Mega FMCG company, Varun Beverages has split for the second time in two years. This time the stock price is sub-divided in the ratio of 5:2. Prior to the split, the FMCG giant was at over Rs 1,570 level, but is now below Rs 650. Brokerages have recommended buying the stock for a target price of a whopping Rs 1,800. Varun Beverages is a top pick for September 2024.
Varun Beverages Share Price:
FMCG stock ended at Rs 649 apiece, up by 3.40% on NSE after ex-split. The stock's new 52-week high and low are at Rs 681.12 apiece and Rs 331.26 apiece, which is adjusted to the stock split ratio.
The adjusted price-to-equity ratio is at a massive 206.50x.
Before the stock split, Varun Beverages' share price stood at Rs 1,573.15 apiece on NSE on September 11, 2024.
Varun Beverages Stock Split:
The PepsiCo distributor in India, turned ex-split on September 12, as it was also the record date for determining entitlement of Equity Shareholders for sub-division / split of existing Equity Shares of the Company.
The ratio of 5:2 stock split means that each Equity Share having a face value of Rs. 5/- (Rupees Five only) each fully paid-up, be subdivided/split into such number of Equity Shares having a face value of Rs. 2/- (Rupees Two only) each fully paid-up.
Varun Beverages has a strong record of stock splits, bonus issues, and dividends.
The latest 5:2 split is its second time in less than 2 years. Earlier, on June 15, 2024, the company split into a ratio of 1:2, where the face value of Rs 10 each was cut to Rs 5 each.
Meanwhile, Varun Beverages has also rewarded investors with bonus issues of 1:2 each in June 2022, June 2021, and July 2019.
Further, since August 2017, the company also distributed 10 dividends. In the last 12 months, the company paid dividends of Rs 2.50 per share.
BUY Varun Beverages Share Price:
Axis Securities Likes Varun Beverages Share Price For 5 Reasons. These Are:
1. Higher opex played spoilsport: Despite this, VBL maintained strong revenue growth, up 28.7% YoY, with consolidated volume increasing by approximately 28% YoY. India volumes grew by about 23%, driven by capacity expansion, a broader distribution reach (4 Mn outlets), and a robust summer season. However, international markets remained flat due to lower volumes in Zimbabwe, affected by the transition to zero-sugar products and a seasonally weak quarter in the African market.
2. Continued Focus on Energy drink/sports drink: The company continues to focus on expanding high-margin Sting energy drink across outlets. It is also expanding the value-added dairy, sports drink (Gatorade), and juice segment.
3. Entry into the Snacks Food: Varun Beverages Morocco SA, a wholly-owned subsidiary, has entered into an Exclusive Snacks agreement to manufacture and package Cheetos in Morocco by May 2025. DRC: It has also entered into the new territory of DRC, thereby expecting to start commercial production at the Greenfield plant in the next quarter. The management believes that the forthcoming Capex of Rs 4,000 Mn for the DRC unit will enhance its capacity and expansion strategy in the African territory.
4. Commencing multiple manufacturing facilities: Successfully commenced three new Greenfield facilities located in Supa (Maharashtra), Gorakhpur (Uttar Pradesh), and Khordha (Odissa). Furthermore, it is setting up backward integration facilities at Guwahati Plant, thereby taking the total number of integrated plants to 13.
5. Acquires 100% stake in South Africa-based company - The company successfully concluded the strategic acquisition of the Beverage Company (BevCo) in South Africa. Now it will expand its footprint across several dynamic markets in the African region - Lesotho, Eswatini, Namibia, Botswana, Mozambique, and Madagascar. The company is engaged in the business of manufacturing and distribution of licensed (Pepsico) and own-branded non-alcoholic beverages in South Africa.
On the valuation, Axis Securities said, "We believe VBL is expected to continue its strong growth momentum on account of 1) Successful strategic acquisition of the Beverage Company, thereby consolidating its presence in South Africa and DRC, 2) Continued focus on expansion in its distribution reach, mainly in rural areas and 3) Commissioning of multiple green field and brownfield facilities across geographies, strengthening manufacturing capabilities and extending market reach, thus saving significant transportation costs. We believe these investments are poised to support the company's long-term growth objectives and profitability."
The target price of Varun Beverages is set at Rs 1,800 per share by the brokerage.
Click it and Unblock the Notifications
Sign in with Google