Target: ₹610
CMP: ₹483.30
Eureka Forbes (EUREKAFO), in its first analyst meet post the demerger, articulated its long-term growth strategy. It expects growth to hinge on product innovation, premiumisation (better aesthetics/ features), penetration (in all channels), reduction in the cost of product ownership (entry price point of ₹6,499 versus ₹12,000 average price), annual maintenance services (36 per cent of FY24 revenue; converting non-Eureka AMC to company-based AMC), and margin expansion (via product mix, value engineering, vendor negotiations, automation and cost reduction in IT and logistics).
We believe the strategy spans medium-to-longer term.
The water purifier market in India currently has a low penetration of 6 per cent versus global players – China (21 per cent), Thailand (20 per cent) and South Korea (60 per cent). Likewise, the vacuum cleaner market has a very low penetration rate of 2 per cent in India versus global players – China (20 per cent), Hong Kong (80 per cent) and Japan (90 per cent). Air purifiers also have a low penetration rate of less than 1 per cent.
We are optimistic on EUREKAFO scripting a turnaround, led by continued double-digit volume growth and sharp margin uptick led by cost measures. Expect an earnings CAGR of 72 per cent in FY24-26, with an ROE/ROCE of 12/9 per cent in FY25-26.