Turning strategic vision into sustainable growth
We are initiating coverage of Eureka Forbes Ltd with a BUY rating and a target price of INR 830 per share, valuing the stock at 45x Mar-28E AEPS (excluding intangible amortization and 50% of performance-linked ESOP costs). Our positive view stems from Eureka’s strong market leadership in highly underpenetrated categories, its high brand equity, capable management team, and asset-light business model. The company has undergone a major turnaround under new management following Eureka’s acquisition by Advent International, with notable improvements in both growth and margins. We expect Eureka to achieve revenue/EBITDA/APAT CAGRs of 14/23/27% respectively, over FY25–28E, led by sustained momentum in water purifiers, recovery in the service business, and strong traction in vacuum cleaners. Given these, Eureka Forbes is our top pick within the consumer durables sector.
▪ Market leader in an underpenetrated market: Eureka stands as the market leader in both electric water purifiers and vacuum cleaners—categories that are still highly underpenetrated in India, with penetration rates of just 6% and 2%, respectively. This underlines strong long-term growth potential. The company commands ~40% share in the organized water purifier segment and ~60% share in vacuum cleaners. Eureka Forbes’s broad and diversified multi-channel approach fuels stronger market reach.
▪ Margins on an upswing: Eureka’s EBITDA margin improved from 7% in FY23 to 11% in FY25 and 12% in H1FY26. We expect the margin to continue to expand, led by operating leverage and cost optimization drive, and reach mid-teens within next five years. Further, it may even reach the high teens thereafter as ad spending normalizes (currently as high as ~11% of sales).
▪ Robust business model; strong cash flows: The expected rise in category penetration, combined with Eureka’s market-leading growth, should drive a 14% consolidated revenue CAGR over FY25-28E. EBITDA/APAT should compound faster, at 23/27% CAGRs respectively, led by margin upswing, bolstering operating free cash flows. The company’s asset-light business model should ensure rising free cash flows and healthy return ratios.
▪ Initiate coverage with a BUY rating: Post its acquisition by Advent International in 2022, Eureka has undergone a major turnaround under the new management, rebounding from a decade of muted growth. The product business CAGR has seen high teens in recent quarters, and the services segment is gaining momentum, as bookings have grown from double digits in Q1FY26 to high teens in Q2FY26. We remain positive on Eureka’s growth prospects, owing to its high brand equity, capable management team, and asset-light business model. We initiate coverage with a BUY rating and a TP of INR 830 per share, valuing it at 45x Mar-28E AEPS (excluding non-cash intangible amortization and 50% of performance-based ESOP expenses).
