Morgan Stanley Eyes 45-Day Surge for Varun Beverages Stock

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AuthorAarav Shah|Published at:
Morgan Stanley Eyes 45-Day Surge for Varun Beverages Stock
Overview

Morgan Stanley reiterated an 'Overweight' rating for Varun Beverages, setting a ₹600 target price with a 21.5% upside potential over 12 months. The brokerage anticipates a stock price increase within 45 days, citing confidence in strong management commentary for the 2026 outlook and portfolio expansion opportunities. Current valuation is seen as attractive compared to historical averages.

Morgan Stanley Predicts Q4 Rally for Varun Beverages

Morgan Stanley has issued a strong 'Overweight' recommendation for Varun Beverages, a key bottling partner for PepsiCo. The brokerage set a price target of ₹600 per share, signaling an anticipated 21.5% upside over the next 12 months. Crucially, Morgan Stanley expressed confidence that the stock price will rise in absolute terms within the next 45 days.

Bullish Outlook and Management Confidence

The firm is optimistic about the company's future, expecting strong commentary from management during the upcoming quarterly earnings. Morgan Stanley analysts believe that the Q4 CY25 earnings call could signal a positive 2026 outlook for Varun Beverages' Indian operations. This optimism is further supported by management's strategic focus on portfolio expansion in existing markets.

Expansion Opportunities Drive Growth

Opportunities for expansion into Ready-to-Drink (RTD) and alcoholic beverages are viewed favorably, providing a solid foundation for medium-term growth and supporting stock outperformance. Morgan Stanley estimates an over 80% probability for this positive scenario to unfold.

Valuation and Recent Performance

Currently, Varun Beverages trades at a 12-month forward Price-to-Earnings (P/E) ratio of 47x, which is lower than its 3-year historical average of 54x, presenting an attractive valuation. In the last five trading sessions, the stock price has gained 2%. Over the past month, it has returned 6.75%, and over six months, it has gained 8%. However, over the past year, the stock price has declined by 18.88%.

Q2 FY26 Financial Snapshot

For the second quarter of FY26, Varun Beverages reported a net profit of ₹1,317 crore, a 5% increase year-over-year. Revenue rose by 2.5% to ₹7,017.4 crore, while Earnings Before Interest, Tax, Depreciation, and Amortisation (EBITDA) remained flat at ₹1,999.6 crore. Consolidated sales volumes saw a 3% decline, with India volumes falling 7.1%. This was partially offset by a 15.1% growth in international volumes, notably 16.1% in South Africa.

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