Varun Beverages Share Price Target Revised To Rs 575 By Emkay - Here’s Why

Brokerage firm Emkay has reiterated its 'Buy' rating on Varun Beverages Ltd (VBL) and retained its share price target at Rs 575, implying a strong upside from the current market price of Rs 512.

The target is based on 50x Jun-27E EPS, driven by anticipated ~15% organic EBITDA CAGR between CY25–27, alongside robust fundamentals and inorganic growth potential.

Varun Beverages Share Price Target
“We retain BUY on VBL and our TP of ₹575, led by our expectation of ~15% organic EBITDA CAGR (CY25-27E) and potential inorganic growth accretion,” Emkay said in its latest note.

Inorganic Acquisitions on Radar as Capex Intensity Drops
With current capacity utilization at 70%, Varun Beverages is witnessing reduced organic capex intensity, creating room for near-term volume growth without large capital spends. As a result, the company is actively exploring inorganic acquisitions to bolster its portfolio and regional footprint.

The brokerage noted that VBL’s debt-to-equity ratio has improved significantly, now at less than 0.1x compared to the historical 0.8x, enhancing its balance sheet strength to support acquisitions.

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Q2 Miss on Revenue Expected; Margins Beat Forecast
Although unseasonal rains impacted sales in India, leading to a 2.5% drop in topline and a ~9% dip in India revenue, international markets came to the rescue. The international business grew 23% YoY, outperforming expectations on the back of strong volume growth in South Africa and a rising contribution from DRC and Foods businesses.

Realizations remained largely flat at ₹180/case, with a ~1.5% decline in India offset by a 7% increase internationally. Despite weaker India volumes, VBL increased water sales, which now make up 18% of the Q2 mix, up from 16% earlier.

Freight, Manpower Efficiencies Drive Margin Upside
Emkay highlighted that cost optimization and structural efficiencies were the standout themes in Q2.

“Despite promotional packs, overall/India Gross margin was stable at 54.5%/53.0%. Consol EBITDA margin was higher by ~80bps at 28.5% (330bps higher vs estimate),” the note stated.
The gains came from freight and manpower savings, strong currency in overseas markets, and renewable energy adoption. SG&A expenses dropped by 190bps, although employee costs rose by 100bps.

Guidance Remains Conservative Despite Outperformance

“We remain conservative, as of now… but higher margins should remain intact with backward integration, distribution/freight optimization, and higher use of renewable energy sources,” Emkay said.

While the Q2 EBITDA and PAT beat consensus estimates by 13–14%, VBL has maintained its annual EBITDA margin guidance of 21–22%, even though reported margins in CY24 are at 23.5%. Emkay believes the margin tailwinds are sustainable, but remains conservative in its future estimates.


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