Skip to main content

Eureka: A Structural Compounder Poised for Growtharget of Rs 700: ICICI Securities

Eureka: A Structural Compounder Poised for Growth


In the dynamic world of business and investments, identifying companies with strong growth potential is a key challenge. 

One such hidden gem that stands out in the Indian market is Eureka, a company that scores exceptionally well on several crucial parameters. 

In this article, we will delve into what makes Eureka a structural compounder and why we believe it is a stock to watch closely.

Established Brands and Legacy


Eureka boasts a rich legacy with established brands like Eureka Forbes, Aquaguard, and Select. These brands have earned the trust of millions of Indian consumers over the years. The value of such established names cannot be underestimated, as they provide a solid foundation for growth.

Extensive Reach


Eureka has a multi-channel presence, with access to over 20,000 GT outlets and delivery to more than 10,000 pin codes across the country. This extensive reach ensures that the company's products are accessible to a wide range of consumers, even in remote areas. It's a testament to their commitment to serving every corner of India.

Diverse Product Portfolio


One of Eureka's strengths lies in its diverse product portfolio, catering to various consumer needs. From storage solutions to hot water systems, from copper/zinc benefits to non-electric water purifiers, Eureka has a product for everyone. This versatility allows them to tap into different segments of the market.

Strong Return on Invested Capital (RoIC)


Exhibit 1 showcases Eureka's impressive RoIC. A strong RoIC is indicative of a company's efficiency in generating returns from its invested capital. Eureka's commitment to profitability is evident, and this is a crucial factor for any investor seeking long-term growth potential.

Growth Initiatives


Eureka is not resting on its laurels; it is actively investing to expand its margins. In the first quarter of FY24, the company reported a 10% increase in margins. This strategic move is expected to free up resources for further growth initiatives.

The launch of a new variant at an entry price point of INR 6,499 is poised to attract consumer trials and expand the customer base. Additionally, Eureka's focus on distribution expansion and enhanced services will provide tailwinds for both growth and improved margins.

Competitive Edge


Eureka's competitive edge in the market is reinforced by several factors. The worsening levels of air and water pollution in India have heightened the demand for clean and safe drinking water solutions, a demand that Eureka is uniquely positioned to meet.

Furthermore, the limited presence of multinational brands in this space and the failure of new entrants to capture a significant market share present Eureka with a distinct advantage. The company's well-established brands and reputation act as a barrier to entry for potential competitors.

Strong Leadership


The induction of Pratik Pota as Managing Director & CEO, along with Gaurav Khandelwal as Chief Financial Officer, and senior industry personnel, has significantly expanded Eureka's management bandwidth. This infusion of talent at the top levels bodes well for the company's strategic direction and execution.

Outlook


Eureka has been valued using a DCF-based methodology, and the outlook is promising. We anticipate the company to achieve a revenue and PAT CAGR of 12% and 50%, respectively, over the period of FY23-26. 

Furthermore, we project a steady improvement in return ratios during the same period.

At our DCF-based target price of INR 700, the implied P/E of FY26E works out to 71x, underscoring the growth potential that Eureka represents. 

This valuation reflects our confidence in the company's ability to deliver sustained growth and create value for its investors.


Eureka's compelling combination of established brands, extensive reach, diverse product portfolio, strong RoIC, and strategic growth initiatives make it a structural compounder to watch. 

With a competitive edge in a growing market and a talented leadership team driving its vision, Eureka is set to embark on a journey of sustained growth and profitability. 



Labels:

Comments

Post a Comment

Popular posts from this blog

Inspirational Story Of Ferrari - Amazing Adviser

Inspirational  Story Of Ferrari Hello friends, today I'm going to discuss one of the most popular sports car companies in the world - Ferrari. Today, each sports car lover dreams to get a Ferrari. It keeps gaining popularity till today. This company was founded by Enzo Ferrari. So let's get to know the success story of Ferrari. Also Read, Success Story Of Amul Success Story of Dominos Pizza The story starts with 18 Feb 1898 when Enzo Ferrari was born in Italy. Enzo was fond of cars right from his childhood. At 10 yrs of age, he went to see a car race with his father.  At that point in time, he decided that he would become a racing driver. After that, he attended many car races. After completing his graduation from Modena College, he worked as a teacher.  But after a few months, he had to join the Italian army for the first World War. In 1916, he suffered a lot with emotions as well as the economy when his brother and father died. After returning from World War, he began to find
1 comment
Read more

Success Story Of Colgate, One Of The Bestselling Toothpaste Brand

Success Story Of Colgate, One Of The Bestselling Toothpaste Brand "It cleans your breath while it cleans your teeth", can you guess whose slogan is this.  If you have guessed correct then today I'm going to tell you the success story of one of the best selling toothpaste brands of India i. e. Colgate.  It's popularity can be measured by thousands of situations where the term toothpaste is replaced by Colgate in India.  Do you know, this brand came into being almost 210 years ago, introduced by Williams Colgate .  And initially, this company used to produce soaps, not toothpaste that too in jars and not tubes.  So now, let's get back to the beginning of the story.  Also Read Success Story Of Haldiram Bujhia Success Story Of Amul How Maggie Became Successful? The founder of Colgate, Willam Colgate was born on 25 Jan 1783 in England. His father was a farmer.  But later, they shifted to Maryland in the US where his father along with a friend began to make candles
1 comment
Read more

Inspirational Story Of BMW - Amazing Adviser

  The wonder of science has shown many miracles in today's age in the form of spectacular vehicles.  Today I will discuss about a German company that specializes in designing cars, bikes and engines - BMW. It came into being before 101 years and is known for its expensive and luxury cars like Rolls Royce and Mini.  But do you know that BMW was in the list of those companies which were restricted to produce any kind of vehicles during the time of World War?  And in that period, this company started making bicycles and kitchen utensils.  Now let's go to the beginning of the story.  Also Read Success Story Of Ambassador Car   Success Story Of Jaguar   Success Story Of UBER     The founder of BMW was Karl Friedrich Rapp. He was born on 24 September 1882 in Germany.  He became a mechanical engineer and opened his start up named Karl Rapp Motorenwerke where mostly aircrafts and their engines were made.  When the first world war started, there was a huge demand of aero engines.  Thus,
5 comments
Read more