Varun Beverages Q1-CY23 Concall: (notes by Soic)
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Net Revenue grew by 37.7% YoY to Rs. 38,929.8 million; volumes grew by 24.7% in Q1 CY2023 to 224.1 million cases
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EBITDA increased by 50.3% to Rs. 7,980.4 million; Gross margins improved by 89 bps to 52.4% from 51.5%; EBITDA margins improved by 172 bps to 20.5% in Q1 CY2023
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Commissioned greenfield in Bundi Rajasthan, and 6 brownfield plants at different plants. The additional Greenfield plant in Jabalpur, MP is expected to be operational very soon.
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Energy Drink has established a leadership position in the category; now focus on Value Added Dairy, Sports Drinks, and Juice segments to sustain the growth momentum and to fuel the next leg of growth.
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Well positioned to achieve the sustainable growth in medium to long term
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CSD contributed to 71% of sales volume, 7% from juices and 22% from water
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Witnessing healthy demand for peak season in next quarter
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Putting up 2 plants to increase capacity for value added dairy and juices. Company has enough products in the category, and will not be adding new products in these categories. Company was previously facing issues in the capacity, which will be met with these plants.
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There is always going to be competition in the market, there is enough room for each player whether it is campa or other players.
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Capex guidance of 1500cr for CY23.
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For growth in CY24 value added dairy, juices and sports drinks will play a role of growth. These are higher margin businesses.
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There is plenty of room for growth in energy drinks. The energy drink market is 15% at industry level.
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Margins from the dairy business will be at par with current level or maybe higher than current margins.
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Getting huge demand for energy drinks but not able to fulfill due to capacity constraints; it is currently available only on key distribution channels.
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Advertisement expenses by PepsiCo will not impact the margins of VBL.
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Prices of gatorade are close to Powerade(coca cola). Company also has a Rs.20 pack of Gatorade; the company will expand its distribution reach in the current year. The same plant can make gatorade so no need to put additional plant.
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Net debt as on 31-Mar is approx. 4000cr; Debt to EBITDA is at ~1x
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The realisation per case of juice and Sports drink is higher than CSD.
Guidance to grow improve ROCE by 100 to 125 bps every year for next few years; current ROCE is 30% so it will go to 31%
Prices of PET bottles and Sugar have been in the same manner in the last few quarters; there is no major change in the last 3-4 quarters.
Disc: no reco.
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