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  • 02 Nov 2022
  • ICICIdirect Research

VARUN BEVERAGES POSTS ROBUST Q2FY23 NUMBERS

VBL - 540 Change: 5.80 (1.08 %)

News:

 Varun Beverages reported another quarter of robust performance with revenue growth of 32.5% led by 24% volume growth and 6.8% realisation growth. Consolidated sales volume and average realisation was at 190 million cases and Rs 167/case, respectively. India sales volume grew 22% to 148 million cases and international sales volume increased by 31.3% to 42 million cases. The higher realisation was mainly due to a better product mix. The company sold smaller SKUs of 250 ml specifically energy drink Sting. Gross margin during the quarter improved 90 bps despite raw material pressure. The company was able to save 130 bps (percentage to sales) through lower employee spends. However, overhead spends were higher by 83 bps mainly due to higher fuel prices. Operating profit witnessed growth of 41% to Rs 699 crore with operating margin expansion of 138 bps to 22%. Lower tax provisioning due to shift in lower tax regime in India along with strong revenue growth & uptick in margins led by 53.3% growth in net profit to Rs 395.5 crore

View:

 VBL is witnessing very strong volume driven growth in India as well as in overseas territory after two years of Covid-19 disruption. The base quarter still was low given many out of home spaces like restaurants, pubs, cinema halls along with education institutions were not fully operational in the base quarter. However, despite that, such high volume growth is very impressive. We believe the company was able to drive higher volumes from its acquired territories of South & West. Moreover, some newer brands like ‘Sting’ in energy drinks & ‘Creambell’ in diary based beverages are getting strong traction & driving volume growth. We believe the efforts towards increasing distribution network & setting up manufacturing units in some of the under penetration territories (UP, Bihar, MP, Chhattisgarh & Rajasthan) would boost volumes in future. We remain positive on the stock

Impact:

Positive