Emkay has maintained a 'buy' rating on Varun Beverages Ltd (VBL) with a long-term target price of Rs 783 with an upside potential of over 25 percent. At 2.34 pm, VBL shares quoted at Rs 606.95 on the NSE, up over 2 percent.

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In the last one week, the stock has corrected by over 3.25 percent although the midcap stock has returned 16 percent to investors so far this year. The one-year return on the stock is positive at almost 12 percent.

The completion of an impending Qualified Institutional Placement (QIP) and Rs 900 crore infusion from qualified institutional buyers will help the company pare its debt, Emkay said in its report on September 10.

"We expect VBL's EPS to increase 15%/50% in CY19/20E on account of the acquisition, balance sheet de-leveraging, benefits of operating leverage and a revival in international business, especially Morocco and Zimbabwe," the report said.

VBL's acquisition of South and West operations from PepsiCo has consolidated its presence and garnered market share as these tropical regions with low seasonability will help in better asset utilisation and sustainable growth, it added.

Furthermore, VBL's in-house production of dairy products at its Pathankot facility is expected to start from H2CY19, which should boost revenue growth, Emkay said.

Besides, ICICI Direct has 'hold' rating on VBL with a target price of Rs 693.

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First Published:Sept 12, 2019 2:37 PM IST