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Turns ex-bonus…

About the stock

Varun Beverages is one of the largest franchisees of PepsiCo in the world. The company produces & distributes carbonated drinks, juices & packaged drinking water in six countries including India. Some of the PepsiCo brands produced by VBL includes Pepsi, Diet Pepsi, Seven-Up, Mirinda, Mountain Dew, Nimbooz, String, Slice, Tropicana, Aquafina among others.

* The company has operations in India (except Andhra Pradesh, J&K and Ladakh), Sri-Lanka, Nepal, Morocco, Zambia & Zimbabwe

Turns ex-bonus on June 6, 2022

* The company made an announcement of bonus share on April 28, 2022. The ratio was one bonus share for every two equity shares, 1:2. The record date for the same is June 7, 2022 while the ex-date for the same was June 6, 2022 (yesterday). Consequently, Varun Beverages’ share price has been adjusted to | 733 /share. Accordingly, our target price stands revised to | 867/share. We maintain our BUY rating on the stock

Key triggers for future price performance:

* With normalisation of mobility, strong summer season after acquisition of south & west territories is likely to drive robust volume growth

* The company has launched several new brands in the last two years i.e. String, ‘Mountain Dew ICE’, milk based beverages. New products are contributing ~10% to volumes and are likely to aid revenues, going forward

* Given the capex requirement equal to depreciation, VBL would be able to completely de-leverage its balance sheet in the next three to four years with strong free cash flow. The reduction in interest cost is expected to boost profitability

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SEBI Registration number INZ000183631

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