Varun Beverages (VBL) reported mixed set of numbers for the quarter, though revenue matched estimates, however operating performance missed the consensus estimates. Revenue (net of excise duty) for the quarter grew by 26.1% yoy to Rs2,059.1cr, in-line with consensus estimates. EBITDA grew by 19.6% yoy to Rs574.9cr, ~4% below estimates. Though gross margin expanded by 137bps yoy, increase in other expense by 270bps yoy as percent of net sales led to EBITDA margin contraction of 150bps yoy to 27.9%. PAT reported 24.9% yoy increase to Rs306.8cr, ~7% below estimate.
The strong jump in revenue was led by robust volume growth of 21.3% yoy to 136.4mn cases; Q2 is the peak season for the company.
The domestic organic volume grew by 12.6% yoy during the quarter.
Realization (derived) was up by 4% yoy.
Gross margin for the company improved by 137bps yoy.
EBITDA margin contracted by 150bps yoy due to sub-optimal volumes/margins in acquired sub-territories. Also, during the quarter company had only supply and distribution arrangement for the Tropicana juice portfolio, and not manufacturing the product, which restricted profitability.
Depreciation cost was up 10.3% yoy, however, finance cost remained flat.
Other income declined sharply to Rs0.3cr against Rs4.7cr in Q2CY17.
Despite robust volume growth, capacity utilization during the peak month remained under 70%, providing significant scope for growth on existing investments.
Company recommended an interim dividend of Rs2.5 per share.
Varun Beverages Ltd is currently trading at Rs. 744.70, down by 16.85 points or 2.21% from its previous closing of Rs. 761.55 on the BSE.
The scrip opened at Rs. 761 and has touched a high and low of Rs. 789.75 and Rs. 735 respectively. So far 1,56,973 (NSE+BSE) shares were traded on the counter. The stock is currently trading below its 50 DMA.
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