JM Financial, a company that analyzes stocks, says you should buy shares of Varun Beverages. They have a target price of Rs 675, which means shares might rise 38% from their current price of Rs 490.
The stock took a big hit, dropping by 30%, but JM Financial believes this was too much. They see strong reasons for Varun Beverages to do well, both in India and in other countries.
In India, the beverage market is mainly controlled by two big companies: Coca-Cola and Pepsi. Together, they hold about 80-90% of the market. Recently, Reliance launched a new drink called Campa, which targets cheaper consumers by selling drinks in PET bottles at 30-40% lower prices than Coca-Cola and Pepsi.
Though Campa is gaining attention, especially in smaller shops, most people still prefer the bigger brands for larger purchases. JM Financial thinks that Campa’s biggest impact will be in bottled water and soda, where pricing is really important.
Coca-Cola and Pepsi aren’t sitting back, though! They are introducing promotions, like cheaper returnable glass bottles and new value-sized options to compete better.
JM Financial believes Varun Beverages has a bright future with lots of opportunities in India. They plan to invest Rs 2,000 crore to build new factories and add thousands of shops to sell their drinks.
Moreover, there’s a huge chance for growth in Africa since Coca-Cola sells about 2.5 billion cases there. Varun Beverages might reach 400 million cases by 2025 and is also looking to enter the food business in several African countries!
Despite increased competition, JM Financial thinks Varun Beverages is a smart investment. They predict low double-digit growth in India and even higher growth internationally. Even in tough times, their shares will still be a good buy.
On Monday, Varun Beverages shares went up more than 3% to Rs 505.2, showing positive signs.
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