Varun Beverage Ltd - 1QCY22 Result First Cut - Stellar performance

Mr. Mitul Shah, Head of Research at Reliance Securities.

# In 1QCY22, net revenue from Operations grew by 26% YoY and 63% QoQ to Rs28.27bn (broadly in line with our estimate of Rs28.01) primarily supported by strong volume growth and higher realization. Realization per case stood at Rs156 (up 7% YoY and up 1% QoQ) due to the favorable mix and improvement in realization in the international markets.

# Total sales volume stood at 181mn cases which were up by ~19% YoY, led by wider vaccination coverage and resumption of the day-to-day activities which helped gain momentum in the domestic markets & strong performance in international markets. Of the total volume, CSD constituted ~70% (up 85% QoQ), juice ~7% (up 117% QoQ) and water ~23% (up 8% QoQ).

# EBITDA increased by 39% YoY and 156% QoQ to Rs5.3bn (15.7% above our estimate) in 1QCY22 due to operating leverage. EBITDA margin stood at 18.8% (up 175bps YoY and up 681bps QoQ).

# Net profit stood at ~Rs2.7bn (up 98% YoY and up 732% QoQ), 19.5% above our estimate of Rs2.3bn in 1QCY22.

Our View: The COVID-19 pandemic has disrupted the soft drinks market in last 2 years. Moreover, consumption shifted towards healthier drink alternatives. Considering this trend, the beverage makers have started introducing various fruit-based drinks to tap this trend. Indian soft drinks industry is rapidly changing, with the companies like PepsiCo India and Coca-Cola India are bringing healthier options, as they are getting transformed from cola makers to beverage makers. VBL's alliance with PepsiCo India is mutually beneficial for both in terms of market share gain and geographic consolidation. This is the first strong season for beverage makers after 2 years of subdued performance consecutively due to pandemic. Therefore, with sharp recovery, expansion of capacity, new product line add up of "Kurkure Puffcorn" in CY22 and likely margin expansion, we maintain BUY on VBL. Post Conference call, we will update our earnings estimate and target price.

Shares of Varun Beverages Limited was last trading in BSE at Rs. 1059.05 as compared to the previous close of Rs. 1037.05. The total number of shares traded during the day was 126550 in over 7552 trades.

The stock hit an intraday high of Rs. 1101.00 and intraday low of 1045.00. The net turnover during the day was Rs. 135756350.00.

Source : Equity Bulls

Keywords

VarunBeverages INE200M01013 VBL Q1CY22 Result FirstCut RelianceSecurities