Varun Beverages Ltd., a leading bottler for PepsiCo, has recently made headlines due to fluctuational stock performances and strategic acquisition movements. The company’s stock has received varied analyst recommendations, capturing the attention of both seasoned and new investors alike.
According to ETMarkets.com, brokerage firm Axis Securities has placed a "Buy" rating on Varun Beverages, setting a target price of ₹710, projecting an upside potential of 42% from its current market price of ₹499. This positive outlook stems from the company's resilient operations and proactive financial strategies.
Interestingly, for the quarter ending December 31, 2024, Varun Beverages reported consolidated total income of ₹3733.43 crore. This figure reflects a decrease of 22.69% from the previous quarter but is up by 39.47% compared to the same period last year. The latest quarter also showcased a net profit after tax of ₹196.33 crore, which provides valuable insights on the company’s operational efficiency.
The investment rationale is underscored by strong holdings among key shareholders, as promoters held 60.2% of the stake, with Foreign Institutional Investors (FIIs) owning 25.27% and Domestic Institutional Investors (DIIs) 6.95% as of December 31, 2024. This distribution highlights significant trust from substantial financial entities, which often signals stability to the broader market.
Despite these positive indicators, shares of Varun Beverages have been trading lower than multiple moving averages, including the 5-day, 10-day, and up to the 200-day averages. This could suggest to investors the need for caution or close monitoring before making significant investment decisions.
The company made headlines recently with its plans to acquire SBC Beverages Ghana Ltd. from Ghana Bottling Company Ltd. for $15.06 million (approximately ₹127.1 crore). Initially set to conclude by February 28, 2025, the timeline has been extended to March 31, 2025, pending necessary regulatory approvals, including those from PepsiCo Inc. This acquisition is part of Varun's broader strategic move to expand its geographical footprint, particularly within the African market.
On November 12, 2024, Varun Beverages confirmed the extension via regulatory filings, stating, "We would like to update the consummation of the aforesaid transaction is extended..." This acquisition is part of Varun’s ambitious growth strategy, which also includes plans to acquire Tanzania Bottling Company SA for $154.5 million, marking significant investment and expansion efforts.
These acquisitions align with the growing demand for beverage products amid changing lifestyle trends and the recovery of the economy post-pandemic. The company's ability to adapt and push forward with growth strategies is commendable, albeit the extension of the acquisition timeline might raise some eyebrows among investors.
Market performance reflects investor sentiment, and Varun Beverages’ stock ended the previous session down by 4.70%, resting at ₹476.40, after having reached as low as ₹454.20 recently, its 52-week low. The stock has experienced notable volatility, having plunged over 21.37% over the past year but impressively surged by 84% over two years. This volatility, along with current trading figures indicating lower trading prices against historical performance, suggests caution for present-day investors.
Experts are closely monitoring the Relative Strength Index (RSI) of Varun Beverages, which sits at 36, indicating the stock is neither overbought nor oversold, signaling potential for either recovery or decline.
Companies like Varun Beverages continue to generate substantial interest from analysts and investors alike, providing insights on the beverage sector's dynamics through strategic acquisitions and operational resilience. The company's plans to diversify and expand internationally represent not only growth but also responsiveness to market needs, paving the way for future success.
Stock market investments always carry inherent risks. Consequently, potential investors are urged to analyze their investment strategies carefully and remain abreast of market dynamics, including performance reports and insights from financial analysts. The past behaviors of Varun Beverages’ stock could be instrumental for investors weighing their options.
With such pivotal investments on the horizon and powerful brokerage recommendations buoying confidence, the case for Varun Beverages as a stock to watch remains compelling, particularly as it continues to navigate the ever-changing market environment.