Talwalkars Better value fitness -Value Pick:: Anand Rathi

Talwalkars Better Value fitness

CMP 188                 Reco: Buy                Expected Value 242             Nifty Level 6058                     

- Pioneer in the Fitness Industry

One of the oldest and largest fitness brand in India.

 - Aims to become a holistic Fitness player

1.      Broadened its scope by introducing NuForm fitness studios, 2) ZUMBA® Fitness Program and 3) Reduce – weight loss diet program.

2.      Increasing focus on optimizing service offerings to leverage the existing infrastructure and enhance customer portfolio.

�� -->

 - Broadening its scope, new initiatives to enhance the same store sales

- The company has widened its footprints in tier II, III, IV cities and towns of India. The company has developed HiFi model to penetrate in to smaller towns of India.

- Proven track record and consistent Financial Performance

3Yr CAGR (FY’09-12) of 21% in Net Revenues, 32% in EBITDA & 60% in PAT on standalone basis.

Valuation

The company has been showing consistent performance and stable margins except for the seasonal impact. The company is also expanding and with new initiatives will help to increase the membership and revenue per gym as well. We see a 3 year CAGR growth (FY11-14E) of 28% in top line and 36% in the bottom line.

At CMP the stock trades at 14.2x and 11.1x its FY13E and FY14E earnings.

We would like to value the company on EV/EBITDA basis at 7.6 on FY14E which gives a one year price target of Rs. 242 an upside of 30% from current levels. At target price the stock will trade at 14.3x for FY14E earnings.

Thanks & Regards

--