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http://content.icicidirect.com/mailimages/ICICIdirect_TalwalkarBetteverValueFitness_InitiatingCoverage.pdf
B e t t i n g O n Y o u n g I n d i a …
Talwalkars Better Value Fitness (TBVF) is one of the largest fitness service
chains in India owning more than 100 health clubs. TBVF is poised to
benefit from a bulging young population and rising awareness of ‘being
fit’ among the young population. With visible evidence of increasing
membership (32% YoY growth in FY11) on a pan-India basis, we believe
TBVF is well placed to benefit from being an early mover in the health
club market in India with a strong brand name and quality services. TBVF
further plans to expand its gym count to ~253 by FY14 by adding new HiFi gyms (budget category) in Tier-III and Tier-IV cities. We expect its net
sales to grow at a CAGR of ~31% to | 229 crore and net profit to grow
~36% to ~ | 40 crore over FY11-14E backed by new gym additions and
favourable demography. We initiate coverage on TBVF with a BUY rating.
Lower penetration + Young population = Ample opportunity
The fitness industry is highly under penetrated in India with mere 0.4%
(taken for top 7 cities) membership as compared to Asia Pacific average
of 3.7%. The industry, as a whole, is expected to benefit from rising
proportion of age group between 20 and 44 in India, which is expected to
be ~40% of India’s total population by the end of 2016. In addition, we
believe growing disposable incomes and rising lifestyle related diseases
would pent up demand for quality health and fitness services.
Healthy expansions plans to reap maximum benefits
The company has added overall ~32 new health clubs across India
(owned and franchisees), taking its total gym count to 101 (73 own gyms,
nine subsidiaries, eight franchises and 11 under licence agreement) with
nearly one lakh members. It has further plans to increase its count of
fitness clubs to ~253 by the end of FY14E. This includes addition of ~60
owned clubs and ~90 clubs through the franchise route with a total
investment of nearly | 120 crore through a mix of internal accruals and
debt. With favourable demographics and volume expansion, we expect
FY11-14E sales and PAT CAGR of ~31% and ~36% respectively.
Valuations
At the CMP of | 157, the stock is trading at a P/E multiple of 12.4x and
9.5x its FY13E and FY14E, respectively (i.e. 6.5x and 5.1x FY13E and
FY14E EV/EBITDA, respectively). We believe the industry is still in the
nascent stage of growth. Also, considering the strong fundamentals of the
company, we have valued the stock at 11.5x FY14 EPS and arrived at a
target price of | 190 (2.1x FY14 book value and 6.0x FY14E EV/EBITDA).
We are initiating coverage on the stock with a BUY rating
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
http://content.icicidirect.com/mailimages/ICICIdirect_TalwalkarBetteverValueFitness_InitiatingCoverage.pdf
B e t t i n g O n Y o u n g I n d i a …
Talwalkars Better Value Fitness (TBVF) is one of the largest fitness service
chains in India owning more than 100 health clubs. TBVF is poised to
benefit from a bulging young population and rising awareness of ‘being
fit’ among the young population. With visible evidence of increasing
membership (32% YoY growth in FY11) on a pan-India basis, we believe
TBVF is well placed to benefit from being an early mover in the health
club market in India with a strong brand name and quality services. TBVF
further plans to expand its gym count to ~253 by FY14 by adding new HiFi gyms (budget category) in Tier-III and Tier-IV cities. We expect its net
sales to grow at a CAGR of ~31% to | 229 crore and net profit to grow
~36% to ~ | 40 crore over FY11-14E backed by new gym additions and
favourable demography. We initiate coverage on TBVF with a BUY rating.
Lower penetration + Young population = Ample opportunity
The fitness industry is highly under penetrated in India with mere 0.4%
(taken for top 7 cities) membership as compared to Asia Pacific average
of 3.7%. The industry, as a whole, is expected to benefit from rising
proportion of age group between 20 and 44 in India, which is expected to
be ~40% of India’s total population by the end of 2016. In addition, we
believe growing disposable incomes and rising lifestyle related diseases
would pent up demand for quality health and fitness services.
Healthy expansions plans to reap maximum benefits
The company has added overall ~32 new health clubs across India
(owned and franchisees), taking its total gym count to 101 (73 own gyms,
nine subsidiaries, eight franchises and 11 under licence agreement) with
nearly one lakh members. It has further plans to increase its count of
fitness clubs to ~253 by the end of FY14E. This includes addition of ~60
owned clubs and ~90 clubs through the franchise route with a total
investment of nearly | 120 crore through a mix of internal accruals and
debt. With favourable demographics and volume expansion, we expect
FY11-14E sales and PAT CAGR of ~31% and ~36% respectively.
Valuations
At the CMP of | 157, the stock is trading at a P/E multiple of 12.4x and
9.5x its FY13E and FY14E, respectively (i.e. 6.5x and 5.1x FY13E and
FY14E EV/EBITDA, respectively). We believe the industry is still in the
nascent stage of growth. Also, considering the strong fundamentals of the
company, we have valued the stock at 11.5x FY14 EPS and arrived at a
target price of | 190 (2.1x FY14 book value and 6.0x FY14E EV/EBITDA).
We are initiating coverage on the stock with a BUY rating
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