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View Bear Cases →Varun Beverages Ltd — Q2 FY24
Varun Beverages delivered a strong Q2 CY2024 with consolidated revenue of ₹7,197 crore (+28.3% YoY) and EBITDA of ₹1,991 crore (+31.8% YoY), driven by 22.9% volume growth in India and gross margin expansion of 222bps to 54.7%.
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Varun Beverages delivered a strong Q2 CY2024 with consolidated revenue of ₹7,197 crore (+28.3% YoY) and EBITDA of ₹1,991 crore (+31.8% YoY), driven by 22.9% volume growth in India and gross margin expansion of 222bps to 54.7%. The Indian summer boosted CSD and juice sales, while international markets were flat due to portfolio transition in Zimbabwe. Management reiterated double-digit growth guidance for H2, supported by new capacities in India and Africa. The DRC plant commenced production in July, and snack food expansion in Zimbabwe, Zambia, and Morocco offers a new growth vector. Risks include integration challenges at BevCo (South Africa) and potential weather disruptions in India.
वरुण बेवरेजेस ने साल 2024 की दूसरी तिमाही में शानदार प्रदर्शन किया। कंपनी की कुल कमाई ₹7,197 करोड़ रही, जो पिछले साल से 28.3% ज्यादा है। कमाई पर मुनाफा (EBITDA) ₹1,991 करोड़ रहा, जो 31.8% बढ़ा। भारत में बिक्री 22.9% बढ़ी, क्योंकि गर्मी के कारण कोल्ड ड्रिंक और जूस की मांग बढ़ी। कंपनी का मुनाफा मार्जिन 54.7% हो गया। अंतरराष्ट्रीय बाजार में बिक्री स्थिर रही। कंपनी को उम्मीद है कि साल की दूसरी छमाही में भी अच्छी बढ़त रहेगी। अफ्रीका में नए कारखाने खुले हैं और स्नैक्स का कारोबार भी बढ़ रहा है। जोखिमों में दक्षिण अफ्रीका में नए कारोबार को जोड़ना और भारत में मौसम की अनिश्चितता शामिल है।
Bear Cases1 alive · 0 deadPromises0 met · 2 missedRisks4 trackedTranscriptfull text
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BevCo integration and margin drag
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Read Transcript →Quarter Snapshot
Consolidated sales volume
401.6M cases
+28.1% YoY
Includes ~28M cases from BevCo; India grew 22.9%, international flat.
India volume growth
22.9%
+22.9% YoY
Driven by strong summer, expanded capacities, and distribution network.
Gross margin
54.7%
+222bps YoY
Improved due to timely PET chip procurement and light-weighting initiatives.
Low/no sugar volume share
46%
Not specified
Contribution from low/no sugar products; margins are better than regular variants.
What Changed vs Last Quarter
NEW
Double-digit volume growth in H2 CY2024
Management expects continued double-digit volume growth in India and consolidated for the second half of the calendar year.
NEW
CapEx of ₹3,600 crore for CY2024
Net capitalization CapEx for 2024 remains at ₹3,600 crore, primarily for greenfield and brownfield expansions.
NEW
CapEx of ₹2,500-2,600 crore for CY2025 season
Planned capitalization of ₹2,500-2,600 crore for the 2025 season, mainly for greenfield facilities in India and snack food manufacturing in Africa.
NEW
Snack food revenue target of ~$100M in 2-3 years
Management expects snack food business in Zimbabwe, Zambia, and Morocco to generate close to $100 million in revenue within the next couple of years.
DROPPED
DRC plant to start commercial production next quarter
The greenfield plant in DRC is expected to start commercial production in the next quarter (Q2 CY24).
DROPPED
Cheetos production in Morocco by May 2025
Varun Beverages Morocco will start manufacturing, marketing, and packaging Cheetos in Morocco by May 2025.
DROPPED
Debt amortization in a couple of months
Management expects to amortize the majority of incremental debt taken for BevCo acquisition and CapEx in the next couple of months.
DROPPED
Long-term margin guidance unchanged
Despite gross margin expansion, management maintains the same long-term margin guidance, citing one-off factors.
NEW RISK
BevCo integration and margin drag
BevCo's lower realization per case and higher working capital days are dragging consolidated margins; turnaround may take several quarters.
NEW RISK
Weather and seasonality impact in India
Excessive rains or harsh winters could dampen out-of-home consumption and pressure volume growth in H2.
NEW RISK
Currency and political risk in Africa
Currency volatility (e.g., Zimbabwe) and political instability in African markets could impact profitability, though management has managed well historically.
NEW RISK
Regulatory compliance for recycled PET
Mandatory 30% recycled PET content from April 2025 may increase costs if the JV plant is delayed or capacity is insufficient.
RISK GONE
Integration and growth in South Africa
BevCo acquisition is recent; management needs time to improve operations and grow PepsiCo's market share from 2.2%.
RISK GONE
Competitive pressure from Campa Cola
Analyst asked about Campa Cola's impact; management downplayed it, but it remains a potential threat in India.
RISK GONE
Debt levels and rising interest costs
Finance costs increased 49.7% due to higher debt for acquisitions and CapEx; average borrowing cost rose from 7.7% to 8%.
RISK GONE
Execution risk in new territories
New greenfield plants and DRC entry require smooth ramp-up; any delays could impact volume growth.
Fast read
Guidance and risk preview
Management expects continued double-digit volume growth in India and consolidated for the second half of the calendar year.
BevCo's lower realization per case and higher working capital days are dragging consolidated margins; turnaround may take several quarters.
View Risks →