Varun Beverages “has demonstrated strong execution in the growing packaged beverages category. It has an opportunity to expand distribution, gain share in the South & West and drive strong EPS growth,” the brokerage said in its investor note dated May 2.

The comments highlight the company’s January-March results, which was “led by strong volume traction and higher per-case realisation, especially in India,” the note said.

The brokerage maintained a ‘buy’ rating and raised the target price to Rs 1,650, from Rs 1,540, implying an upside of 17%.

Varun Beverages Q1 FY23 (Consolidated, YoY)

• Revenue up 38% at Rs 3,952.59 crore vs Rs 2,867.48 crore (Bloomberg estimate: Rs 4,123.15 crore).

• Ebitda up 50% at Rs 798.04 crore vs Rs 531 crore (Bloomberg Estimate: Rs 696.10 crore).

• Ebitda margin at 20.2% vs 18.5% (Bloomberg Estimate: 19.47%).

• Net profit up 62% at Rs 438.57 crore vs Rs 271.09 crore (Bloomberg Estimate: Rs 355.45 crore).

The company, on Tuesday, announced a 1:2 stock split. The company will split one existing equity share of face value Rs 10 into two equity shares of face value Rs 5 each, it said in an exchange filing. Varun Beverages will decide the record date for the subdivision of existing equity shares after the approval of equity shareholders.

The rationale behind the stock split is to enhance the liquidity of the company’s equity shares, it said. Through this sub-division of equity shares, the company also wishes to encourage small investors to participate, by making the equity shares of the company more attractive.

The authorised share capital is Rs 1,000 crore, divided into 200 crore equity shares of face value Rs 5 each, the company said in a revision of the memorandum of association of the company.

Shares of Varun Beverages gained 1.55% to 1,437 per share, compared with a 0.37% decline in the Nifty 50, as of 1:36 a.m.

Of the 15 analysts tracking the stock, 11 maintained ‘buy’ and three maintained ‘hold’, according to Cogencis data. Meanwhile, the one remaining analyst maintained a neutral stance between ‘buy’ and ‘hold’.