Talwalkars Better Value Fitness: Buy for a target implying an upside of 32% | Should you invest in Talwalkars | IndiaNotes.com


Company Overview


Largest fitness chain in India and Srilanka with 211 centres. Has Six fitness centre formats – Talwalkars Premium, Talwalkars, Snap Fitness, Power World Gym, HiFi and Zorba. Since its inception in 1932, Talwalkars has been synonymous with health and wellness offering a diverse range of services including Gyms, Nutrition counseling, Personal training, Weight loss, Weight gain, Massage, Power plate, Spas, Zumba fitness workshops, Aerobics, Pilates and Group cycling.


Valuation


The optimistic growth of the Indian fitness industry shall enable Talwalkars to grow its business in a sustainable and profitable manner. Enhanced market presence strong brand equity and competitive advantage over its peers bodes well. A preventive approach to healthcare has accelerated demand for its services and has translated to strong market presence and dominance in the Indian fitness industry. Talwalkars focus on increasing its number of gyms, mainly through PWG format which have low capex and should enable it to post better margins in future.


In recent years, Talwalkars has extensively invested in opening of premium gyms, power world gyms, purchase of land for the club project (joint venture with David Lloyd Leisure – – Europe’s premium health sports and leisure club chains with plans of opening 7-10 clubs across India), investment in value-added services like Transform, NuForm, Reduce, TRX and relocation of some fitness centres.


Talwalkars has also increased number of equipment at its gym upgraded the existing ones and upgraded to systematic software and controls.


With the number of gyms increasing, Talwalkars should be able to retain its dominant position in the Indian fitness industry.


Moreover, Demerger into Gym Co. and Lifestyle Co. should help it achieve incisive focus on business operations.


Based on FY 17 performance & business growth outlook, we estimate the share price of the company as per P/E valuation at 13x on FY 18E EPS at Rs27.28 , the estimated share price for next year tenure turns around to be around Rs348 (as stated above). Therefore, we recommend to BUY this script.

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