Emkay Retains BUY on Varun Beverages Despite 11% Target Price Cut to Rs 625 – Here’s Why

Brokerage firm Emkay Global has revised its target price for Varun Beverages Ltd (VBL) by 11% to Rs 625, while maintaining its BUY rating on the stock. Despite near-term challenges, the brokerage firm remains upbeat on the company’s long-term prospects, underpinned by robust fundamentals and consistent growth drivers.

Varun Beverages Limited (VBL) is a leading player in the Indian beverage industry, recognized as one of the largest PepsiCo franchisees outside the United States. VBL's operations extend to India and several other countries in the Indian sub-continent and Africa. 

Also Read: Varun Beverages Q4 Results 2025: PepsiCo Bottler Net Profit Soars 33% Up To Rs 731.30 Crore - Check Earnings Details | Republic World

Healthy financial performance

The revision follows VBL’s performance for the March quarter, which, while largely in line with expectations, reflected mixed trends across geographies. The company posted strong India revenue growth of 18%, outpacing the estimated 15%, thanks to a 16% jump in volumes and a modest 2% rise in realization.

However, at the consolidated level, topline growth of 30% was tempered by a 12% decline in international realization, largely due to the integration of lower-margin operations in South Africa.

Robust domestic market, weak international sales

Varun Beverage's performance in the domestic market provided a buffer, with volume and realization growth of 16% and 2%, respectively. In contrast, international realization dipped by 12%, largely due to the consolidation of a lower-margin South African business. This weighed on consolidated margins, even though topline growth came in at a healthy 30% year-on-year.

The company’s planned acquisitions in Tanzania and Ghana—expected to contribute 7–8% to topline growth—were scrapped due to compliance-related challenges. This development prompted the downward revision in EPS guidance, as per Emkay Global.

It manufactures, distributes, and sells a wide range of PepsiCo's carbonated and non-carbonated beverages, including popular brands like Pepsi, Mirinda, 7UP, Mountain Dew, and Aquafina.

Gross margin contracted by 170 basis points to 54.6%, with India and international operations contributing to the dip. However, India’s EBITDA margin improved by 110 basis points, thanks to operating leverage. International margins, particularly in South Africa, were significantly lower at 14.4% compared to the group’s ~23% average.

Positive Outlook

Emkay remains confident in VBL’s long-term prospects, pointing to ongoing investments in low-calorie product lines, PET packaging light-weighting, and increased marketing activity in under-penetrated markets. The company is also focusing on driving growth in high-margin categories like energy and value-added hydration, with brands like Nimbooz doubling in volume year-on-year.

Despite trimming the target price, Emkay reiterated that competitive intensity will expand the overall beverage category, and VBL is well-positioned to capitalize on this trend.