VBL - Fundamental Analysis

Last Updated Time : 02 Aug 25, 12:58 am

Fundamental Rating: 4.3

Here's a comprehensive analysis of Varun Beverages Ltd. (VBL) — PepsiCo’s key bottling and distribution partner in India and several international markets. This company has shown formidable financial momentum, backed by strong return ratios, volume growth, and operating efficiency.

🧾 Core Financial Strength

Profitability & Returns

ROE: 22.5% and ROCE: 24.8% — excellent metrics indicating high operational efficiency and return generation

Quarterly PAT Growth: +81.4% — massive uptick from ₹726 Cr. to ₹1,317 Cr.

EPS: ₹8.5 — relatively modest, but backed by consistent growth

Debt-to-Equity: 0.12 — low leverage, suggesting prudent capital structure

Dividend Yield: 0.20% — nominal, not a focus area for investors seeking income

📊 Valuation Metrics

Metric Value Comment

P/E Ratio 60.8 High, but justified by fast growth; below industry PE of 82.4

P/B Ratio ~9.42 Suggests rich valuation; reflects premium assigned to brand and scalability

PEG Ratio 1.10 Fairly valued considering earnings growth trajectory

🏭 Business Model & Competitive Advantage

Core Business: Bottling and distribution of PepsiCo’s beverage portfolio (including carbonated drinks, juices, and water)

Strengths

Exclusive bottling rights in high-growth geographies

Scalable model with backward integration (PET preform, caps, sugar syrup, etc.)

Seasonal cyclicality leveraged well (Q1/Q2 spikes due to summer demand)

Risks

High valuation may limit upside in short term

Heavily exposed to sugar prices and climatic impact on beverage demand

Decline in FII holdings (-1.12%) may suggest profit booking or macro caution

📉 Technical & Sentiment Indicators

RSI: 67.9 — approaching overbought zone

MACD: +6.92 — bullish trend persists

Moving Averages

Price (₹512) > 50-DMA (₹480) but < 200-DMA (₹520) — nearing long-term resistance

High recent volume — suggests strong institutional and retail action

🎯 Entry Zone & Holding Strategy

Recommended Entry: ₹490–₹505 — a technical support zone above 50-DMA but below resistance

Target Range (12–18 months): ₹600–₹640 — based on earnings growth and seasonal uplift

Holding Suitability

Growth-focused portfolios

Long-term horizon investors looking for FMCG exposure with emerging market flavor

Less ideal for dividend seekers or deep value investors

Would you like a side-by-side comparison with Radico Khaitan or United Breweries to assess beverage market positioning and margins? Or maybe we build an ROI model factoring in monsoon patterns and summer demand peaks? Let’s go deeper if you’d like. 🥤📈

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