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We maintain BUY on VBL, while hoisting our TP by ~15% to Rs620 (from Rs540) on 5-6% EPS increase led by PAT beat of 11% and addition of Twizza. We also increase our TP multiple, by ~10% to 45x, led by shedding of margin concerns (upsizing of packs/RM inflation). Despite a high base, consolidated EBITDA grew strongly at ~21%, helped by ~16% growth in India and ~40% growth in the International business. With a favorable climate so far, the commentary suggested even better growth trends in Q2TD which, along with a low base (May/Jun-26), bodes well for a strong growth uplift in CY26. VBL is also better placed in terms of margin (vs peers), with strategic stocking of PET and lower discounting in a strong demand environment – this was reflected in reduction of the volume-value gap to ~150bps (vs ~400bps in Q4) and EBITDA margin gain of ~60bps in Q1. The only headwind is an increase in gasoline cost, which might raise logistics cost in coming quarters. VBL’s ahead-of-the-curve investment in distribution/capacity expansion (up ~50%) is a key competitive edge when the global supply chain is encountering disruption. FCF generation is likely to significantly improve, as CY26 organic capex is expected at ~Rs5bn.

All-round beat led by volume growth and better than expected realization

VBL’s revenue grew ~18% to Rs65bn (~6% beat to our estimate), led by ~37% growth in International revenue and ~11% growth in India operations. Encouragingly, India volume growth increased 14.4%, led by initiatives such as pack upsizing, selective pricepoint launches in identified markets to onboard new consumers, and new launches in the energy- and juice-based drink segments; International volume was up 21.4% YoY, leading to consolidated volume growth of 16.3%. Consolidated realization at Rs174.1/case was up 1.6%, supported by better realization in International business (up ~9%) primarily due to favorable currency movement; realization in the Domestic business was down 1.5%, mainly due to product upsizing. India realization, though, was better than expected due to lower discounting and premiumization of the product portfolio. Consolidated gross margin was up by ~60bps YoY, led by higher share of low sugar/no sugar at 63% (vs 59% in Q1CY25). EBITDA margin was up by 55bps at 23.3% (~100bps higher vs our estimate) led by gross-margin expansion and operating leverage.

Inventory levels to support margins; strong traction in NCB portfolio

VBL’s commentary on margin outlook is assuring, as the company has mitigated geopolitical and input cost risks by maintaining high inventory levels (up to ~6 months), ensuring limited near-term impact and enabling margin management through efficiencies and calibrated discounting. Apart from maintaining margins, the company remains focused on driving growth, led by continued expansion of its distribution network, with addition of ~0.5mn outlets targeted in CY26 + new product launches. New launches like A-Rush and Sting Classic are seeing strong traction, with better than expected demand, though aluminium-can shortage remains a constraint. The non-carbonated beverage (NCB) portfolio is scaling up well, with dairy (60-70%), Nimbooz (50-60%), and Tropicana PET (>100%) delivering robust growth.

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