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Talwalkars Better Value Fitness (Q4 FY13)

India Infoline Research Team / 14:28 , May 09, 2013

CMP Rs154, Target price Rs210, Upside 35.5% 

  • Talwalkars BVF posted a strong 30% yoy rise in net revenues driven by higher gym additions yoy; company added 29 gyms under all formats in FY13 and has a gym base of 144 of which 101 are owned gyms
  • Q4 margins expanded by 108bps yoy on tight control in admin and other expenses though staff costs did rise on the back of newly recruited Zumba trainers and marketing for ‘Reduce’ (weight loss) program
  • PAT jumped 27% yoy led by robust EBIDTA growth (+33% yoy) and lower interest costs (-24.6% yoy) due to better treasury management and deployment of QIP funds to reduce interest expenses
  • Net debt to equity declined to an estimated 0.6x in FY13 from 0.9x in the previous fiscal while absolute debtors showed commendable decline (Rs177mn vs Rs201mn in FY12) despite 28% yoy increase in FY13 net sales
  • Company has indicated that it would add 20-30 fitness centres in the current fiscal under various formats; however, along with volume growth, it would also focus on same store sales growth through several value added offerings like Zumba, NuForm and Reduce. We revise lower our FY14 EPS estimates based on FY13 actual figures and shift target PE multiple on FY15 earnings; retain BUY with revised 9-12 mth tgt of Rs210 (earlier Rs235).  
Results table (consolidated)
(Rs m) Q4 FY13 Q4 FY12 % yoy FY13 % yoy
Net sales 504 387 30.4 1,522 25.8
Staff (83) (56) 48.3 (312) 25.6
Admin & other expenses (137) (117) 17.2 (471) 17.0
Operating profit 284 214 32.9 739 32.3
OPM (%) 56.4 55.3 108 bps 48.6 237 bps
Depreciation (41) (29) 42.2 (146) 24.4
Interest (21) (28) (24.6) (108) 18.2
PBT 222 157 41.7 484 38.6
Tax (90) (45) 100.5 (158) 52.1
Effective tax rate (%) 40.4 27.9 1,251 bps 32.7 319 bps
Adjusted PAT 132 112 18.2 326 32.9
Adj. PAT margin (%) 26.3 29.0 (270) bps 21.4 113 bps
Extra ordinary items - 4 - - -
Minority int (11) (20) (45.2) (26) (10.2)
Reported PAT 121 95 27.1 300 36.4
Source: Company, India Infoline Research

Financial summary
Y/e 31 Mar (Rs m) FY12 FY13E FY14E FY15E
Revenues 1,194 1,522 1,851 2,227
yoy growth (%) 28.6 27.5 21.7 20.3
Operating profit 543 739 892 1,073
OPM (%) 45.5 48.6 48.2 48.2
Reported PAT 221 301 350 457
yoy growth (%) 37.5 36.3 16.5 30.5





EPS (Rs) 9.1 12.5 14.5 19.0
P/E (x) 16.9 12.4 10.7 8.2
P/BV (x) 2.6 1.9 1.7 1.4
EV/EBITDA (x) 9.4 7.3 6.4 5.1
Debt/Equity (x) 1.1 0.8 0.8 0.6
RoE (%) 16.3 17.0 15.6 17.5
RoCE (%) 15.2 16.7 17.3 19.0
Source: Company, India Infoline Research