Varun Beverages (VBL)

FairStock Score: 48/100 — MIXED

Score breakdown: P/E: 0/3 · ROCE: 1/2 · Growth: 2/2 · Dividend: 0/1

Key Financials

Strengths

• 5-year revenue CAGR of 19.70% demonstrates proven long-term compounding and franchise expansion.
• Conservative balance sheet: D/E of 0.13, positive FCF of ₹784 Cr, Piotroski F-score of 7/9 and Altman Z-score of 5.83.
• Promoter holding of 59.43% aligns management with minority shareholders.
• ROE of 15.51% and ROCE of 19.99% indicate acceptable capital efficiency.

Concerns

• Current sales are declining 6.85% and profit is declining 9.06%; latest quarterly net margin is around 6.2%.
• Valuation is very rich: P/E 50.28, EV/EBITDA 32.53, P/B 8.37, price far above Graham Number of ₹109.59.
• Dividend yield is negligible at 0.22%, forcing reliance on future growth for returns.
• FairStock Score is 38/100, suggesting a mixed combination of quality and valuation.

AI Analysis

Let me think about Varun Beverages as a business first. It is a Pepsi bottler with a powerful distribution franchise in India, and the 19.70% five-year revenue CAGR shows that the company has compounded quickly. The balance sheet is sound: debt/equity is only 0.13, free cash flow is ₹784 Cr, Piotroski score is 7/9, and Altman Z-score of 5.83 suggests no financial distress. ROE of 15.51% and ROCE of 19.99% are respectable, and promoters own 59.43%, so my interests are aligned with theirs. But Graham taught me that no business is worth overpaying for. At ₹484.25, the market cap is ₹1.53 lakh Cr and the P/E is 50.28. The EV/EBITDA is 32.53, and the price-to-book ratio is 8.37 against book value of ₹57.89. The Graham Number is ₹109.59, so the stock trades at a margin of safety of -311.91%. This is speculation, not investment. I am being asked to pay four times what a conservative Graham calculation would assign for a company whose latest annual sales fell 6.85% and profits fell 9.06%. The latest quarter earns ₹260 Cr on ₹4,204 Cr of sales—a thin net margin—and the dividend yield is just 0.22%. This is a decent fast-growing franchise, but the current growth engine has stalled. The 5-year record says it can grow again; the current numbers say momentum is not there. As Buffett would say: it is far better to buy a wonderful company at a fair price than a fair company at a wonderful price. Here, we have a good company at an unwonderful price. I would wait for a better price, or for growth to resume, before committing capital. No margin of safety, no interest.

Data from BSE/NSE filings. AI analysis is for educational purposes only — not investment advice. Scoring methodology · Disclaimer