NDA Securities Limited has issued an "Accumulate" recommendation for Varun Beverages Limited (VBL), highlighting its robust growth trajectory amid expanding PepsiCo partnerships and international footprints. With a current market price of Rs 464, the research firm sets a 12-month target of Rs 524—implying 12.9% upside—and a 24-month horizon at Rs 637, signaling 37.4% potential returns. Key drivers include stellar CY24 financials: Rs20,008 crore revenue, Rs4,711 crore EBITDA, and Rs2,634 crore net profit, fueled by volume surges in energy drinks and hydration segments, backward integration efficiencies, and African market forays. Healthy cash accruals of Rs3,100 crore mitigate capex demands, while a de-risked balance sheet boasts a 15% debt-to-capital ratio. Investors face seasonal risks but gain from VBL's diversified portfolio and execution prowess.

Strategic Empire-Building Unfolds

Varun Beverages Limited , PepsiCo's premier franchisee beyond U.S. borders, has metamorphosed from a regional bottler into a multinational behemoth spanning India, Nepal, Sri Lanka, Morocco, Zambia, and Zimbabwe. Portfolio Diversification: The company orchestrates a symphony of carbonated soft drinks like Pepsi and Mirinda, alongside high-margin energy boosters such as Sting and Rockstar, hydration staples including Aquafina, and emerging juice lines under Tropicana. This mix optimization propelled 1,124 million cases sold in CY24, with non-carbonated beverages gaining traction to counter summer seasonality. Backward Integration Mastery: In-house production of preforms, closures, crown corks, and refrigeration assets slashes costs, fortifies supply chains, and elevates margins amid volatile PET resin prices.

Geographic Conquest Accelerates

VBL's territorial dominion now bifurcates 72% domestic revenue from 28% international, underpinned by 48 state-of-the-art plants—36 in India, 12 abroad—and 1.15 million visi-coolers. African Ambitions Ignite: Recent acquisitions in Tanzania, Ghana, and BevCo in South Africa, coupled with a Carlsberg beer distribution pact and a Kenyan subsidiary, herald premium segment entry. These moves, backed by new production lines, mitigate execution risks through localized partnerships and standardized operations. Domestic Stronghold: Northern, western, and southern sub-territories benefit from 130 depots, 2,600 vehicles, and 2,800 distributors, ensuring rural-urban penetration. Shareholder evolution shows promoters at 59.44%, FIIs at 21.93%, and DIIs climbing to 11.78% by September 2025.

Financial Fortitude Shines

NDA's projections paint a luminous path: CY25E revenue at Rs24,932 crore and CY26E at Rs31,068 crore, with PAT escalating to Rs4,253 crore (EPS Rs12.58). Profitability Pillars: RoE at 19.64% and RoCE at 19.19% in CY24 underscore efficient capital alchemy, despite capex intensity peaking at 22.5% of sales. Debt discipline—leverage dipping to 1.39x and interest coverage at 8.11x—bolsters resilience, with Rs3,036 crore cash reserves offsetting Rs400-500 crore repayments. Expense Vigilance: Raw materials command 45% of costs, yet backward integration and rPET usage (7,300 MT in Pepsi Zero/Sting) curb volatility; water usage ratio steadies at 1.56x.

Valuation and Investor Roadmap

At 50.7x CY24 P/E, VBL trades at a premium, justified by 20%+ CAGR visibility and category leadership. Accumulate Levels: Entry optimal at Rs450-470, reflecting 52-week troughs near Rs419; add on dips to Rs430 for risk-averse portfolios. Momentum builds above Rs500, targeting Rs524 (12M) amid volume ramps. Strategic Targets: Conservative investors eye Rs600 by mid-2026; aggressive ones chase Rs660-680 on African synergies and RTD/alcohol forays (Memorandum amended for beer, wine, spirits). Stop-loss at Rs410 guards against monsoon vagaries. Upside catalysts: 10%+ volume growth, 200bps margin expansion.

Low Risk for Long Term Investors

VBL navigates treacherous waters: 40% revenue tethered to April-June monsoons, PepsiCo pact expiry (safeguarded till 2039), and African integration frictions. Volatility Vectors: PET spikes and health regulations loom, countered by zero-sugar innovations and PepsiCo's R&D pipeline. Resilience Arsenal: Diversified mix (energy/hydration up 30%), scale economies, and Crisil-endorsed liquidity (22% bank line utilization) fortify defenses. For traders, RSI oversold below Rs450 signals rebounds; long-term holders bank on 25% RoCE trajectory. This brew of growth and grit positions VBL as a portfolio cornerstone.