Varun Beverages Q1 CY2026 beat lifts targets to Rs 620

Strong start to CY2026 shifts earnings expectations

Varun Beverages (VBL), a key PepsiCo bottler, reported a better-than-expected performance in the January to March quarter (Q1) of CY2026. The company follows the calendar year as its financial year, running from January 1 to December 31. Brokerages flagged broad-based strength across India and international operations as the key driver of upgrades to earnings estimates for CY2026 and CY2027. Management commentary on near-term demand and margin resilience also supported the positive revisions.

The stock reaction reflected the improved sentiment. Shares extended gains for a third straight session on Tuesday, rising about 2% to an intraday high of Rs 529. The stock was also reported to have risen roughly 33% to 35% over the past month, with the recent move attributed to the Q1 CY2026 earnings announcement.

Q1 CY2026 headline numbers: revenue up 18%, profit up 20%

Varun Beverages reported consolidated net profit of Rs 878.71 crore in Q1 CY2026, up 20.1% year-on-year from Rs 731 crore. Revenue from operations rose 18.1% to Rs 6,574 crore, compared with Rs 5,567 crore a year earlier.

EBITDA increased 21% to Rs 1,528.93 crore from Rs 1,263.96 crore, and the EBITDA margin improved by 55 basis points to 23.3%. In India, the company reported a 112 basis points expansion in EBITDA margin, attributed to operational efficiencies from strong volume growth and better gross margins.

Volumes led the growth, with international ahead of India

The quarter’s revenue growth was supported primarily by higher volumes. Consolidated sales growth rose 18%, driven by robust volume growth of 16% and a 1.6% increase in realisations. Total cases sold across geographies reached 363 million.

India volumes grew 14.4%, while international operations expanded 21.4%. Net realisation per case was around Rs 174, with the international business contributing meaningfully due to favourable currency movements. In contrast, domestic net realisation per case saw a 1.5% dip, attributed to pack upsizing and targeted price-point launches.

Margin picture: gross margin improved, but costs stayed elevated

Gross margin improved by 62 basis points year-on-year to 55.2%, supported by a better product mix and early stocking of raw materials. However, the improvement at the operating level was lower because employee costs rose 21% year-on-year.

Analysts noted management’s intention to reduce discounting and take pricing actions to protect margins. Emkay Research pointed to strategic stocking of polyethylene terephthalate and lower discounting in a strong demand environment. It also highlighted the narrowing of the volume-value gap to 150 bps from 400 bps in the preceding quarter, alongside an operating profit margin gain of about 60 bps in Q1 CY2026. One risk cited was higher gasoline costs, which could raise logistics costs in coming quarters.

Broker upgrades: targets cluster around Rs 585 to Rs 620

Following Q1 CY2026, multiple brokerages raised forecasts and target prices. Antique Stock Broking increased its CY2026 and CY2027 estimates by 7% and 8%, respectively, maintained a ‘buy’ rating, and set a target price of about Rs 585. Emkay Research maintained ‘buy’ and increased its target price by 15% to around Rs 620, citing a 5% to 6% increase in earnings and an 11% beat on net profit in Q1 CY2026.

Another brokerage maintained a Buy rating with a target price of Rs 615, citing volume growth of more than 14% in India, stable margins, and a strong start to the summer season. Domestic brokerages also reiterated Buy calls with targets around Rs 600, implying about 16% upside in one note.

Africa push, new categories, and acquisitions in focus

Analysts highlighted Africa as a long-term growth lever, alongside capacity expansion and scaling of new categories such as dairy products, energy drinks, and snacks. A key development referenced by Emkay was the incorporation of numbers from South African beverage firm Twizza, which it said was acquired in December last year.

Separate company commentary and broker notes also pointed to continued investment in manufacturing and backward integration across international markets. In a CLSA note, backward integration for Zambia, DRC, and Morocco was flagged as a driver of margin expansion, and distribution of snacking products was noted to have started in Zambia and Zimbabwe. A plant was expected to be commissioned in Zimbabwe by October, according to that note.

Competition, discounting, and raw material coverage

Rising competition, including from Campa, remained part of the market discussion, but broker commentary indicated management was not concerned. Lower discounts and efficiency gains, including benefits from new plants, were expected to support margins.

On input visibility, one brokerage said Varun Beverages holds raw material inventory for six months for international operations. In India, the company was said to have sufficient inventory for the second quarter and partial coverage for the third quarter. Any additional cost impact was expected to be managed through lower discounts and cost-control measures, as per the note.

Recent quarters provide context: CY2025 volatility and recovery

Varun Beverages’ commentary for CY2025 cited weather-related disruptions in India during the peak summer season, including heavy rainfall that affected volumes, with performance improving in the fourth quarter. The company commissioned four new greenfield production facilities in India during the year at Prayagraj (Uttar Pradesh), Damtal (Himachal Pradesh), Buxar (Bihar), and Mendipathar (Meghalaya), and said these were stabilising to support higher volumes and operating leverage.

For the quarter ended December 31, 2025 (Q4), the company reported net profit of Rs 251.78 crore (up 36% year-on-year), revenue of Rs 4,334.7 crore (up 13.5%), and EBITDA of Rs 639 crore (up 10.2%). However, EBITDA margin contracted to 14.7% from 15.2%.

Key numbers snapshot

What investors will watch next

Management commentary and broker notes pointed to stronger growth trends in Q2 CY2026, supported by favourable weather and a low base. Analysts also highlighted pricing and discount discipline, the trajectory of fuel costs and logistics expenses, and progress on scaling new categories such as dairy, energy drinks, and snacks.

The pace of ramp-up at new plants, the sustainability of international currency-driven realisations, and execution in African markets are likely to remain central to earnings revisions through CY2026.

Conclusion

Varun Beverages’ Q1 CY2026 performance combined strong volume-led growth with margin improvement, leading to earnings upgrades and higher target prices across brokerages. Near-term focus remains on summer-led demand, discounting discipline, and cost control, alongside capacity-led expansion in India and international markets.