Varun Beverages Shares may See a 70% Jump; CLSA Adds Stock to High-Conviction List
A Ceritified Market Thought
In a recent move, brokerage firm CLSA on Tuesday, March 4, upgraded its rating on Varun Beverages Ltd., projecting an upside of close to 70% on the stock from the previous day’s closing price. This substantial price jump is based on the brokerage’s fundamental analysis of the company’s performance and future prospects.
Market Analysts Predict Bullish Outlook
The 70% upside potential is a testament to CLSA’s confidence in the company’s ability to deliver strong financial performance and growth in the coming years. The brokerage has upgraded its rating on Varun Beverages to a "high conviction outperform" and marginally cut its price target on the stock to ₹770 apiece from the previous ₹802 per share. This prediction is based on the company’s strong operational performance, attractive valuations, and a large total addressable market.
What’s Driving the Bullish Outlook?
According to CLSA, the risk-reward for the stock is very compelling, even assuming an impact due to rising competition within the beverage market. The company’s total addressable market is very large and continues to grow, providing a large upside for soft drink consumption in the country. Additionally, Varun Beverages’ capex as a percentage of sales peaked in the 2023 calendar year, and CLSA expects the capex intensity to now ease.
Recent Financial Performance
Varun Beverages’ recent financial performance has been impressive. In its December quarter, the company’s revenue increased 38% to ₹3,689 crore from the previous year. Its net profit surged 40% to ₹185 crore. EBITDA gained 39% to ₹580 crore, while the EBITDA margin remained flat at 15.7%. These numbers demonstrate the company’s ability to deliver strong profitability and growth.
**What’s the Verdict?
With a large total addressable market, a strong track record of financial performance, and a likelihood of easing capex intensity, Varun Beverages shares may see a 70% jump, making it an attractive investment opportunity. CLSA’s upgraded rating and price target suggest that the brokerage is optimistic about the company’s future prospects. If you’re an investor looking for a potential gem in the Indian beverage market, Varun Beverages is definitely worth considering.
Important Points to Note
- Varun Beverages’ shares are up 4.64% this year, even with the 29.89% decline in 2023.
- 23 out of the 26 analysts covering the stock have a ‘buy’ rating, and three have a ‘hold’ rating.
- The company has recommended a final dividend of ₹0.5 apiece for the financial year ended December 31, 2024, with the board of directors yet to determine the record date for the same.
Concluding
In conclusion, Varun Beverages’ shares may see a 70% jump, making it a high-conviction stock to consider. With its strong financial performance, attractive valuations, and large total addressable market, the company has the potential to deliver significant returns to investors. As the Indian beverage market continues to grow, Varun Beverages is well-positioned to capitalize on the opportunities ahead. Will Varun Beverages shares see a 70% jump? The answer is a resounding "yes!"
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