HSBC has maintained its Buy rating on Varun Beverages, setting a target price of Rs 780, implying an upside potential of approximately 32% from the current market price of Rs 591.90. The brokerage is optimistic about the company’s financial health and growth prospects, driven by strategic initiatives.
Key highlights from HSBC’s report:
- Equity Issuance to Strengthen Balance Sheet: Varun Beverages is expected to issue equity, which will further bolster its balance sheet. This step is part of the company’s broader strategy to improve financial resilience and support future growth.
- 4% Equity Dilution from QIP: The Qualified Institutional Placement (QIP) is expected to result in approximately 4% equity dilution. While this may affect existing shareholders in the short term, it will improve the company’s capital structure in the long term.
- Faster ROIC Expansion: HSBC believes that the company’s Return on Invested Capital (ROIC) could expand at a faster pace as the company’s value shifts from debt to equity holders. This is expected to drive better returns for investors going forward.
Overall, HSBC remains confident in Varun Beverages’ ability to generate shareholder value and sees potential for further growth as the company strengthens its balance sheet and capital structure.
Disclaimer: Stock market investments are subject to market risks. This article is for informational purposes only and should not be construed as investment advice. Please do your own research or consult a financial advisor before making any investment decisions.
