Emkay Global Financial has revised the price target for Eureka Forbes to Rs 450 from Rs 725, citing ongoing margin concerns. While maintaining a 'Buy' rating, the brokerage noted that commodity cost inflation may impact profitability. The company reported a 15% revenue increase in Q2 FY2027, but investors are now watching for a margin recovery expected in the fourth quarter.
Emkay Global Financial has adjusted its outlook on Eureka Forbes, lowering the stock's price target to Rs 450 from Rs 725 while maintaining a 'Buy' rating. This revision reflects the brokerage's updated view on the company's valuation and the ongoing impact of inflationary pressures on input costs.
The brokerage action follows the company's second-quarter performance for fiscal year 2027. Eureka Forbes reported a 15% year-on-year revenue increase, reaching Rs 8.9 billion. The company also achieved a record operating profit margin (EBITDA) of 13.6%, bolstered by strong demand in the water purification segment and growth in robotics and water softener categories.
Despite the solid top-line performance, Emkay Global Financial has reduced its earnings per share forecast for fiscal year 2028 by 6%. The primary driver behind the significant target price adjustment is a change in the valuation multiple, which has been reduced from 45x to 30x. This shift indicates that while the company's underlying business operations remain steady, the brokerage has adopted a more cautious stance regarding the company's valuation in light of competitive headwinds and external economic factors.
Investors should monitor the management's commentary on raw material costs. While the company achieved record margins in the second quarter, management has indicated that inflationary pressure on gross margins is expected to persist through the third quarter. The timing of a potential margin recovery, which the company anticipates for the fourth quarter, will be a key area for shareholders to track. Furthermore, the company continues to navigate a competitive consumer durables market, where limited visibility on sustained volume-led growth remains a challenge to watch in the coming quarters.