HSBC has retained its ‘Buy’ rating on Varun Beverages, but has cut its target price to ₹620 (from ₹640) citing concerns over weaker-than-expected volume trends in Q2. The brokerage said the current moderation in volume is already priced into the stock, but investor focus has shifted to whether the current slowdown is seasonal or a sign of structural cooling.
Varun Beverages, the largest bottler for PepsiCo in India, has seen robust growth in recent years but has recently flagged early monsoon conditions as a key drag on volumes. HSBC has accordingly trimmed its volume estimates, though it continues to remain constructive on the company’s fundamentals.
Interestingly, the brokerage sees the changing competitive landscape in India’s beverages sector as healthy, with more players likely to grow the overall category rather than cannibalise share. It notes that Varun Beverages’ distribution strength, operating efficiency, and high rural penetration position it well to sustain growth in line with the broader soft drinks industry.
The company had earlier reported Q1 volume growth of over 9%, but concerns remain over whether that momentum can be sustained in a seasonally lean quarter like Q2. Still, HSBC believes any near-term weakness will be offset by a rebound in H2, supported by festive season and new product initiatives.
