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Talwalkars Better Value Fitness: Buy for an upside of 172.7% over a period of 24 months

Ventura Securities | 01 Dec, 2017  | Follow Author | Add to my Favourites 
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Talwalkars  Better  Value  Fitness  Ltd  (Talwalkars)  offers  a  unique  play  to  participate in India’s burgeoning fitness industry. Talwalkars is not only the  market leader by far but is twice as large as the next best peer. It has grown  its  pan  India  presence  through  a  judicious  combination  of  owned  and  franchise  centres,  which  are  housed  under  four  brands  that  address  all strata  of  society.  Talwalkars  has  also  added  a  number  of  non-equipment based  fitness  programs,  viz.  Zorba,  Zumba,  etc.,  which  have  a  high  ROE.

With  a  view  to  attract  the  non-gyming  and  “busy,  on  the  go”  segment, Talwalkars has introduced ‘Reduce and Nuform’ programs, which have been well received. Its recent tie-up with Mickey Mehta, a fitness celebrity, will go a long way in further improving the attractiveness of its non-gym business.

Over  the period FY14-17, the earnings of Talwalkars have grown at a healthy CAGR  of  21.5%  to  Rs.  65.6  crore,  return  ratios  -  ROE  and  ROCE  -  have  remained relatively pedestrian (considering the fact that the service industry typically has higher ratios). Hence, with a view to unlock value, Talwalkars is looking  to  demerge  its  two  businesses  –  the  gym  business  and  lifestyle business. This will bring to fore the superior shareholder returns of the Gym Co. leading to a sharp re-rating.

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Disclaimer: The author has taken due care and caution to compile and analyse the data. The opinions expressed above are only the views of the author, and not a recommendation to buy or sell. Neither the author nor accept any liability whatsoever arising from the use of any of the above contents.


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