Earnings Outlook
Varun Beverages Apr-Jun consol PAT seen up 28% YoY
This story was originally published at 06:00 IST on 17 July 2024
Register to read our real-time news.Informist, Tuesday, Jul 16, 2024
By Avishek Rakshit
KOLKATA – Volume driven growth is expected to help Varun Beverages Ltd post 28.3% year-on-year growth in its consolidated net profit for the Apr-Jun period to 12.8 bln rupees, according to the average of estimates from seven brokerages. The consolidated revenue is expected to rise 26.1% year-on-year to 71.9 bln rupees.
Sequentially, the company's net profit is seen increasing by 137.4% and revenue is seen growing by 63.4%. The company posted a net profit of 9.9 bln rupees in the year-ago period and 5.4 bln rupees during Jan-Mar. Its revenue was nearly 57 bln rupees in the Apr-Jun period of the last financial year and nearly 44 bln rupees a quarter ago.
Amongst the brokerages, Motilal Oswal Financial Services has estimated the company's net profit the highest at 14.2 bln rupees while KR Choksey Research estimated it the lowest at 10.5 bln rupees. Motilal Oswal Financial Services also projected Varun Beverages' revenue the highest at 75.9 bln rupees and KR Choksey Research estimated it the lowest at 61.1 bln rupees.
The company is yet to decide on the announcement date for the earnings. Varun Beverages follows the calendar year as its financial year.
In a report, Kotak Institutional Equities said it expects Varun Beverages to post 27% volume growth at 401 mln cases. The projection is based on the estimate that Varun Beverages has registered a 22% volume growth in domestic volumes, driven by undisrupted summer and heat waves across the country, along with other structural growth drivers such as share gains in under-penetrated areas, distribution expansion, sustained momentum in high-growth portfolio, and others. Also, the company is expected to register a 60% volume growth in its international business led by addition of South Africa.
Motilal Oswal Financial Services estimated the volume growth higher at 35% and Nuvama Wealth Management estimated the volume growth at 30%. Agreeing to the reasons cited by Kotak Institutional Equities over the volume growth, Nuvama Wealth Management added that the energy drinks portfolio is expected to have grown faster and is expected to outpace the overall growth rate by 2-3%.
Kotak Institutional Equities said that the average realisation from sales would have increased by 3%. In India, the average realisation is estimated to have increased by 6% owing to an improvement in the product mix, while there could have been a 2% decline from international sales, owing to the consolidation of its business in South Africa.
Varun Beverages is expected to report earnings before interest, tax, depreciation, and amortisation of 19.8 bln rupees, according to the average of estimates from six brokerages. The EBITDA is seen in the range of 16.6-21.2 bln rupees.
Nuvama Wealth Management expects the company's overall gross margin to expand by 451 basis points to 57% due to operating leverage, but the EBITDA margin may decline by 193 bps to 25%.
Citing operating leverage, Kotak Institutional Equities has projected Varun Beverages' EBITDA margin to increase by 180 bps. Motilal Oswal Financial Services also expects the EBITDA margin to improve to 27.8% compared to 26.9% in the year-ago period.
Motilal Oswal Financial Services said that the integration and ramp-up of BevCo, which Varun Beverages acquired in South Africa, will be in focus, and the company's plans over scaling up operations overseas and further capital expenditure are the key monitorables.
Today, shares of Varun Beverages closed 1.8% lower at 1,599 rupees on the National Stock Exchange.
Following are the Apr-Jun earnings estimates of Varun Beverages based on reports compiled by Informist from seven brokerage houses:
Broker Name | Net Sales (in million rupees) | Net Profit (in million rupees) | EBITDA (in million rupees) |
Axis Securities Ltd | 73,190.00 | 13,590.00 | 20,950.00 |
Emkay Global Financial Services Ltd | 73,533.00 | 12,632.00 | 20,007.00 |
Kotak Institutional Equities | 74,061.00 | 13,502.00 | 21,225.00 |
KR Choksey Research | 61,114.00 | 10,533.00 | 16,623.00 |
Motilal Oswal Financial Services Ltd | 75,944.00 | 14,226.00 | 21,142.00 |
Nuvama Wealth Management Ltd | 75,193.00 | 12,138.00 | 18,798.00 |
Sharekhan Ltd | 69,920.00 | 12,650.00 |
|
Average | 71,850.71 | 12,753.00 | 19,790.83 |
End
Edited by Ashish Shirke
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