Hold Varun Beverages, target price Rs 1370: Emkay Global Financial Services

Emkay Global Financial Services has hold call on Varun Beverages with a target price of Rs 1370.The current market price of Varun Beverages is Rs 1295.45.

Varun Beverages, incorporated in the year 1995, is a Large Cap company (having a market cap of Rs 83538.58 Crore) operating in FMCG sector.

Varun Beverages key Products/Revenue Segments include Beverages, Other Operating Revenue, Other Services for the year ending 31-Dec-2021.

Financials
For the quarter ended 31-12-2022, the company has reported a Consolidated Total Income of Rs 2223.48 Crore, down -31.77 % from last quarter Total Income of Rs 3258.92 Crore and up 28.14 % from last year same quarter Total Income of Rs 1735.19 Crore. Company has reported net profit after tax of Rs 81.53 Crore in latest quarter.

The company’s top management includes Mr.Ravi Kant Jaipuria, Mr.Varun Jaipuria, Mr.Raj Pal Gandhi, Mr.Rajinder Jeet Singh Bagga, Dr.Naresh Kumar Trehan, Mr.Pradeep Sardana, Ms.Sita Khosla, Dr.Ravi Gupta, Ms.Rashmi Dhariwal. Company has APAS & Co as its auditors. As on 31-12-2022, the company has a total of 65 Crore shares outstanding.

Investment Rationale
Faster traction in Sting and stronger distribution expansion leads to a 5-6% increase in the brokerage's EBITDA estimates. However, higher capital investment restricts EPS increase to 1-2% and drives a 200-300bps reduction in Emkay's RoIC estimates. Lower RoIC leads to a 2% cut to its TP multiple.

The brokerage maintains HOLD, with TP of Rs1,370/share (based on 37x Mar-25E EPS vs. 38x earlier). Faster scale-up of the foods’ portfolio remains a potential upside.

Promoter/FII Holdings
Promoters held 63.9 per cent stake in the company as of 31-Dec-2022, while FIIs owned 26.45 per cent, DIIs 3.39 per cent.