Shares of Varun Beverages Limited reached a record high on Wednesday with a rise of about 18%. However, the decline in the afternoon reduced the pace to just 7.25%. The company’s board of directors approved the acquisition of a beverages company to expand its presence in South Africa. According to the exchange filing on Tuesday, the company said that it will acquire 100% stake in South African soft drinks company for Rs 1,320 crore.
Jefferies Financial Group said that the company will focus on increasing PepsiCo’s reach and market share. He said that the company will focus on PepsiCo’s brand to improve operating margins.
What did Jefferies say?
- Jefferies has kept a buy rating on the stock. He has kept a target price of Rs 1,132.90.
- South Africa is the largest soft drink market in Africa. In this, the per capita consumption of soft drinks is 240 bottles annually.
- However, market growth has been low. Its compound annual growth in the last five years has been 3%.
- Per capita consumption of soft drinks is high in Namibia and Botswana. There it is 160–260 bottles annually.
Motilal Oswal Financial Services Opinion
- The research firm has kept a buy rating for the stock. The target price has been fixed at 1,285.
- Better conditions in the South African market will help in growth.
- The market will reach 1.54 billion cases by 2027. It will have a CAGR of 5.3% during 2022–27.
- 65% of the population is between 15 and 64 years old. This will also help in the growth of the market.
CLSA increased rating
- The brokerage has increased the rating for the stock to buy.
- He has also increased the target price from Rs 1,070 to Rs 1,419.
- According to him, the announcement of acquisition in South Africa is part of the company’s strategy.
- South Africa is the largest beverages market in Africa. But his shares of PepsiCo are limited.
Due to the news of this deal, the company’s shares closed at Rs 1,249 on NSE with a rise of 6.6% on Wednesday. The stock has seen an increase of 87.07% since January 1. The total traded volume so far during the day has been 24 times its 30-day average.
Five out of 19 analysts tracking the company have a buy rating on the stock. Three have advised to hold and one to sell. There is a possibility of 14.3% decline in the stock.
