Mid- and small-cap stocks will outperform in the medium to long term. However, mid-cap stocks can become blue-chip or large-cap stocks if they grow aggressively in terms of sales and earnings. One of the mid-cap stocks turned into a large cap a few months ago and produced a return of 6.5 times his best in five years. So if you invested Rs 1 Lakh, you are now at 7.5 Lakhs. This article discusses Varun Breverages Limited, its financial performance, positive factors, risk factors for investing in this company and its stock price performance over the past 1-5 year timeframe.
Also read: This mid-cap stock has delivered a 1000% return over the last five years
About Varun Beverage
Varun Beverages Limited manufactures, bottles and distributes beverages. Outside the United States, PepsiCo is the world’s second largest beverage bottling company.
The Company manufactures carbonated soft drinks, soft drinks, non-alcoholic beverages and soft drinks.
Company financial performance
Revenue increased from Rs 5,105 Crores in CY18 (January to December 18th) to Rs 13,173 Crores in CY22 (January to December 22nd). The latest quarterly results for the period ending 22 December show a profit of Rs 2,214 crore compared to a profit of Rs 1,734 crore in the same period last year.
Margin increased from INR 29.6 billion in CY18 to INR 155 billion in CY22. Profit for the quarter on 22nd December he was Rs 8.1 crore and last year he was Rs 3.2 crore for the quarter ended 21st Dec.
ROE is 33% and RoCE is 27.8%.
Its EPS increased from Rs 10.6 on CY18 to Rs 23.05 on CY22.
Positive factor of this company
Significant revenue and profit margin growth over the past five years.
The company has high annual EPS growth.
Improved net cash outflow over the last few years.
Brokers recently raised their stock price targets.
The stock trades at 62x multiples compared to 74x multiples in the industry.
Currently, 29 mutual fund schemes have invested 2.7% of the shares and 721 FPIs and FIIs have invested 25.3% of the company’s shares.
The stock is showing strong short-, medium-, and long-term momentum, and the technical trend is very bullish.
Negative factors for investing in this company
Book value is Rs 78.6. This means the stock is trading at 18.2 times its book value.
Book value per share has deteriorated over the past two years.
The promoter has reduced its holding by 5% over the past three years.
The dividend yield is low at 0.07%.
Also read: Top Low Risk and High Return Stocks to Invest in 2023
The current market price of the stock is Rs 1,430. Let’s take a look at how stock prices have changed over the past five years.
Last 3 months – 25% return (1 lakh changed to 12.5 lakh)
Last year – 112% return (Rs 10k changed to Rs 212k)
Last 3 years – 480% return (Rs 10,000 changed to Rs 58,000)
Last 5 years – 656% return (Rs 10k changed to Rs 75.6k)
The board will consider a stock split on the 2ndnd May 2023. The stock currently trades at 62x his P/E, while his P/E in the industry is 74x his. This stock moved from mid-cap to large-cap a few months ago. Such stocks may be attractive during market corrections.
Disclaimer: This article is for educational purposes only. Stock investment is high risk. I continue to research various stocks that are outperforming and the reasons behind it, and post them on this blog so that investors can benefit from the analysis. I do not currently own any of these shares, but may purchase them in the near future. Please consult your financial advisor before investing in such stocks.
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Suresh KP is the founder of Myinvestmentideas. He is his NISM Certified – Investment Advisor and NISM Certified – Research Analyst. He has been analyzing financial markets for the past 20 years.
