Goldman Sachs has initiated coverage on Varun Beverages Ltd. with a ‘buy’ rating and a price target of Rs 600, implying a 25% upside and highlighting the company’s positioning in one of the fastest-growing ready-to-drink beverage markets globally.

India’s low per capita consumption of RTD drinks leaves massive headroom for growth, and VBL, Pepsi’s second-largest bottler globally, is tapping in. The firm has ramped up Pepsi’s India market share from 28% in 2015 to 38% in 2024, making India one of PepsiCo’s top-performing geographies, as per the note.

Goldman Sachs sees this momentum continuing, with new demand pockets like energy drinks and hydration fueling the next leg. Notably, the firm sees no disruption from new entrant Campa Cola.

Beyond India, VBL’s Africa playbook is winning Goldman Sachs’ confidence. After successfully turning around territories through backward integration and distribution upgrades, the brokerage expects South Africa to be the next transformation story, with Ebitda margins projected to jump from 10% to 17% by 2027.

Importantly, the report stated that the company’s capital expenditure phase is largely behind, setting the stage for higher free cash flow. And with a price-to-earnings multiple of 40 times the earnings per share value for fiscal 2027—higher than its five-year average—Goldman Sachs believes superior execution and strong earnings growth justify the premium.

The note flagged increased competition and execution delays as risks.

The bottling major reported a 35% year-on-year rise in net profit for the first quarter of this calendar year. The company follows a January-December period to report its quarterly results.

The Pepsi bottler recorded a consolidated net profit of Rs 726.49 crore for the quarter ended March, compared to Rs 537.27 crore in the same quarter of the previous fiscal, according to its stock exchange notification. This was above Bloomberg’s estimates of Rs 741 crore.

The board has also approved an interim dividend of Rs 0.50 per share.

Varun Beverages Q1CY26 Highlights

  • Revenue up 29.2% at Rs 5,566.94 crore versus Rs 4,317.31 crore (Bloomberg estimates: Rs 5,476 crore).

  • Ebitda up 28% at Rs 1,263.96 crore vs Rs 989 crore (Bloomberg estimates: Rs 1,235 crore).

  • Margins at 22.7% vs 22.9%.

  • Net profit up 35% at Rs 726.49 crore vs Rs 537 crore (Bloomberg estimates: Rs 741 crore).

. Read more on Markets by NDTV Profit.Superior execution and strong earnings growth justify Varun Beverage’s premium valuation, according to Goldman Sachs.  Read MoreMarkets, Business, Notifications 

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