Double Dhamaka! Board announces stock split from Rs 5 to Rs 2 and Rs 1.25/share dividend; Beverages company’s stock trades at high ROE & high ROCE; Results out!

The stock gave multibagger returns of over 100 per cent in just 1 year whereas BSE Sensex Index was up by 23.5 per cent.

Varun Beverages Ltd has announced an interim dividend of Rs 1.25 per equity share for the financial year 2024, payable on its 1,29,94,48,412 issued shares, and is proposing a stock split of its Rs 5 face value equity shares into smaller Rs 2 face value shares, subject to shareholder approval through postal ballot. The record date for the stock split will be determined after obtaining shareholder consent.

Financial Performance

The company delivered strong financial results for the second quarter of the fiscal year 2024. Revenue surged by 28.3 per cent YoY to Rs 719.68 crore, driven by a 28.1 per cent increase in consolidated sales volume to 401.6 million cases. Domestic sales witnessed robust growth of 22.9 per cent, while international volumes remained relatively flat due to challenges in Zimbabwe. Notably, the company achieved a remarkable 46 per cent contribution from low or no-sugar products to the overall sales volume. EBITDA climbed by 31.8 per cent to Rs 199.12 crore, supported by improved gross margins of 54.7 per cent due to efficient procurement and packaging optimization. Consequently, EBITDA margin expanded by 74 basis points to 27.7 per cent. The bottom line also reflected strong growth, with PAT increasing by 25.5 per cent to Rs 126.18 crore.

Half-Yearly Performance

The company's performance for the first half of the fiscal year 2024 was equally impressive. Revenue grew by 21.1 per cent YoY to Rs 1151.42 crore, while EBITDA surged by 29.1 per cent to Rs 297.99 crore. Profit after tax also exhibited robust growth, increasing by 25.3 per cent to Rs 180.98 crore. These results underscore the company's consistent performance and strong market position.

Operational Highlights and Expansion

The company marked a significant milestone with the commencement of commercial production at its Kinshasa, Democratic Republic of Congo facility on July 22, 2024. The plant, equipped with two CSD/Water PET lines, has an installed capacity of 550 bottles per minute each. Furthermore, the company has entered into an exclusive snacks franchising agreement with PepsiCo for Zimbabwe and Zambia. This strategic move involves an estimated investment of approximately Rs 60 crore in manufacturing facilities at both locations, with an annual capacity of around 5,000 metric tons each. The facilities are expected to be operational by October 1, 2025, for Zimbabwe and April 1, 2026, for Zambia.

About the Company

Varun Beverages Ltd has been associated with PepsiCo since the 1990s and is a key player in the beverage industry and one of the largest franchisee of PepsiCo in the world. The company produces and distributes a wide range of carbonated soft drinks, non-carbonated drinks and packaged water sold under trademarks owned by PepsiCo. PepsiCo brands produced and sold by the company include Pepsi, Seven-up, Mirinda Orange, Mountain Dew, Tropicana Juices and many more.

On Tuesday, shares of Varun Beverages Ltd plunged 5.02 per cent to Rs 1,600 with an intraday high of Rs 1,701 and an intraday low of Rs 1,576 from its previous closing of Rs 1,684. The stock’s 52-week high is Rs 1,707.1 and its 52-week low is Rs 796. The company has a market cap of over Rs 2 lakh crore and has delivered good profit growth of 47.3 per cent CAGR over the last 5 years. The shares of the company have an ROE of 35 per cent and an ROCE of 29 per cent. The stock gave multibagger returns of over 100 per cent in just 1 year whereas BSE Sensex Index was up by 23.5 per cent. Investors should keep an eye on this large-cap stock.

Investors should keep an eye on this large-cap stock.

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