UBS has reaffirmed its 'Buy' rating on Eureka Forbes with a 12-month target price of ₹640 per share, implying a 45.45% upside potential from current levels. According to the latest reports, the international brokerage has revised its projections, forecasting revenue and EBITDA CAGRs of 13% and 22% respectively for FY25-28. UBS cited the company's stepping up of investment in capex, R&D and product innovation, which could drive 150 basis points market share gain in water purifiers over FY25-28E. The brokerage also expects scale-up of the higher-margin service (annual maintenance) and filter businesses, which can drive 250 basis points margin expansion in FY25-28E. UBS believes the market under-appreciates Eureka Forbes' scale advantages in water purifiers and services, with the company positioned as a 'steady earnings compounder'.
The water purifier market in India currently generates revenues of around ₹5,400 crore, and UBS expects it to reach ₹9,600 crore by FY30 with a 12% CAGR. As reported by The Economic Times, this growth will be driven by improving penetration, rising health and hygiene awareness, and a lower total cost of ownership supported by a 2x longer filter life. Currently, about 27% of installed water purifiers have Annual Maintenance Contracts (AMCs), and UBS estimates the total AMC revenue potential at ₹2,800 crore, up from ₹800 crore now, pointing to significant recurring income. UBS expects Eureka Forbes to gain an extra 1.5% market share in this segment between fiscal years 2025 and 2028, backed by investments in R&D, product development, and plans to launch 30 new products in fiscal year 2025. The target customer base is also expanding 9% annually, led by rising incomes, further aided by urbanisation and family nuclearisation.
UBS expects Eureka Forbes to outgrow the market and gain a 150 bps share supported by product innovation, smart features and design. According to the brokerage's analysis, the company's unmatched brand equity, with Aquaguard being a virtual synonym for water purifiers, further strengthens its competitive position. The company's extensive pan-India footprint includes 21,000+ outlets, 19,500 pin codes, and 4,500/8,000+ frontline staff and service engineers. Beyond water purifiers, UBS expects vacuum cleaners and air purifiers to grow by 18% annually until fiscal year 2030, aiming to tap into low penetration rates (under 2% for air purifiers) and increasing health awareness. UBS notes that Eureka Forbes has a unique moat in water purifiers, with limited competition, with water purifiers having a relatively small total addressable market.
UBS's valuation for Eureka Forbes is in line with the broader consumer durables sector, with the brokerage assigning a 36x target PE for EFL at a ~10% discount to the average valuation of consumer durables. As reported by The Economic Times, the brokerage sees strong upside potential from the fast-scaling air purifier and vacuum cleaner category, which is expected to grow at ~2.5x by FY30E vs FY25. UBS predicts a 2.5% increase in margins between fiscal years 2025 and 2028, mainly from growing high-margin service businesses and more Annual Maintenance Contracts. The company's current P/E is around 40x, while rivals like Kent RO Systems trade at about 50x P/E, Livpure at 30x, and diversified Havells India at 60x P/E.
According to The Economic Times, Eureka Forbes shares have gained around 8% in the past five days but declined more than 14% in the past one month and around 21% in the past six months. The stock was trading with marginal losses at ₹443 per share as of 1:15 pm, but fell over 1% to hit a low of ₹440 on BSE today. At this price level, UBS's target price suggests 45.45% potential upside ahead. The general analyst consensus is around ₹500, highlighting that reaching UBS's target price of ₹640 will require excellent execution and market share gains. While analyst initiations often give stocks a short-term boost, long-term success depends on the company consistently meeting its growth targets and managing its service-focused distribution network across India.
