iifl-logo-icon 1

Invest wise with Expert advice

By continuing, I accept the T&C and agree to receive communication on Whatsapp

  • Open Demat with exclusive Advice & Services
  • Get a dedicated Relationship Manager to help you grow your wealth
  • Exclusive advisory on 20+ trading & wealth-based investment options
  • One tap Investments, Automated trading & much more
  • Minimum 1 lakh margin required
sidebar image

Varun Beverages: Strong volume growth continues

8 Mar 2023 , 10:33 AM

Recommendation: Buy

Target Price: Rs 1,520


VBL posted strong volume/value growth of 41%/49% YoY, driven by resurgence in out-of-home demand post COVID, distribution expansion and rapid scale-up of energy drink ‘Sting’. On a 3-year CAGR basis, organic volume/value growth stood at 16.8%/21.8% over CY19-22. ROE/ROIC expanded strongly, on the back of robust expansion in EBITDA margin. However, FCFF was negative at Rs300 million, as the company continued to spend on capacity expansion (Rs18 billion capex). Continued investments in distribution/capacity expansion will keep growth elevated in the medium term. Analysts at IIFL Securities forecast sales/EBITDA CAGR of 15% for CY22-25. 

Broad-based growth

VBL’s CY22 performance was strong with volume/value growth of 41%/49% YoY. India volumes growth was higher at 44%, boosted by resurgence in the out-of-home channel post COVID, complemented by VBL’s initiatives to expand distribution in underpenetrated territories of West and South. Moreover, Sting became a key growth lever contributing ~10% of domestic volumes and higher realization at the company level. While gross margins contracted by 180bps YoY due to higher preform prices, EBITDA margin expanded by 240bps owing to higher realization (6% YoY) and operating leverage due to strong volume growth.

Elevated capex to fuel next leg of growth

CY22 capex continued to be high at Rs18 billion (13.6% of sales) versus Rs.9 billion in CY21 targeted towards capacity expansion in India and International. FCFF as a result was negative at Rs300 million. However, robust margin performance led to net debt-to- EBITDA falling to 1.3x from 1.9x in CY21. ROE/ROIC expanded strongly to 33%/20% from 18%/11% in CY21, driven by higher asset turns and EBIT margin.

Growth trajectory will remain robust

VBL has been a clear outlier in an otherwise subdued growth environment. Analysts at IIFL Securities expect this to continue in the medium term, driven by multiple efforts taken by the company to penetrate deeper in existing and new territories and new product launches (Sting) leveraging changes in consumer tastes post COVID.


Related Tags

  • Varun Beverages
  • VBL
sidebar mobile


Read More
Knowledge Centerplus

Logo IIFL Customer Care Number
1860-267-3000 / 7039-050-000

Logo IIFL Securities Support WhatsApp Number
+91 9892691696

Download The App Now

Knowledge Centerplus

Follow us on


2024, IIFL Securities Ltd. All Rights Reserved

  • Prevent Unauthorized Transactions in your demat / trading account Update your Mobile Number/ email Id with your stock broker / Depository Participant. Receive information of your transactions directly from Exchanges on your mobile / email at the end of day and alerts on your registered mobile for all debits and other important transactions in your demat account directly from NSDL/ CDSL on the same day." - Issued in the interest of investors.
  • KYC is one time exercise while dealing in securities markets - once KYC is done through a SEBI registered intermediary (broker, DP, Mutual Fund etc.), you need not undergo the same process again when you approach another intermediary.
  • No need to issue cheques by investors while subscribing to IPO. Just write the bank account number and sign in the application form to authorise your bank to make payment in case of allotment. No worries for refund as the money remains in investor's account."

www.indiainfoline.com is part of the IIFL Group, a leading financial services player and a diversified NBFC. The site provides comprehensive and real time information on Indian corporates, sectors, financial markets and economy. On the site we feature industry and political leaders, entrepreneurs, and trend setters. The research, personal finance and market tutorial sections are widely followed by students, academia, corporates and investors among others.

  • 9 out of 10 individual traders in equity Futures and Options Segment, incurred net losses.
  • On an average, loss makers registered net trading loss close to Rs. 50,000.
  • Over and above the net trading losses incurred, loss makers expended an additional 28% of net trading losses as transaction costs.
  • Those making net trading profits, incurred between 15% to 50% of such profits as transaction cost.
Copyright © IIFL Securities Ltd. All rights Reserved.

Stock Broker SEBI Regn. No: INZ000164132, PMS SEBI Regn. No: INP000002213,IA SEBI Regn. No: INA000000623, SEBI RA Regn. No: INH000000248

We are ISO 27001:2013 Certified.

This Certificate Demonstrates That IIFL As An Organization Has Defined And Put In Place Best-Practice Information Security Processes.