Eureka Forbes
Sustained growth driven by strong brand equity
Eureka Forbes Ltd. (Eureka), backed by Advent International, is a leading player in India’s consumer durables sector with dominant presence in water purifiers, vacuum cleaners, and air purifiers, underpinned by a robust AMC- driven services franchise. Over four decades, the company has built strong brand equity, consumer trust, and an extensive distribution network spanning direct sales, retail, and e-commerce. Structural tailwinds such as rising urbanization, the proliferation of nuclear households, and increasing health and hygiene awareness are driving sustained demand for premium and technologically advanced appliances. With consumer preferences shifting towards preventive healthcare and service-backed ownership models, the water purifier segment in particular, offers a long runway for growth. Eureka’s established brand positioning, diversified product portfolio, and nationwide service infrastructure uniquely positions it to capture these opportunities and strengthen its leadership. We believe the company has the potential to deliver revenue/ EBITDA/ PAT CAGR of 13%/ 18%/ 28% over FY25-28E with OPM of 10.9%/ 11.8%/ 12.6% in FY26E/ 27E/ 28E. We initiate coverage on Eureka with BUY rating given its leadership in a highly underpenetrated category, annuity-driven services model, and long-term structural growth levers. We value the stock at 45x 1HFY28E EPS to arrive at a TP of INR 701.
Low penetration, especially in rural markets, provide significant scope for improvement
Electric purifier penetration is still quite low at ~7% pan-India (~20% in metros, ~12% in urban, and ~3% in rural areas), and ~65% of the overall households are still using untreated water, which indicates to a significant opportunity for water purifiers. Structural drivers such as improving piped water availability in homes, availability of electricity, better affordability, and instances of pandemic/ water-borne diseases will drive adoption over the long term, in our view. Government initiatives like the Jal Jeevan Mission are expected to accelerate adoption of clean drinking water over the medium to long term.
Significant service opportunity, tiered structure to drive affordability
UV/ RO products typically have a service opportunity of ~1.5x-2x of product sales over its life cycle of about seven years, thus providing a recurring revenue opportunity. Given Eureka’s 11 million installed devices, there could be a potential service revenue opportunity of ~INR 25 bn, which is ~3x the current service revenue (FY25). Initiatives such as a tiered AMC structure directly reaching consumers and another to stop fake providers and spurious spare parts will help the company capitalize on the opportunity and drive growth over the medium to long term.
Complementary product categories enhance overall offering in the category
Vacuum cleaners and air purifiers are other categories where penetration is low (~2% in vacuum cleaner and <2% in air purifiers) and have potential for growth over the medium term. Eureka offers an innovative range of products across price range to tap the market. Factors such as increased industrial activities, urbanization, traffic pollution, and emissions from factories and households are driving expansion for air purifiers. Vacuum cleaners provide ease of use, convenience, and save time thereby making them a valuable appliance in households, commercial spaces, and industrial settings. Investment Summary
Eureka Forbes is a market leader in water purifiers with strong brand equity, annuity-driven AMC services, and a wide distribution network. Low category penetration, rising health awareness, and premiumization trends offer a long runway for growth. We believe the company has the potential to deliver revenue/ EBITDA/ PAT CAGR of 13%/ 18%/ 28% over FY25-28E with OPM of 10.9%/ 11.8%/ 12.6% in FY26E/ 27E/ 28E. We initiate coverage on the stock with BUY and a TP of INR 701, valuing it at 45x its 1HFY28E.
