ICICI Securities research report on Eureka Forbes
Smaller players in the water purification market have introduced a differentiated offering – free servicing for initial 24 to 30 months. For Eureka Forbes, this may increase the cost of acquisition of new consumers, but we believe the concern is overdone as: 1) most of the variants introduced by smaller players are at a premium price point of INR10,000-plus, whereas Eureka is trying to drive growth at the bottom of pyramid with the launch of variant at INR6,499; 2) The pan-India industry penetration level is still ~5% (urban: 12%), which indicates healthy long-term growth potential for most incumbents; 3) Eureka continues to benefit from strong brand equity and established distribution.
Outlook
We also note players such as Havells, Tata Swacch and V Guard have failed to gain more than 5% market share in water purifiers, indicating Aquaguard’s strong brand equity. Given strong business tailwinds, we remain constructive on Eureka Forbes. Maintain BUY with a DCF-based unchanged TP of INR 650.
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