Nuvama Institutional Equities has initiated coverage on Eureka Forbes with a ‘Buy’ call and a target price of Rs 700, citing the company’s dominant position in an underpenetrated market and strong earnings compounding potential.
Founded in 1982, Eureka Forbes is India’s largest electric water purifier (EWP) maker with a 40-45 per cent share of the Rs 4,900 crore organised market, maintaining a 10-12 percentage point lead over its nearest rival. With penetration levels at just 6 per cent, Nuvama expects Eureka Forbes to be the biggest beneficiary of category tailwinds driven by urbanisation, rising piped water access, and health awareness.
The brokerage projects a 14 per cent revenue CAGR for FY25-28, with Ebitda/PAT growing at 24 per cent/31 per cent CAGR respectively, aided by strong operating leverage and cost optimisation. After-sales service, which already contributes a third of revenues, is expected to be a key growth driver, with Nuvama forecasting a 25 per cent-plus CAGR in segment profit over the same period.
Eureka Forbes also leads the vacuum cleaner (VC) category, commanding a 60-70 per cent market share in a Rs 600 crore segment with less than 2 per cent penetration. Alongside 30 new product launches in FY25, expanded R&D, higher capex, and foray into smart connected appliances, the company is seen strengthening its growth runway.
Nuvama highlights Eureka Forbes’ strong free cash flow generation-projecting a 24 per cent CAGR in FCF over FY25-28 with FCF-to-revenue ratios above peers-as evidence of its robust financial model.
“Eureka Forbes offers a strong compounding opportunity in consumer durables. With leadership in two underpenetrated categories and an expanding after-sales ecosystem, we see scope for sustained earnings outperformance,” Nuvama said.