Choice Broking starts Varun Beverages at Buy, sees ₹550 target
The brokerage forecasts 15% revenue, 16% EBITDA and 17% PAT CAGRs over CY25–CY28E, citing outlet expansion, African growth and a broader beverage-and-snacks portfolio.
What happened
Choice Broking initiated Varun Beverages with a Buy and ₹550 target, citing India outlet expansion, African growth, diversification into dairy, energy drinks
Key facts
- Target price: ₹550
- Potential upside: 31%
- Revenue CAGR forecast: 15% (CY25-CY28E)
- EBITDA CAGR forecast: 16% (CY25-CY28E)
- PAT CAGR forecast: 17% (CY25-CY28E)
- India outlets served: 4 million of an estimated 12 million FMCG outlets
- India per-capita beverage consumption: about 7 litres versus global average of about 31 litres
- International revenue share: 20% in CY21, 33% in CY25, projected near 40% by CY28E
- Visi-coolers in India: more than 1 million
- Estimated EBITDA margin advantage from backward integration: 300-400 basis points
- Consolidated EBITDA margin: about 17% in CY19 and approximately 23% in CY25
- Forecast EBITDA margin: 23-24% during CY25-CY28E
- Valuation: 40x estimated September 2028 EPS
- Valuation discount to long-term average P/E: about 20%
- Long-term average P/E: 50x
Why this matters
The expected rise in overseas revenue from 33% in CY25 to nearly 40% by CY28E highlights Africa as a strategic growth platform and reinforces the appeal of adjacent beverage-and-snacks expansion.
What to watch
- Quarterly international revenue growth versus domestic growth and progress toward the 40% overseas revenue-mix target.
- Africa volume growth, net outlet additions, cooler deployments and same-outlet throughput.
- Consolidated EBITDA margin versus international-margin trajectory.
- Currency movements and repatriation conditions in key African markets.
- PET resin, sugar, concentrate and freight-cost trends.
- Capex, net-debt-to-EBITDA and free-cash-flow conversion during expansion.
- PepsiCo brand launches, territory additions and evidence of snacks cross-selling.
- Accelerate cooler placement, returnable-glass distribution and outlet additions in underpenetrated African territories.
- Prioritize local manufacturing, warehousing and input sourcing to reduce FX exposure and import dependence.
- Use the wider beverage-and-snacks portfolio to raise distributor throughput and retailer wallet share, especially outside peak carbonated-drink seasons.
- Increase investor focus on international segment margins, currency-adjusted growth and capital intensity as overseas mix approaches 40%.
- Potentially pursue adjacent territory, bottling-capacity or snack-distribution investments if African cash flows scale as expected.