Business & Investment

The beverage company aims to counter the influence of Covid and has been reassessed.

New Delhi: People who deal with pandemics and are trapped in their homes can hardly expect to increase their soda and fruit juice sales.

But that’s exactly where

There is a contrarian projection.Bottling company Pepsi, With gatorade Tropicana India hopes to get out of the second wave of the pandemic virtually intact and ride on domestic consumption and better volume growth in rural areas.

Analysts at Dalal Street seem to believe in the treatise and the company’s ability to do so.

There is a lot of speculation about whether demand will recover from the second wave. COVID The pandemic in India will be as strong as it was seen when unlocking last year. Some economists say it will take some time for consumer sentiment to revive, as the upper and middle classes have been significantly affected this time.

Varun Beverages is aware of the uncertainty and has not quantified the impact of the blockade on its business. Still, the June quarter is expected to be much better than last year, thanks to the eased blockade.

“Currently, we are taking into account that April sales forecasts will decline by 25%, May by 50% and June by 10%, which will increase revenue. The strong results for the March quarter are strong. It gives us the confidence to speed up recovery when we get back to normal, “said Emkay Global’s Devanshu Bansal and Ashit Desai.

Analysts are primarily bullish on equities and maintain a “buy” valuation, even if the next seasonally strong quarter may see some negative impact. They expect rural and domestic consumption to partially offset the impact.

“The company has converted some of its” out-of-home “consumption into” in-home “by introducing a 1.25-liter family pack. In addition, with the expansion of distribution in rural areas, the company has achieved strong growth in rural areas, supported by the establishment of business coolers, “said Sanjay Manyal of ICICI direct.

“The hotels, restaurants and cafes (HORECA) segment, which account for 10% of volume, will continue to be affected, but we believe that rural belts and household consumption will drive the company’s growth,” he said.

The stock price target of the securities company is 1,200 rupees, and the profit growth rate in 20 to 22 is projected to be a CAGR of 20.4%. The stock price was evaluated at 20 times that of CY22 EV / Ebitda.

In the active market on Friday, stock prices fell nearly 2% to trade at Rs 987.

Varun Beverages reported that consolidated profit for the March quarter more than doubled to Rs 136.75, supported by increased sales across the domestic and international markets. Total revenue increased 31.96 percent to Rs 2,275.60.

For the peak season, the company is preparing to deal with uncertainty and could be better than last season, which was hurt by a complete lockdown.

“In addition to strong domestic consumption trends, new product launches, efficient market development and distribution strategies can help growth. From a medium-term perspective, small-scale acquisitions in the South and West regions Opportunities to acquire shares from new players are a good sign, “said Suvarna Joshi of Axis Securities.

Axis has also set goals from Rs1,230 to Rs1,200 for short-term challenges.

Main risks

Among the major risks to the bullish outlook is the blockade of countries that can disrupt supply chains and soft drink demand during peak summer seasons.

On the other hand, sustained rises in oil-based raw material prices and sugar prices can impact operating income over the long term.

Domestic sugar prices have risen 7-8% in the past month, and global sugar prices have risen nearly 15% in two months. If they rise further, it could mean an increase in the cost of Varun beverages.

The beverage company aims to counter the influence of Covid and has been reassessed. The beverage company aims to counter the influence of Covid and has been reassessed.

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