Talwalkars Better Value Fitness (Q2 FY13) – BUY

India Infoline News Service | Mumbai |

Company took 6%-8% price hikes across gyms which did not do so in H1 CY12; despite higher prices, annual renewal rates increased to 76%, an indication of robust brand positioning

CMP Rs197, Target Rs235, Upside 19.3% 

  • Talwalkars consolidated Q2 net revenues rose 30% yoy driven by ~17% yoy rise in owned gym base, increase in subsidiary gym count and HiFi franchisee income; new initiatives like NuForm, Zumba classes and ‘Reduce’ also supported improved same store sales during the quarter
  • Company took 6%-8% price hikes across gyms which did not do so in H1 CY12; despite higher prices, annual renewal rates increased to 76%, an indication of robust brand positioning
  • Update on new initiatives: currently 6 NuForm studios operational in Mumbai and Thane with ~500 members; Zumba classes started in August 2012 in 15 gyms across India with member base of 160. Company launched Reduce-Diet Program in July 2012 in Bangalore and has ~225 members. Reduce food products are offered within the gym by dietician as part of diet program
  • EBIDTA margin improved ~400bps yoy driven by lower admin & other expenses as opex costs expectedly lagged seasonally strong revenue growth; robust EBIDTA performance translated in to a ~47% yoy jump in reported PAT; company has achieved 54%/53% of our FY13 revenue/PAT forecasts in H1 FY13. 
  • On the back of a strong quarter, we retain our FY13/14 estimates and forecast revenue/PAT cagr of ~29%/35% over FY12-14; retain BUY with 9-mth tgt of Rs235.
Results table (consolidated)
(Rs m) Q2 FY13 Q2 FY12 % yoy
Net sales 502 385 30.2
Staff (109) (84) 29.3
Admin & other expenses (139) (122) 14.5
Operating profit 253 179 41.4
OPM (%) 50.5 46.5 399 bps
Depreciation (38) (31) 21.7
Interest (31) (24) 30.6
PBT 185 125 48.4
Tax (56) (38) 48.9
Effective tax rate (%) 30.2 30.1 11 bps
Minority int (7) (4) 81.9
Reported PAT 122 83 46.5
Source: Company, India Infoline Research

Financial summary
Y/e 31 Mar (Rs m) FY11 FY12 FY13E FY14E
Revenues 928 1,194 1,572 2,001
yoy growth (%) 43.0 28.6 31.7 27.3
Operating profit 401 543 725 926
OPM (%) 43.1 45.5 46.1 46.3
Reported PAT 160 221 283 403
yoy growth (%) 106.0 37.5 28.4 42.3





EPS (Rs) 6.7 9.1 11.7 16.7
P/E (x) 29.6 21.5 16.8 11.8
P/BV (x) 3.8 3.3 2.8 2.3
EV/EBITDA (x) 14.2 11.2 8.6 6.7
Debt/Equity (x) 1.0 1.1 0.9 0.7
RoE (%) 19.1 16.3 18.1 21.5
RoCE (%) 16.4 15.2 17.8 21.3
Source: Company, India Infoline Research
BSE 303.55 2.65 (0.88%)
NSE 303.55 2.70 (0.90%)

***Note: This is a NSE Chart

 

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