Varun Beverages share price target 2026: 31% returns ahead? Why Choice Broking recommends 'buy' - Rationale explained

Varun Beverages Ltd, the flagship bottler for PepsiCo in India and several international markets, has been in the spotlight after brokerage Choice Broking reiterated a 'buy' rating with a revised price target. The new target implies a potential upside of around 31% from the current market price, according to the brokerage's analysis. The recommendation comes amid strong volume growth, margin expansion, and capacity additions across domestic and overseas operations. Analysts point out that the company's consistent execution and robust distribution network make it a preferred pick in the fast-moving consumer goods (FMCG) space.

Choice Broking's rationale is anchored on multiple growth drivers. The company has been expanding its production capacity in key markets, including India, Nepal, and parts of Africa, to cater to rising demand. The brokerage highlights that Varun Beverages is benefiting from favorable product mix, with a growing share of high-margin products like juices, energy drinks, and packaged drinking water. Additionally, the company's focus on rural penetration and new distribution channels is expected to drive volume growth in the coming years. The brokerage also notes that the company's debt reduction and improved working capital management have strengthened its balance sheet, enabling better return ratios.

On the financial front, Varun Beverages has reported robust numbers in recent quarters. For the quarter ended June 2026, the company recorded a revenue growth of 18% year-on-year, driven by strong summer demand and new product launches. Net profit grew by 22% during the same period, aided by operating leverage and cost efficiencies. The company's EBITDA margin improved by 150 basis points to 21%, reflecting better cost control and premiumisation. For the full fiscal year 2026, analysts project revenue growth of around 16% and earnings per share (EPS) of ₹14.5, up from ₹12.0 in FY25. The brokerage expects the company to continue its double-digit growth trajectory, supported by capacity expansion and market share gains.

From a valuation perspective, the stock trades at a forward price-to-earnings (P/E) of 38x based on FY26 estimated earnings, which is at a slight discount to its historical average of 42x. Choice Broking believes this offers a good entry point for long-term investors. The brokerage has set a price target of ₹1,850, implying a 31% upside from the current level of around ₹1,410. The target is based on a P/E multiple of 50x on FY27 estimated EPS of ₹37, reflecting the company's growth prospects and strong competitive position. However, the brokerage also cautions that any slowdown in demand, adverse weather conditions, or raw material price inflation could impact the company's performance.

Analysts also point to potential risks, including intense competition from other beverage companies and regulatory changes in key markets. Nevertheless, they remain optimistic about the company's long-term fundamentals. "The company's ability to innovate and adapt to changing consumer preferences will be crucial," says a note from Choice Broking. "With a strong pipeline of new products and increasing capacity, we believe Varun Beverages is well-positioned to deliver sustained growth."

"We expect Varun Beverages to deliver a CAGR of 15% in revenue and 20% in net profit over FY25-FY27, driven by capacity expansion and premiumisation." — Choice Broking report

In conclusion, Choice Broking's 'buy' rating and 31% upside target make Varun Beverages an attractive proposition for investors with a long-term horizon. The company's robust execution, expanding footprint, and improving profitability are key positives. However, investors should keep an eye on valuation and macroeconomic factors. As always, a diversified approach and consultation with a financial advisor are recommended before making any investment decision.

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