Talwalkars Better Value Fitness (Q1 FY15)

India Infoline News Service | Mumbai |

Talwalkars posted a steady Q1 with revenue growth of 19.6% yoy driven by higher share of value added services per gym.

CMP Rs211, Target Rs230, Upside 9.0% 
  • Talwalkars’ posted 19.7% yoy rise in net revenues driven by higher share of value added services per gym

  • Margins expanded 906bps yoy on the back of operating leverage benefits due to an enhanced base

  • Posts 18.5% yoy rise in net profit supported by healthy operating performance despite a rise in depreciation, interest costs 

  • Positive on growth outlook with 19% PAT cagr over FY14-16; accumulate with 9-12mth target of Rs230

Result table
(Rs m) Q1 FY15 Q1 FY14 % yoy FY14 FY13 % yoy
Gross sales 447 374 19.7 2,095 1,688 24.1
Less: service tax (47) (39) 20.4 (222) (179) 23.7
Service tax (%) 10.6 10.5 - 10.6 10.6 -
Net sales 400 335 19.6 1,873 1,509 24.1
Other op income 1 2 (32.2) 11 13 (17.6)
Revenues 401 337 19.3 1,884 1,522 23.8
Staff (81) (77) 5.2 (359) (312) 15.0
Admin & other expenses (133) (133) 0.1 (587) (471) 24.6
Operating profit 187 126 48.1 938 739 27.0
OPM (%) 46.6 37.5 906 bps 49.8 48.6 124 bps
Depreciation (98) (50) 95.1 (242) (146) 65.1
Interest (38) (30) 27.4 (120) (108) 10.9
PBT 50 46 9.7 576 484 19.0
Tax (6) (6) 1.0 (178) (158) 12.7
Effective tax rate (%) 12.9 14.0 (111) bps 31.0 32.7 (170) bps
Minority int (3) (5) (35.5) (32) (26) 24.3
Reported PAT 40 34 18.5 366 301 21.8
Source: Company, India Infoline Research

Steady quarter with ~20%/18.5% increase in revs/PAT

Talwalkars posted a steady Q1 with revenue growth of 19.6% yoy driven by higher share of value added services per gym. According to the company, share of value added services has grown from 18-20% in 2011-12 to 22-23% in 2013-14. Consolidated gym base expanded to 150 from 145 a year ago. Talwalkars launched a unique ‘Transform’ program which is a combination of NuForm (technology based complete fitness program) and Reduce (diet-based weight loss solution) and the national marketing campaign for the same was launched from April 1, 2014 to support margins in a seasonally weak quarter.

EBIDTA margin jumped ~900bps yoy on the back of operating leverage tailwind as well as higher share of value added services/gym. Company mentioned about slow off take of Zumba (provided by freelancers in past 5-6 years) as compared to other offerings but expressed confidence of a pickup in enrolments based on its corporatized approach. Net profit tracked the improved operating performance with growth of 18.5% yoy despite higher depreciation and interest costs yoy. 

Remain positive on growth outlook: Accumulate

Company reiterated its plans open fitness centres in locations which can yield a higher RoCE and improve same store sales. It would actively market margin accretive ‘Transform’ program which it believes has large growth potential. Meanwhile the initial response in the first week of the important August scheme has been encouraging and same store performance has been better yoy. We retain our estimates and Accumulate rating with 9-12mth target of Rs230.


Financial summary
Y/e 31 Mar (Rs m) FY13 FY14 FY15E FY16E
Revenues 1,509 1,884 2,234 2,573
yoy growth (%) 26.4 24.9 18.6 15.2
Operating profit 726 938 1,097 1,271
OPM (%) 48.1 49.8 49.1 49.4
Reported PAT 300 366 418 521
yoy growth (%) 36.2 21.8 14.4 24.5
EPS (Rs) 12.5 15.2 17.4 21.6
P/E (x) 16.9 13.9 12.2 9.8
P/BV (x) 2.6 2.3 2.0 1.7
EV/EBITDA (x) 9.5 7.8 6.4 5.2
Debt/Equity (x) 0.8 0.8 0.6 0.5
RoE (%) 17.0 16.3 16.2 17.3
RoCE (%) 16.7 16.4 17.7 19.4
Source: Company, India Infoline Research
 

***Note: This is a NSE Chart

 

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