The Fundamentally Strong FMCG Stock Is Trading at a 33% Discount — Should You Buy Varun Beverages Now?
Strong FMCG Stock: In a market where FMCG stocks typically trade at premium valuations due to their defensive nature and consistent cash flows, Varun Beverages Limited (VBL) has emerged as a rare opportunity. Currently trading at a discount of nearly 33% from its 52-week high, this fundamentally strong PepsiCo bottling partner could be a value buy for long-term investors seeking exposure to a fast-growing beverage company with strong domestic and international presence.
📉 Stock Overview: A Deep Discount Opportunity
Varun Beverages is currently trading at ₹458.50 per share, well below its 52-week high of ₹682.84. Despite this recent correction, the stock has delivered a phenomenal 657% return over the past 5 years, highlighting the strength of its business model and execution.
With a market cap of ₹1.55 lakh crore, the company holds a leading position in the beverage sector, producing and distributing some of the most well-known PepsiCo brands like Pepsi, 7 Up, Tropicana, Aquafina, and others.
🏭 Company Profile & Operations
Established in 1995 and headquartered in Gurugram, VBL is PepsiCo’s second-largest bottling partner globally outside the US. The company operates:
- 50 manufacturing facilities (38 in India, 12 overseas)
- 130+ depots and 2,800+ main distributors
- Business across 10 countries with distribution rights in 4 more
Between 2019 and 2024, Varun Beverages has grown its sales volumes at a CAGR of 18%, underlining robust expansion across geographies.
🚀 Expansion Plans & Capex
To fuel future growth, Varun Beverages has laid out a capex plan of ₹3,100 crore for CY2025, with ₹900 crore still unutilized. This will support the commissioning of two new Greenfield plants in Bihar and Meghalaya, which are expected to become operational by May 2025.
Backward integration efforts—like new facilities in Prayagraj and DRC—aim to enhance supply chain efficiency and reduce dependence on external vendors.
🥤 Innovation & Health-Conscious Products
Partnering with PepsiCo, VBL is actively launching new products like Jeera Masala Soda and relaunching Nimbu Masala Soda, while also transitioning toward healthier product offerings. Currently, 59% of its beverage portfolio consists of low-sugar drinks, aligning with consumer trends for health and wellness.
📊 Financial Performance Snapshot
Varun Beverages has maintained stellar financial growth over the past five years. Its recent Q1 FY25 results are equally impressive:
| Particulars | Q1 FY24 | Q1 FY25 | Growth % |
|---|---|---|---|
| Revenue | ₹4,317 Cr | ₹5,567 Cr | 28.96% |
| Net Profit | ₹548 Cr | ₹731 Cr | 33.39% |
| Revenue CAGR (5 Years) | – | – | 22.92% |
| Net Profit CAGR (5 Years) | – | – | 41.04% |
📈 Valuation & Brokerage Ratings
Despite its solid fundamentals and growth, Varun Beverages trades at a Price-to-Earnings (P/E) ratio of 55.7, which is reasonable for a fast-growing FMCG stock.
Brokerages remain optimistic:
- Goldman Sachs: Buy, Target Price ₹600 → Upside: 30.92%
- Motilal Oswal: Buy, Target Price ₹665 → Upside: 45.10%
📋 Key Financial Ratios of Varun Beverages
| Metric | Value |
|---|---|
| Market Cap | ₹1,55,027 Cr |
| Current Price | ₹458 |
| 52-Week High / Low | ₹683 / ₹419 |
| P/E Ratio | 55.7 |
| Book Value | ₹49.1 |
| Dividend Yield | 0.22% |
| ROCE | 24.8% |
| ROE | 22.5% |
| EPS | ₹8.46 |
| Debt-to-Equity Ratio | 0.17x |
| Face Value | ₹2.00 |
🔍 Conclusion
Varun Beverages checks all the boxes — strong revenue and profit growth, a wide distribution footprint, expanding capacity, product innovation, and healthy return ratios. With the stock trading at a 33% discount from its peak, long-term investors may find this an opportune time to accumulate.
Backed by robust fundamentals and optimistic brokerage calls, Varun Beverages could be a hidden gem in the FMCG space, especially for those looking to invest in high-growth companies with global exposure.
❓ Frequently Asked Questions (FAQs)
Q1. Why is Varun Beverages stock in focus now?
A1. The stock is trading at a 33% discount from its 52-week high, presenting a potential buying opportunity for long-term investors.
Q2. What does Varun Beverages do?
A2. VBL produces, bottles, and distributes PepsiCo beverages such as Pepsi, 7 Up, Tropicana, and Aquafina across India and several international markets.
Q3. How has the company performed financially?
A3. The company reported a 28.96% rise in revenue and 33.39% growth in net profit in Q1 FY25, with 5-year CAGR in net profit at 41.04%.
Q4. What are the future growth drivers for VBL?
A4. Capacity expansion, backward integration, new product launches, and an emphasis on low-sugar beverages will likely drive future growth.
Q5. What do brokerages say about the stock?
A5. Goldman Sachs and Motilal Oswal have both given a Buy rating, with targets of ₹600 and ₹665 respectively, indicating an upside potential of 30% to 45%.
Q6. Is Varun Beverages a good long-term investment?
A6. Given its consistent growth, low debt, high ROE/ROCE, and strong brand association with PepsiCo, it can be considered a strong long-term bet.
For more market insights, follow our news.
Stay tuned for more updates and insights on the stock market! For more insights on investing in the Indian stock market, check out resource like MoneyControl, ET, NSE India.