Varun Beverages Shares In Focus: Brokerages Offer Mixed Views On Q2 Results And Alco-Bev Venture
Shares of Varun Beverages Ltd. remain in sharp focus on Thursday, a day after the company reported in-line September quarter results and most importantly, announced a major strategic move into the alcoholic beverage segment.
Brokerages Offer Mixed Views
Brokerages have offered mixed views on Varun Beverages following the company’s earnings reports and entry into the alco-bev business.
Goldman Sachs reiterated a ‘buy’ on Varun Beverages while hiking its target price to Rs 615 from Rs 590.
The firm noted that domestic business growth showed signs of recovery in October, especially now that peak winter-related headwinds are over.
Goldman Sachs is optimistic about the company’s new venture, stating the distribution arrangement with Carlsberg for African markets opens up a large potential Total Addressable Market (TAM).
Citi Trims Target Price
On the other hand, Citi, while maintaining a ‘buy’ rating on the counter, has trimmed its target price from Rs 685 to Rs 675.
The firm believes that domestic business softness is ‘transient’, stating that performance will improve eventually.
As for the venture into the alcoholic beverages segment, Citi sees the Carlsberg deal as potential catalysts for long-term growth.
The brokerage even noted that a potential launch in this segment could help allay investor concerns on market shares.
Varun Beverages’ Business Overview
Varun Beverages is one of the largest franchisees of PepsiCo. It distributes a wide range of carbonated soft drinks, as well as a large selection of non-carbonated beverages, including packaged drinking water in India.
But on Wednesday, the board approved plans to add an alcoholic beverage business to the main objects of the Memorandum of Association of the company.
Certain African subsidiaries of VBL will now test the beer market in their territories. They have entered into an exclusive distribution agreement with Denmark’s Carlsberg Breweries A/S for their popular brand ‘Carlsberg‘.
Investment Implications
The mixed views from brokerages reflect the uncertainty surrounding Varun Beverages’ venture into the alcoholic beverage segment. However, the company’s strong track record in the beverage industry and its partnership with Carlsberg are positive factors to consider.
Investors should keep a close eye on the company’s progress in the alco-bev business and its impact on the company’s overall performance.
In the meantime, those interested in investing in the Indian stock market can explore other opportunities, such as Nifty 50 index funds or diversified equity mutual funds.