Posted on March 5, 2025, by Niftynews
Varun Beverages stock is receiving positive attention after several top brokerages, including CLSA, upgraded the stock to their high-conviction outperform list. Despite increasing competition from Campa Cola and Coca-Cola, Varun Beverages remains a strong performer with a 61% upside potential. Shares of Varun Beverages Ltd. (VBL) closed flat at ₹476.45 on March 5, 2025, after hitting an intraday high of ₹486.30 on the BSE.
Brokerages Predict 61% Upside for Varun Beverages Stock
In a significant move, CLSA upgraded Varun Beverages stock to a high-conviction outperform list, citing an attractive risk-reward ratio. Despite making a slight adjustment to its target price, lowering it to ₹770 from ₹802, CLSA still sees an impressive 61% potential upside from the stock’s previous closing price of ₹477.30.
Although CLSA revised its earnings estimates for 2025-2027 due to competition concerns, it remains optimistic about Varun Beverages. According to CLSA, the company’s strong position in the market will help mitigate the downside risks, such as 5% downside for EBITDA and 6.2% downside to EPS in 2025.
Strong Technical Outlook for Varun Beverages Stock
On the technical front, Jigar S Patel, Senior Manager – Technical Research at Anand Rathi Shares and Stock Brokers, identified crucial levels for Varun Beverages stock. He noted that support is found near ₹460, while resistance is at ₹486. Patel suggests that a decisive daily close above ₹486 could trigger further upside momentum, whereas a drop below ₹460 could signal weakness.
Traders are encouraged to watch these levels closely, as maintaining above the support levels will likely reinforce the bullish sentiment, while a break below support could result in a potential sell-off.
Jefferies Optimistic on Varun Beverages Stock
In addition to CLSA’s optimistic outlook, Jefferies has assigned a buy rating on Varun Beverages stock, setting a target price of ₹715. Jefferies highlighted the company’s strong fundamentals, particularly driven by volume growth and margin improvement. However, the brokerage did express concerns over the increasing competition from brands like Coca-Cola and Campa Cola, which could pressure the company’s margins.
Despite these challenges, Jefferies believes that Varun Beverages remains a solid investment, backed by its strong distribution network and ability to deliver consistent growth.
Impressive Q4 Performance Strengthens Positive Outlook
Varun Beverages further strengthened its position with an impressive 36% year-on-year increase in consolidated net profit for the December 2024 quarter. The company’s net profit surged to ₹195.64 crore, driven by strong volume growth and improved margins. This strong performance in the December quarter has solidified the positive outlook on Varun Beverages stock and reaffirms the company’s ability to navigate through competitive pressures.
Challenges from Competition and Capex Plans
Despite the strong growth outlook, Varun Beverages faces some challenges, particularly from increasing competition. Coca-Cola and Campa Cola have been making moves in the Indian market, which could impact Varun Beverages’ market share and margins. To counter this, Varun Beverages will need to focus on innovation and brand-building strategies.
Additionally, the company has increased its capex guidance, which has raised some concerns among analysts. Although the higher capital expenditure is expected to fuel long-term growth, it could weigh on the company’s short-term profitability. Furthermore, slowing urban consumption in India may pose a risk to future growth, especially in urban areas where consumer preferences can shift quickly.
Varun Beverages Stock Remains a Strong Investment
In conclusion, Varun Beverages stock continues to show solid growth potential, with 61% upside predicted by CLSA and Jefferies. While there are risks related to competition and increased capital expenditure, the company’s strong earnings, robust market position, and ongoing volume growth provide a positive outlook for the stock.
Investors should watch key technical levels, including support at ₹460 and resistance at ₹486, as the stock navigates these challenges. With positive sentiment from brokerages and strong business fundamentals, Varun Beverages stock remains an attractive option for long-term investors.
