25 is predicted to see a recovery. Strong margins help alleviate concerns around competitive pressures.
CLSA Maintained High Conviction Outperform rating; revised target price downward from Rs. 786 to Rs. 774, implying an upside of 48.27 percent from current market price of Rs. 522.
CLSA observed that Varun Beverages performance was consistent, with a robust EBITDA margin growth in spite of a 7 percent drop in volume in India. While mix affected domestic realizations, cost efficiencies bolstered margins. Cost-cutting measures are viewed as sustainable, and a new CFO has been appointed.
About the Company
Varun Beverages Ltd. has been connected to the PepsiCo brand since the 1990s and is among the largest franchisees in the world. By producing and distributing a broad range of carbonated soft drinks, non-carbonated beverages, and packaged drinking water under PepsiCo’s trademarks, the company contributes significantly to the beverage industry.
Leading brands including Pepsi, 7UP, Miranda Orange, Mountain Dew, Tropicana juices, and several more are part of its product lineup, which serves a variety of consumer tastes in both domestic and foreign markets.
Financial Outlook
Varun Beverages posted revenue of Rs. 7,017 crore in Q2 CY2025, up 26 percent QoQ from Rs. 5,567 crore but down 2.5 percent YoY from Rs. 7,197 crore. Net profit surged 81.3 percent QoQ to Rs. 1,325 crore from Rs. 731 crore, and grew 5 percent YoY from Rs. 1,262 crore.
PBT stood at Rs. 1,732 crore, rising 77.1 percent QoQ from Rs. 978 crore and 4.1 percent YoY from Rs. 1663 crore. EBITDA margin improved to 28.5 percent in Q2 CY2025 from 27.7 percent a year ago.
At the moment, the company’s P/E ratio is 62x lower as compared to its industry P/E 82.4x, and its ROE and ROCE are 22.5 percent and 24.8 percent, respectively, showing companies financial performance, whereas the D/E ratio of the company stands at 0.12.
Written by Akshay Sanghavi
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