Buy Eureka Forbes; target of Rs 450: Emkay Global Financial

Moneycontrol • 1 day ago

Original source

Key Investment Pillars

  • Revenue growth: Eureka Forbes delivered strong 2Q results with 15% yoy revenue growth, driven by broad-based growth across channels and categories.
  • Margin pressure: Operating leverage supported profitability, but gross margin contraction due to commodity cost pressures is a key headwind.
  • Growth acceleration: Management expects growth to accelerate in 2HFY27, supported by strong momentum in festive demand and healthy secondary and tertiary sales.
  • Premiumization: Water purifier revenue grew at a high-teens pace, alongside market share gains, and other segments reported robust growth, with strong volume traction in water softeners and premiumization-led growth in robotics.

Thesis Validation Checklist

  • Revenue growth: Watch for sustained growth across channels and categories, particularly in water purifiers and emerging categories like robotic vacuum cleaners.
  • Margin recovery: Monitor gradual margin recovery in 4Q, implying broadly flattish EBITDA margins for FY27.
  • Commodity cost inflation: Track the impact of commodity cost pressures on margins and the company's ability to pass on price hikes.
  • Competitive intensity: Assess the company's ability to sustain market share gains amidst rising competitive intensity.