Varun Beverages Stocks Surge 5% Following Stellar Q1 Results: Is it Time to Invest?

• Varun Beverages share price saw a significant increase of over 5 per cent in morning trade on BSE on Tuesday, May 14, following the company’s impressive Q1 earnings.
• The company’s share price opened at ₹1498.15, a jump from its previous close of ₹1477.80, and rose 5.5 per cent to ₹1558.45.
• At around 9:45 am, the shares were trading 3.13 per cent higher at ₹1,524 apiece, while the equity benchmark Sensex was 0.13 per cent up at 72,874.

Varun Beverages share price surges following impressive Q1 earnings, with the company’s profit after tax (PAT) rising 25 per cent year-on-year. The company also announces the appointment of a new CFO and the incorporation of a wholly-owned subsidiary in Zimbabwe.

Impressive Q1 Results for Varun Beverages

In a filing to the exchange during market hours on Monday, May 13, Varun Beverages reported a 25 per cent YoY increase in its PAT for Q1, rising to ₹548 crore from ₹438.6 crore in the same quarter last year. This increase was driven by volume growth, an increase in net realisation, and improved profit margins.

Revenue and Gross Margins Increase

Net revenue for Q1 climbed 11 per cent YoY to ₹4,317.3 crore, up from ₹3,893 crore in the corresponding quarter last year. Gross margins also improved by 385 bps to 56.3 per cent from 52.4 per cent YoY, primarily due to reduced PET prices and a focus on reducing sugar content and light-weighting packaging.

EBITDA and Margin Improvement

EBITDA for the quarter under review rose 23.9 per cent YoY to ₹988.8 crore from ₹798 crore in the same quarter last year. The EBITDA margin improved by 240 bps to 22.9 per cent in Q1, led by higher gross margins and increased realisation. The company managed to improve its EBITDA margin despite the rise in fixed costs associated with the acquisition of new territories and commissioning of new greenfield plants for the season.

New CFO and Subsidiary

Varun Beverages also announced the appointment of Rajesh Chawla as the CFO and a Key Managerial Personnel (KMP) of the company from May 14, 2024, following the resignation of Lalit Malik as the CFO and KMP of the company on May 13, 2024. Additionally, the company announced the incorporation of a wholly-owned subsidiary, Varun Foods (Zimbabwe) Pvt. Ltd, in Zimbabwe, with the acquisition expected to be completed on or before August 31, 2024.

Conclusion

Varun Beverages’ impressive Q1 results have led to a surge in its share price, with the company showing strong growth in revenue, profit, and margin. The company’s future outlook remains positive, with new appointments and acquisitions on the horizon. Brokerage firms also remain upbeat about the company’s prospects, maintaining buy calls on the stock.