Talwalkars Better Value Fitness - Q1FY14 Result - BUY - IIFL

CMP Rs128, Target Rs190, Upside 49.0%

- Talwalkars Better Value Fitness (TBVF) reported ~31% yoy in net revenues driven by increase in consolidated gym base to 145 from 127 a year ago

- Amongst the newly launched initiatives, Zumba program now covers 31 centres with targeted expansion to 100 in FY14; Reduce outlets have also been expanded to 44 centres with estimated 75 centres by end FY14; company signed a master franchisee agreement in May 2013 for establishing 30 HiFi gyms in Tier III & IV towns over next three years

- OPM improved 96bps yoy due to 224bps yoy decline in staff cost though admin & other expenses rose yoy due to one time expense towards launch of Reduce program; reported PAT growth trailed EBIDTA rise on higher yoy depreciation

- Q1 and Q3 being typically lean quarters are not true indicators of full year performance; we expect the full impact of new initiatives to be felt over next few quarters. Company expects share of value added services to improve from 18-22% of sales to about 35-40% in the next three years. Marginally tweak our FY14/15 estimates but retain BUY with revised target Rs190 (earlier Rs210).

Source : Equity Bulls

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