The global brokerage has set a 12-month target price of Rs 640 per share for the stock, indicating a potential upside of 44% from the previous closing price of Rs 445 on the NSE, and listed four key drivers that could support a long-term upside.
The Indian water purifier market currently has a revenue of around Rs 5,400 crore, and UBS expects it to reach Rs 9,600 crore by FY30 with a CAGR of 12%, supported by improved penetration, increasing health and hygiene awareness, and lower cost of ownership by 2x longer filter life. It noted that the target consumer base is also growing at around 9% annually, due to rising incomes and further aided by urbanization and nuclearisation of the family.
“We expect Eureka Forbes to grow the market and gain 150 bps share supported by product innovation, smart features and design. Eureka Forbes’ unmatched brand equity, which is a virtual synonym for Aquaguard water purifiers, further strengthens its competitive position.” UBS said.
The global brokerage said water purifiers have a relatively small total addressable market (TAM), requiring a diverse, service-oriented distribution network, which limits the attractiveness for scale-oriented white goods companies.
“EFL’s extensive pan-India footprint (21,000+ outlets, 19,500 pin codes, and 4,500/8,000+ frontline staff and service engineers) enables it to target an underpenetrated market with limited competition.”
UBS said the Eureka Forbes valuation is in line with the broader consumer durables sector. “Our 36x target PE is a ~10% discount to the average consumer price for EFL, despite EFL’s leadership in the water purification segment, offering an attractive risk-reward profile. We also see strong potential from the fast-growing air purifier and vacuum cleaner category. Risks arise from potential execution flaws in cross-selling or cost-efficiency initiatives.” But it has fallen more than 14% in the last one month and about 21% in the last six months. The stock was trading marginally lower at Rs 443 per share till 1:15 pm.
(Disclaimer: The suggestions, recommendations, views and opinions given by the experts are their own. They do not represent the views of The Economic Times)
