Talwalkars Better Value Fitness (Q4 FY12)

India Infoline News Service | Mumbai |

Higher interest cost during the quarter was countered by a lower tax rate which led to ~45% increase in reported PAT

CMP Rs151, Target Rs190, Upside 25.8%
  • Talwalkars reported a healthy 22.4% yoy growth in net revenues (qoq comparison not meaningful due to strong seasonality) driven by >30% yoy rise in owned gym base; on a consolidated basis, the company now has 128 gyms
  • Operating profit jumped ~50% yoy driven by tight cost control and royalty received from franchisees; company has partly tweaked employee incentive plan which has led to lower fixed expenses which along with use of existing bench strength in several fitness areas has helped reduce the employee cost on per gym basis. Lower admin cost is due to inclusion of software up gradation cost in Q4 FY11 and tight control over other admin costs like central marketing, operations etc; EBIDTA ex-royalty is similar to Q4 FY11 levels  
  • Higher interest cost during the quarter was countered by a lower tax rate (28% vs 34% in Q4 FY11) which led to ~45% increase in reported PAT
  • We have assumed annual own gym additions of 18 each in FY13/14 and expect the company to clock ~30% cagr in revenues and PAT over FY12-14; return ratios (RoE, RoCE) too would remain above 16% over next 2 years; retain BUY with 9-mth tgt of Rs190  
Results table (consolidated)
(Rs m) Q4 FY12 Q4 FY11 % yoy FY12 % yoy
Net sales 381 311 22.4 1,194 28.6
Staff (56) (57) (1.7) (248) 22.9
Admin expenses (109) (112) (2.2) (362) 24.4
Selling & Mktg (8) (4) 121.6 (41) 16.2
Operating profit 208 139 49.5 543 35.5
OPM (%) 54.6 44.8 989 bps 45.5 233 bps
Depreciation (29) (20) 44.3 (118) 31.3
Interest (28) (16) 80.3 (91) 6.2
Other income 5 7 (23.8) 16 (24.3)
PBT 157 111 41.4 350 42.2
Tax (45) (35) 25.9 (104) 41.1
Effective tax rate (%) 27.9 34.0 (619) bps 29.5 (99) bps
Extra ordinary items 4 (7) - 4 -
Minority int (20) (3) 590.6 (29) -
Reported PAT 95 66 44.9 221 37.6
Source: Company, India Infoline Research
 
Financial summary
Y/e 31 Mar (Rs m) FY11 FY12E FY13E FY14E
Revenues 928 1,194 1,605 2,022
yoy growth (%) 43.0 28.6 34.5 26.0
Operating profit 401 543 721 914
OPM (%) 43.1 45.5 44.9 45.2
Pre-exceptional PAT 164 217 273 367
Reported PAT 160 221 273 367
yoy growth (%) 106.0 37.5 23.6 34.6
         
EPS (Rs) 6.7 9.1 11.3 15.2
P/E (x) 22.7 16.5 13.4 9.9
P/BV (x) 2.9 2.5 2.2 1.8
EV/EBITDA (x) 11.4 8.0 6.6 5.2
Debt/Equity (x) 1.0 0.9 1.1 1.1
RoE (%) 19.1 16.3 17.5 19.9
RoCE (%) 16.4
BSE 304.75 2.05 (0.68%)
NSE 302.70 0.45 (0.15%)

***Note: This is a NSE Chart

 

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