Posted on March 7, 2025, by Niftynews
Why Varun Beverages Share Price Soared 17% After Hitting 52-Week Low
Varun Beverages share price, the largest PepsiCo bottler outside the United States, has experienced a remarkable 17% rebound in its stock after hitting a 52-week low of ₹419.55 on March 3, 2025. This comeback is a welcome turn after Varun Beverages share price had fallen by 38% from its 52-week high of ₹681.12 in July 2024. The stock’s recovery has caught the attention of investors, and in this article, we explore why the rebound is significant.
The Setback: Competitive Pressure and Declining Market Sentiment on Varun Beverages Share Price
The decline in Varun Beverages share price was largely due to competitive pressure from Campa Cola, a new entrant backed by Reliance Industries. Campa Cola introduced aggressive pricing strategies, offering 200 ml bottles at ₹10, directly challenging the pricing power of Pepsi and Coke. This led to a period of significant selling pressure on Varun Beverages share price, which suffered a sharp decline as investors grew concerned about its ability to maintain its market share.
The Cola War: Campa Cola’s Aggressive Strategy and Its Impact on Varun Beverages Share Price
Reliance-backed Campa Cola entered the market with a bold strategy, utilizing higher trade margins, a strong distribution network, and investment in back-end infrastructure, such as installing refrigerators and signage at retail points. They also secured co-presenting rights for the Indian Premier League (IPL), giving them valuable exposure. Despite these efforts, however, analysts, including Jefferies, noted that Indian consumers are still largely loyal to established brands like Pepsi and Coca-Cola.
Even though Campa Cola’s lower prices have attracted retailers, they are not replacing the demand for Pepsi and Coke. In fact, despite Campa Cola’s competitive pricing, Pepsi and Coca-Cola remain the top choices among consumers, leaving Varun Beverages share price unaffected by the immediate challenges posed by the new entrant.
Weather and Seasonal Demand: A Crucial Summer for Varun Beverages Share Price
India is expected to experience above-normal temperatures this summer, which will likely drive up demand for cold beverages. This period, from March to June, is extremely important for Varun Beverages as it generates nearly 50% of its annual volume during these months. Analysts forecast strong double-digit volume growth for the company in 2025, which could further bolster investor confidence in Varun Beverages share price and lead to continued stock growth.
Valuation and Investment Opportunities in Varun Beverages Share Price
Despite the competitive challenges, analysts believe Varun Beverages share price is currently undervalued. Jefferies reports that the stock is trading at 45 times its one-year forward price-to-earnings (P/E) ratio, which is below its five-year average and comparable to other FMCG peers. According to CLSA, the stock’s valuation has corrected from 63 times to 48 times, signaling that the concerns about the company may be overblown.
Strong Financial Performance in December 2024: A Positive for Varun Beverages Share Price
Varun Beverages delivered solid financial results for the quarter ending December 2024. The company’s revenue grew by 40% year-over-year, reaching ₹3,817.61 crore, compared to ₹2,731 crore in the same period last year. Its net profit rose by 36%, reaching ₹196 crore, compared to ₹144 crore the previous year. EBITDA also grew by 39% to ₹580 crore, indicating that the company’s financial health remains strong, despite the challenges it faces in the market. These positive results should help boost Varun Beverages share price in the coming quarters.
The Road Ahead for Varun Beverages Share Price
Despite facing competitive headwinds from Campa Cola, Varun Beverages remains a strong player in the beverage industry. The 17% stock surge after hitting its 52-week low is a testament to the company’s resilience and growth potential. With strong fundamentals, expected growth in the upcoming summer season, and competitive advantages in the market, Varun Beverages share price is poised to continue its upward trajectory.
Investors should keep an eye on the company’s performance over the next few months, especially during the crucial summer period, as Varun Beverages looks to maintain its position as a leading player in the Indian beverage market.
