Morgan Stanley has initiated coverage on Pepsi bottler Varun Beverages with an “overweight” rating, setting a price target of ₹1,701, which suggests a 23% potential upside from Monday’s closing stock levels.

What Happened: Morgan Stanley praised Varun Beverages for its ability to scale operations domestically and internationally. It noted that the company's strong profitability should help PepsiCo’s largest bottling partner outside the US continue to exceed the growth rates of the food and beverage industry.

The brokerage expects the company to achieve an annual revenue growth of 19% over the next three years for its India operations, with EBITDA margins holding steady at an average of 23.7%.

This rating makes Morgan Stanley the 18th brokerage to recommend a “buy” or equivalent for Varun Beverages, joining 22 analysts who cover the stock.

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In terms of valuation, Varun Beverages trades at a favourable multiple of 57 times the estimated earnings per share for the 2025. This compares positively to peers like Nestle, trading at 66 times the earnings for the financial year 2026, and Tata Consumer at 54 times.

Since its 2016 public debut, Varun Beverages’ stock has multiplied over 18 times, delivering positive returns each year. In 2024, the stock is already up 12%, following an 87% rally in 2023 and a 123% surge in 2022. As of March, domestic funds held a 2.26% stake in the company, slightly down from December, while foreign portfolio investors reduced their stake to 25.06% from 25.73%.

Price Action: Varun Beverages Ltd. shares were trading 0.19% higher ₹1,383.40 on Tuesday at midday.

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