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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.


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. 


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