Varun Beverages share price could offer an upside of around 31%, according to Choice Broking, which has initiated coverage on the PepsiCo bottler with a ‘Buy’ rating and a target price of ₹550.
The brokerage believes the company is well placed to deliver sustained growth, supported by deeper penetration in India, rapid international expansion, portfolio diversification and continued margin strength. Choice Broking expects Varun Beverages to clock a Revenue/EBITDA/PAT CAGR of 15%/16%/17% over CY25–CY28E.
According to Choice Broking, Varun Beverages has two key growth engines operating simultaneously. In India, the company has reached around 4 million of an estimated 12 million FMCG outlets, leaving significant room for distribution expansion. India’s per capita beverage consumption, at around 7 litres, also remains well below the global average of approximately 31 litres, offering a long-term growth opportunity despite rising competition from players such as Campa and Coca-Cola.
International markets, particularly Africa, represent the second major growth lever. The brokerage noted that Varun Beverages has expanded its overseas presence through a combination of greenfield operations in markets such as the Democratic Republic of Congo and Kenya, as well as acquisitions, including BevCo, Twizza, and Crickley Dairy in South Africa. International operations contributed around 20% of revenue in CY21, which rose to 33% in CY25 and is estimated to approach 40% by CY28E.
Choice Broking also highlighted Varun Beverages' efforts to leverage its extensive distribution infrastructure to expand beyond carbonated soft drinks and packaged water. The company has access to around 4 million outlets in India, more than 1 million visi-coolers, and an expanding route-to-market network in Africa.
This infrastructure is increasingly being used to introduce and scale categories such as energy drinks, value-added dairy, hydration products and snacks. The company has also entered newer segments through initiatives such as Calpis with Asahi, a beer distribution test with Carlsberg in Africa, and a proposed entry into ready-to-drink and alcoholic beverages in India.
According to the brokerage, these adjacencies could offer better realisations, favourable tax structures or stronger margins while allowing the company to leverage its existing distribution and operating infrastructure.
Choice Broking expects Varun Beverages' profitability to remain supported by its extensive backward integration, disciplined acquisitions and prudent capital allocation.
The company manufactures several key inputs internally, including preforms, closures, crates and crowns, while also investing in PET recycling. According to the brokerage, this integration provides an estimated 300–400 basis points EBITDA margin advantage compared with non-integrated operations.
Varun Beverages has also focused on acquiring strategically relevant businesses and integrating them into its existing operations to improve efficiency. Its capital expenditure has largely been funded through internal accruals, with debt deployed selectively for major acquisitions and expansion.
As a result, consolidated EBITDA margins have expanded from around 17% in CY19 to approximately 23% in CY25. Choice Broking expects margins to remain in the 23–24% range between CY25 and CY28E.
Choice Broking sees faster international expansion and improved margins in overseas markets as key potential triggers. Continued volume growth in India, driven by outlet additions and greater visi-cooler penetration, could provide further support.
The brokerage also expects premiumisation and the scaling up of newer categories—including energy drinks, dairy and snacks—to create additional growth opportunities. New ventures such as Calpis, Carlsberg, and the proposed entry into RTD and alcoholic beverages could also enhance Varun Beverages' long-term growth potential.
At the target price of ₹550, Choice Broking values the stock at 40 times its estimated EPS for September 2028, representing a discount of around 20% to its long-term average P/E multiple of 50 times.
The brokerage flagged rising competition, adverse weather conditions such as prolonged winters or higher rainfall, and slower-than-expected margin improvement in international markets as key risks.
