Varun Beverages Shares Tumble Despite Strong Quarterly Results

Varun Beverages saw a significant drop in its stock price today, falling around 7 percent during intra-day trading despite announcing impressive results for the quarter ending June 2024.

For this quarter, the company reported a profit after tax (PAT) of ₹1,261.83 crore, which is a 25.5 percent increase from ₹1,005.42 crore in the same period last year. This growth can be attributed to rising sales volumes and improved profit margins.

Revenue from operations also experienced a robust growth of 28.3 percent year-on-year, reaching ₹7,196.86 crore compared to ₹5,611.40 crore in Q2 of the previous year.

Additionally, the company’s earnings before interest, taxes, depreciation, and amortization (EBITDA) increased by 31.8 percent, amounting to ₹1,991.2 crore, up from ₹1,511.02 crore a year ago. The EBITDA margin improved by 74 basis points to 27.7 percent, driven by higher gross margins.

Speaking of gross margins, there was a substantial uptick of 222 basis points, rising to 54.7 percent from 52.5 percent in the corresponding quarter last year. The company noted that timely procurement and storage of PET chips helped them take advantage of better pricing. They also focused on reducing sugar content and lightweight packaging.

In terms of sales volume, Varun Beverages reported a 28.1 percent increase, selling 40.16 crore cases compared to 31.35 crore cases in the same quarter from the previous year. Notably, India volumes surged by 22.9 percent, though international volumes outside of India remained steady.

Ravi Jaipuria, the Chairman of Varun Beverages, expressed optimism about the company’s performance, highlighting India as a market with great demand potential due to its expanding middle class and youthful population. The company is focusing on strengthening its infrastructure and distribution networks to capitalize on this growth.

Alongside its impressive earnings report, Varun Beverages announced a stock split of 2:5 and an interim dividend of ₹1.25 per share. However, even with these announcements, the stock dipped as much as 6.9 percent to ₹1,566.85 during trading today.

Despite the decline, the company’s stock has seen a remarkable increase overall, rising 97 percent from a 52-week low of ₹796 last year. In fact, it’s provided nearly 110 percent returns in the past year alone.

The drop in stock price might indicate profit booking by investors or concerns about future growth even after a strong quarterly performance.