ICICI Securities Recommends Buying Eureka Forbes with a Target Price of Rs 700

ICICI Securities has expressed a bullish outlook on Eureka Forbes, recommending a buy rating on the stock and setting a target price of Rs 700 in its research report dated September 30, 2023.

In their report, ICICI Securities highlights several factors that support their positive view on Eureka Forbes:

1. Established Brands: Eureka Forbes boasts established brands such as Eureka Forbes, Aquaguard, and Select.
2. Multi-Channel Presence: The company has a robust multi-channel presence, with access to over 20,000 General Trade (GT) outlets and serving more than 10,000 pin codes.
3. Diverse Product Portfolio: Eureka Forbes offers a wide range of products that cater to various consumer needs, including storage solutions, hot water solutions, copper/zinc benefits, and non-electric water purifiers.
4. Strong Return on Invested Capital (RoIC): The company demonstrates a strong RoIC.

Eureka Forbes is investing to expand its margins, with a 10% improvement recorded in Q1FY24. The launch of a variant at an entry price point of INR 6,499 is expected to attract consumer trials. Additionally, distribution expansion and a focus on services offer growth and margin tailwinds.

The worsening air and water pollution levels in India, the limited presence of multinational brands in the market, and the challenges faced by new entrants in gaining significant market share provide Eureka Forbes with a competitive edge. The induction of key personnel, including Pratik Pota as MD & CEO and Gaurav Khandelwal as CFO, has expanded the company’s management bandwidth.

ICICI Securities has initiated coverage on Eureka Forbes with a BUY rating. They have valued the company using a Discounted Cash Flow (DCF) based methodology. Their model projects a revenue and PAT CAGR of 12% and 50%, respectively, over FY23-26, with improving return ratios over the same period. At their DCF-based target price of INR 700, the implied Price-to-Earnings (P/E) ratio for FY26E works out to 71x.

This research report provides valuable insights for investors interested in Eureka Forbes, emphasizing the company’s strong brand presence, diverse product portfolio, and growth potential in a competitive market.