VARUN Beverages Q3FY23 Concall or Q4CY22 concall
-Improved product mix led to 49% Revenue growth and PAT growth of 100%+.
-Sting contributed to realisation and revenue growth. Expect category to keep growing.
-Launched products in value added dairy segment recently.
-Sting is 9.6% of sales volume. Gross margins were minimally impacted inspite of higher cost of RM. Gm’s declined this year, yet EBITDA Margins increased due to realisations and operating leverage.
-Ebitda Margins at 22.2% for the full Year.
-Debt/ebitda at 1.23 times and D/E at 0.65 times.
-CWIP at 600+ crores for Greenfield and brownfield capex. Entire Capex for CY23 or FY24 at 1500 crores.
-Snacks Business: at the moment in India Pepsi isn’t looking for distribution. Only working on co packing and giving it to Pepsi. This is what they are looking for. Varun has started distribution and packaging for them in Morocco. Varun will start talks of manufacturing for them soon in Morocco. Currently importing from Portugal and Egypt.
-Production for Snacks business for Pepsi in India: production started in November and December. Pepsi has asked to expand the same.
-South and Western territories are growing faster. Seasonality in the business is structurally coming down.
-Looking at 10-15% expansion in distribution. Targeting to reach 3.5million outlets from 3million currently. Expanding trucks, visi coolers etc.
-National roll out for dairy business will happen in FY24. Tripling capacity by the end of this year. Sourcing for dairy also in place in all the regions.
-Don’t find much competition in dairy competition and Sting (energy drink) vs our key competitor.
-Rajasthan, Mp, and 6 brownfield: This is where we are doing our capex.
-Vision of the company is to reach 1 billion volume. Want 50% growth in volumes over 3 years in India. At 652 million today. Implies a 15%+ Volume growth in Indian Business.
-1500 crore capex+Cream bell capex will be capitalised.
-Analyst asked this Q: Gross margins if they revert back to mean and operating leverage kicks in. Margins might actually go to 22.5 to 23%. Management replied by saying- no guidance on margins, it might be possible.
-Snacks business for Pepsi- currently it is foot in the door. 1 line at the moment and talking about 1 more line.
-Volume growth for the Full year was 41%.
-Expect energy drink to become 15% of overall beverages business. As even in other geographies like Pakistan, Thailand etc. Energy drinks are at 15%. Energy drinks used to be very expensive, due to value and pricing. Energy drinks have really taken off in last 5-7 years.
-% Wise growth is faster in East, West and Souther India vs North.
-Juice and Dairy capex will be ready by the end of this year. Which will contribute to growth by next year.
-Difference between us vs Other FMCG in rural markets:
Only now power and electrification of villages has started. Due to this we are getting much more traction vs the likes of HUL, Dabur etc etc. As they were already present in villages since long. Thus, our category volume growth is much faster.
-Sting was 16% of total volumes in Q3FY23, Q4CY22.
-Sting volume has grown 175% vs the last year when looked at Q4CY22 or Q3FY23.
Disc: Invested and trades in last 30 days.
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