Earnings Outlook
Varun Beverages PAT seen up 17% on year on higher volumes
This story was originally published at 20:05 IST on 16 October 2024
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By Avishek Rakshit
KOLKATA – Volume-driven growth, especially in its international business, is expected to help Varun Beverages Ltd. to post a 17.4% year-on-year growth in its consolidated net profit at INR 5.9 billion in Jul-Sept, according to an average of estimates from nine brokerages. The higher sales are expected to push the consolidated revenue of the company up by 20.0% year-on-year to INR 47.3 billion.
Sequentially, however, the company’s net profit and revenue are expected to decline by 53.1% and 35.6%, respectively. The Jul-Sept quarter coincides with the rainy season when the demand for cold beverages usually dips compared to summer.
Varun Beverages, the franchisee to bottle and sell beverage brands and snack items owned by US-based Pepsico Holdings in India and parts of Africa, will announce results for the September quarter on Oct. 22.
The company reported a net profit of INR 5.0 billion on revenue of INR 39.4 billion a year ago and a net profit of INR 12.5 billion on revenue of INR 73.3 billion in Apr-Jun.
Among the brokerages, Antique Stock Broking has projected the highest net profit for Varun Beverages in Jul-Sept at INR 6.6 billion and Emkay Global Financial Services the lowest at INR 5.4 billion. The estimates for revenue range from INR 46.1 billion by Nuvama Wealth Management and INR 49.4 billion by Antique Stock Broking.
Kotak Institutional Equities has estimated a 20% sales volume growth for Varun Beverages at a consolidated level of 264 million cases. In India, volumes could rise by 6%, but in international operations, the company’s sales volume is set to increase by 68% following the acquisition of BevCo in South Africa.
Brokerages Motilal Oswal Financial Services and Nuvama Wealth Management are also bullish on the company posting higher volume growth. While the former pegged the consolidated volume growth at 23%, Nuvama Wealth Management estimated the volumes to rise by 5% in India, and by 18% globally.
In India, heavy rains, resulting in floods, especially in rural India and waterlogging in urban centres, impacted demand.
Kotak Institutional Equities, however, expects the company’s realisations from sales to be flat on year. Although the sales mix in India in terms of products was positive, it is likely to be offset by the South African business, which is undergoing a phase of consolidation. In March 2024, Varun Beverages acquired the South African BevCo to expand its business.
The company is expected to report earnings before interest, tax, depreciation, and amortisation of INR 11.0 billion, according to the average of the estimates of eight brokerages. The estimates on EBITDA range from INR 10.4 billion by Elara Securities and INR 11.8 billion by Antique Stock Broking.
Nuvama Wealth Management said that overall gross margins may decline by 121 basis points to 45.9% while EBITDA margins could expand by 16 basis points to 23% due to lower staff costs and other expenses.
On Wednesday, shares of Varun Beverages closed 0.5% down at INR 608.30 on the National Stock Exchange.
Following are the Jul-Sept earnings estimates of Varun Beverages based on reports compiled by Informist from nine brokerage houses:
Broker Name | Net Sales (in million INR) | Net Profit (in million INR) | EBITDA (in million INR) |
Antique Stock Broking Ltd | 49,392.00 | 6,606.00 | 11,776.00 |
Axis Securities Ltd | 47,530.00 | 5,750.00 | 10,980.00 |
Elara Securities (India) Pvt Ltd | 46,461.00 | 5,961.00 | 10,442.00 |
Emkay Global Financial Services Ltd | 47,595.00 | 5,424.00 | 10,766.00 |
Kotak Institutional Equities | 46,574.00 | 5,670.00 | 10,867.00 |
KR Choksey Research | 47,769.00 | 6,147.00 | 11,363.00 |
Motilal Oswal Financial Services Ltd | 47,607.00 | 5,870.00 | 10,871.00 |
Nuvama Wealth Management Ltd | 46,059.00 | 5,836.00 | 10,571.00 |
Sharekhan Ltd | 46,280.00 | 5,670.00 |
|
Average | 47,251.89 | 5,881.56 | 10,954.50 |
End
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Edited by Saji George Titus
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