Varun Beverages Q1 Review – Strong Quarter, Outlook Pushes Up Estimates for the Year: Yes Securities

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Varun Beverages Ltd. showed solid volume growth on a high basis thanks to an early start to summer, no impact from the third wave of Covid-19, increased mobility, improved offers portfolio and a solid international performance.

Growth was even better in juices and other new launches like Sting and dairy, with the out-of-home channel showing strong momentum and in-home consumption trends continuing.

High operating leverage helped improve Ebitda margins despite PET cost inflation of 30% which sharply reduced gross margins.

Varun Beverages is expected to have a strong CY22 with a new greenfield unit in Bihar, the benefits of the new distribution infrastructure created in the Southern and Western markets over the past two years, strong sales in newly launched categories and better international performance.

As debt continues to decline and the cash position continues to improve, the company plans to acquire more territories from Pepsico, primarily in Africa.

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