ICICI Securities has kept its 'Buy' rating and ₹360 target price for Eternal, citing strong growth in its credit card business and expansion in the quality circle segment. The brokerage noted that improvements in operational efficiency and lower working capital needs following the 1P model transition have strengthened the company's financial outlook.
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ICICI Securities continues to hold a positive outlook on Eternal, reiterating its 'Buy' recommendation with a target price of ₹360. This assessment is based on the company's recent operational performance, particularly in its credit card and retail segments. According to the brokerage, the credit card business reported a 20% growth compared to the same period last year, which they described as a positive development for the company's core financial health.
The company's retail division, specifically the quality circle segment, saw an 86.2% acceleration in year-on-year growth during the first quarter. This performance was supported by a strategy of increasing product variety in larger cities and adding approximately 200 new store locations across tier-2 cities. Additionally, the 'going out' segment recorded a 60% year-on-year growth rate in the first quarter, exceeding previous trends of 30-40%.
A key focus for investors is the company’s transition to a 1-platform model. Management reported that this shift, combined with stricter control over inventory, has successfully reduced the company's need for working capital. Lower working capital requirements often mean the company can hold onto more cash, which is a positive factor for financial flexibility. These operational changes, alongside optimized supply chain processes, are expected to support profit margins moving forward.
While the outlook is positive, ICICI Securities also pointed out an important investor consideration regarding customer loyalty. The brokerage noted that the customer additions currently driven by aggressive discounting in the convenience-focused quality circle format may not necessarily lead to long-term brand loyalty. This suggests that the company’s ability to retain these customers without relying solely on discounts will be a key factor for its sustained success.
Looking ahead, investors may want to monitor whether the company can maintain its current growth momentum in the credit card and retail segments as it scales up. Tracking the impact of the 1-platform model on future quarterly margins and cash flow will be essential to verify if these operational efficiencies translate into lasting profitability. The company's ability to balance its rapid store expansion with consistent cost management remains a primary area for continued observation.