Eureka Forbes Eyes ₹660 Target Amid Strong Growth and Expansion, Says ICICI Securities

Summary: ICICI Securities is confident about Eureka Forbes’ growth potential, maintaining a “Buy” rating with a target price of ₹660, as mentioned in their report dated October 9, 2024.

Key Takeaways:

• Strong Growth in FY24: Eureka Forbes has made significant strides during the first phase of its transformation, with notable investments in expanding distribution (36% growth between FY22-24). This has led to an increase in both volume and market share in FY24, with expectations for continued growth through FY26.
• Product Expansion: The company is focusing on creating new categories to boost market penetration. They are launching affordable products to attract new customers and ramping up media campaigns to increase visibility.
• Cost Optimization: Eureka Forbes has been working on optimizing costs, leading to an impressive expansion in EBITDA margins, from 4.8% in FY22 to 9.1% in FY24. They’ve also implemented a stock option plan for managers based on performance.
• Improved Services and Digital Focus: Eureka Forbes has expanded its service reach, now covering over 19,500 pin codes in India. With a focus on enhancing customer experience through technology, they have also modernized their direct-to-consumer app, resulting in quicker complaint resolution and improved customer satisfaction.
• Looking Ahead: The company is entering phase-2 of its transformation, where it plans to improve customer service by leveraging technology. Their focus will be on quick response times and better service quality.
• Market Position and Growth Opportunities: With just 6% penetration in India’s water purifier industry, there is immense potential for growth. Eureka is well-positioned to capitalize on this, especially after its transformation phase. The company’s investment in affordable products and expanded distribution aims to attract more first-time buyers.
• Maintain BUY Rating: ICICI Securities remains positive about Eureka Forbes’ future, projecting revenue and profit growth over the next few years. They have slightly raised their earnings estimates for FY25 and FY26 and continue to recommend a buy rating with a target price of ₹660.

Conclusion: Eureka Forbes has successfully completed the first phase of its transformation, showing strong growth in market share, distribution, and profitability. With further improvements planned in customer service and technology, the company is set to continue its upward trajectory.

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