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Research
Talwalkars Better Value Fitness - Hem Securities
Posted On : 2012-12-30 19:43:28( TIMEZONE : IST )
Ever since the opening of its first health club way back in 1932 in Mumbai, Talwalkars has become synonymous with spreading fitness, across the length and breadth of India. For over 80 years, the company has dominated and led the gymming business in India. In 2011-12 Talwalkars further widened fitness concepts into areas beyond gyms and spas. It operates 130 gyms across 69 cities in India, with an active member base of over 1.30 lakh.
- The company has posted excellent numbers for the quarter ending September 2012. The gross sales surged to Rs.56.21 crores, up 32.6% for the September 2012 quarter as against Rs.42.39 crores during the corresponding quarter previous year. The increase is attributable to robust August scheme. The company reported a good operating profit of Rs.25.35 crores compared to Rs.17.93 crores of corresponding previous quarter. Net profit skyrocketed about 47% at Rs.12.17 crore as compared to Rs.8.31 crore y-o-y. EPS stood at Rs.5.05. Margins too expanded sharply; operating profit margin expanded by 280bps at 45.10% and NPM surged 205bps at 21.65% on a y-o-y basis.
- The company has widened its footprints in tier II, III, IV cities and towns of India. The company was also able to generate additional revenue by offering additional facilities such as NuForm, Zumba classes and Reduce. The company took a price hike of 6%-8% across health clubs which had not taken a price hike during the first half of the calendar year. Despite the price hike the company has witnessed an increase in its annual renewal rates to 76%.
Valuation
With strong market share in organized fitness industry, new initiatives like Zumba and Nuform studios, consistent growth and financial performance, TBVFL growth prospects looks promising. We believe TBVFL is trading at an attractive valuation at 16.6X and 12.21x of FY13EPS of Rs.11.33 and FY14EPS of Rs.15.40. We initiate a 'BUY' on the stock with a target price of Rs.240 (appreciation of about 28%) with the medium to long term investment horizon.
