Multibagger Stock Declares Blockbuster Quarterly Results & Stock Split. Do You Own It?

One of Bollywood's most iconic taglines "Yahan ke hum Sikanadar" was remixed completely to promote Pepsi's new tagline "Rise up, Baby!". The video features Ranveer Singh as the brand ambassador of Pepsi.

From the days of Ye Dil Mange More (1998) to Rise up, Baby! (2023), Pepsi has remained a favourite beverage across the globe. In India, Pepsi, and other products of the PepsiCo company are distributed by Varun Beverages, a BSE 200 company.

Varun Beverages is the second largest bottling company of PepsiCo's beverages in the world outside the US. Considering the popularity of Pepsi, no wonder Varun Beverages is one of the top midcap stocks in India.

Brands Licensed to Varun Beverages

In the past couple of years, Varun Beverages share price has stayed on investors' radar as it displayed consistency in reporting healthy earnings.

This time around too, the company reported blockbuster quarterly earnings. It also announced a stock split.

Ever since the stock split was announced, shares of the company have been on an uptrend.

Before we move on to company specific and growth prospects, let's take a look at the details of the stock split by Varun Beverages.

• Varun Beverages announced stock split on 2 May 2023.
• Shares of the company will be split in a ratio of 1:2. This means that each share of Rs 10, will now be converted into 2 shares of Rs 5 each.
• The record date of the stock split will be decided after receiving approval from the shareholders of the company.

Many consider the announcement of a stock split as a positive signal, and investors often perceive it as an indication of the company's future growth prospects.

In the case of Varun Beverages, as the company has not yet fixed a record date for the stock split, some investors might buy shares in anticipation of the split. This even though they do not yet know the exact date they need to own the shares to be eligible for the split.

And it appears this anticipation buying is creating a momentum effect in Varun Beverages stock price.

This is the first time Varun Beverages has decided to split its shares. The stock split will increase the liquidity and decrease the share price to make it more affordable for investors.

Now let's take a look at the company's financials.

Varun Beverages financials: On a growth trajectory

For the current year ended December 2022, the company's revenue came in at Rs 129.9 billion (bn), which is a growth of 48.4% on a YoY basis. Net profit saw a 21.7% YoY growth during the same time and came in at Rs 15.5 bn.

The company follows a January to December reporting year.

Over the last five years, Varun Beverages has grown its revenue at a compounded annual growth rate (CAGR) of 21% while net profit has grown at a CAGR of 38.9%! Robust demand for cold drinks throughout India was the key driving factor of rising profit.

The company had also announced a dividend of Rs 1 per equity share for the current year ended December 2022.

Varun Beverages Financial Snapshot - (2018-2022)

Particulars	Dec-18	Dec-19	Dec-20	Dec-21	Dec-22
Total Revenue (Rs in m)	50,042.0	70,532.0	63,815.0	87,564.0	1,29,946.0
Growth (%)		40.9	-9.5	37.2	48.4
Gross profit (Rs in m)	10,198.0	14,667.0	11,480.0	16,769.0	28,061.0
Gross profit margin (%)	20.5	20.9	18.1	19.3	21.7
Net profit (Rs in m)	2,999.0	4,722.0	3,573.0	7,461.0	15,501.0
Net profit margin (%)	6.0	6.7	5.6	8.6	12.0

The company also reported its Q1 earnings for the March 2023 quarter.

The company reported a 69% year-on-year (YoY) increase in its consolidated net profit to Rs 4.3 bn for the March 2023 quarter. It had a net profit of Rs 2.5 bn in the same quarter last year.

Revenue from operations grew 37.8% YoY to Rs 39.5 bn in the quarter from Rs 28.7 bn in March 2022.

Strong growth prospects

Varun Beverages is a key player in the beverage industry with operations spanning across 6 countries and 2 continents, with access to a wide range of population.

Strong demand for the company's products across markets and normalcy in day-to-day activities translated to solid volume growth in calendar year 2022.

In 2022, the company entered into an agreement to distribute and sell Lays, Doritos, and Cheetos for PepsiCo in the territory of Morocco. It also commenced commercial production of Kurkure Puffcorn at the manufacturing plant in Kosi, Uttar Pradesh for PepsiCo.

In the same year, energy drink - Sting - emerged as a key growth driver for the company. Its value-added dairy and juices segment received a positive reception from consumers. The management believes these products will continue to drive growth in the future.

In its announcement of Q1 results, the company said it had boosted capacity at six existing locations in addition to opening a new production plant in Kota, Rajasthan.

Many parts of India are experiencing heat waves as temperatures continue to rise. Rising heat and humidity lead to an obvious increase in the demand for cold drinks. Varun Beverages is well placed to benefit from this.

One big concern is competition, which has heated up post Reliance's acquisition of Campa Cola. There are many branded players too, which are doing the same thing as Varun Beverages.

How Varun Beverages share price has performed recently

On a YTD basis, Varun Beverages share price has gained 8% In the past one year, Varun Beverages share price has delivered multibagger returns by rallying almost 100%.

The company was listed in 2016 when its financials were questionable with a couple of years of losses along with mounting debt.

But all that's in the past. Market experts are bullish on the company as it is well placed to capitalise on its capacity expansion plans and tap unpenetrated regions for market share gains.

Varun Beverages shares touched a 52-week high of Rs 1,480 today and a 52-week low of Rs 675 touched today on 09 May 2022.

Here's how the company has performed since listing.

About Varun Beverages

Varun Beverages is a mid-cap company in India's FMCG sector. With a market capitalisation of Rs 777.5 bn, it is the sixth largest FMCG giant in India.

It's one of the largest PepsiCo franchisees outside of the United States.

The company has been associated with PepsiCo since the 1990s.

It's a Part of RJ Corp group, a diversified business conglomerate with interests in beverages, quick-service restaurants, dairy, and healthcare.

The company produces and sells a wide range of carbonated soft drinks (CSDs) and non-carbonated beverages (NCBs).

The company operates 31 manufacturing plants in India and six abroad, including two in Nepal and one each in Zimbabwe, Sri Lanka, Morocco, and Zambia.

To know more about company, check out the Varun Beverages company fact sheet and quarterly results on our website.

You can also compare Varun with its peers:

Varun Beverages vs Avanti Feeds

Varun Beverages vs Bikaji Foods

Varun Beverages vs Britannia

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...