Talwalkars Better Fitness Value ltd is a play on the growing healthcare market in India. It has a strong brand name and is now capitalizing, with rapid expansion. Gym is a highly localized business in the sense it needs to be easily accessible to local population at an affordable price (at least from a mass market perspective). Talwalkars has managed to break away from its peers and now leads the scale pack with 145 gyms on consolidated basis. Talwalkar Better Value Fitness as a company is focused on addressing the fitness deficit in India. Over the years, Talwalkars has enriched its brand through a conscious positioning around fitness, training knowledge, diverse offerings and uplifting health club environment. Company has been prudently positioned as an affordable brand addressing a growing customer base with increasingly diverse requirements. This strategy of company has paid off in terms of company’s ability to reach out to a large potential customer base and attract more members. Nowadays fitness is not only about gymming; it is also about peripheral areas comprising a healthy diet, dance-based fitness program, spa, massage, aerobics and yoga and that is where company is also focusing on, since in a country like India there seems to be huge market for such services. Over the years, Talwalkars has diversified and branded these offerings, and this has helped to enhance the proportion of these value added services from 18-20 % in 2011-12 to 22-23 % in 2013 -2014, going ahead they expect to enhance the proportion of these value-added offering. The company also being able to retain its renewal rate 70-76 % at a time when there is a fear of membership attrition. The company has added overall 14 new health clubs across India (owned aswellas franchisees) during FY14, taking its total gym count to 149 (103 own gyms, 16 subsidiaries, 13 franchise & licensed gyms and 17 HiFi gyms) with around 1.4 lakh members. Going forward, the company will continue its new health club expansion by carefully choosing locations, which will yield incremental RoCE of 25 % on an ongoing basis. The company will also focus on driving profitability across the system through active marketing of value-added services and improving same-store sales from current 4-5 % to 8-10 %. With favourable demographics and volume expansion, it is expected that the FY15-17E gym count to increase at CAGR of 8.0 % to 175 gyms by 2017E. There is a vast opportunity exists for further scale building considering the fragmented nature of industry. For instance, market share of the top 5 players by no. of clubs is just 16 % compared to global top 5 average of about 40 %. Talwalkars has a decent spread-out across the North, West and South regions which together accounts for 94 % of the total gyms. It is also targeting different price segments with roll out of both regular as well as ‘low cost’ HiFi gyms especially in those tier II/III cities which may not support a full service Talwalkars’ gym. The Company plans to open 20-25 fitness centres within the next 2 quarters and 100 fitness centres over the next three years and has plans to reach 100 towns in three years. This includes the plans to expand the Hi-Fi gyms to 30 over the next three years. Under the signed master franchisee for establishing 30 HiFi fitness centres in Tier-III and IV towns over the next three years, Talwalkars would be launching soon in Aurangabad, Jalna, Osmanabad, Parbani and Udgir. Going forward fitness centres in the Franchise format has also been initiated in Bhilwara, Jagatpura (Jaipur) and Patna. The company would expand the gyms in a well measured and steady manner through ownership as well as profitable franchise route after carefully assessing the market situation, demand & the extent of profits generated from existing assets (Same Store Sales growth). The company would ensure that the fitness centres would be opened in locations which can yield a higher ROCE of 25 % on an ongoing basis. Along with new gym additions, Talwalkars is expected to continue to focus on improving its SSS growth through higher share of Value added services (VAS) and increase in membership base. Talwalkar’s priority would be to enhancing throughout from each of its fitness centres and growing the proportion of value-added services being provided. In line with this, it expects to increase same-store sales to 8-10 % (H1FY15 SSS growth already at 8.9 % annualized) from around 4-5 % in FY14. Same store sales focus give an indication that value added per store is gaining significance as a driver of sales rather than just being volume driven. Talwalkar's revenue has grown at a CAGR of 26 % over the last 3 years largely driven by volume growth of 17 %, while its net profit has grown at a CAGR of 32 % over the same period on account of margin expansion. It can be expected that company's revenue to grow by 20 % in FY15e and by 22 % in FY16e. Talwalkars maintained healthy momentum in revenues with growth of 29 % yoy in what is seasonally a lean quarter for the company. Same store sales improved to 10.2 % yoy from 8.9 % in a challenging environment for discretionary spending. During the quarter, value added services grew at a healthy pace which led to 0.50 % uptick in margins. An improved operating performance and lower tax rate led to 26 % yoy rise in PAT. Company locked in 8‐9 gym locations across Delhi, Mumbai and other locations at attractive long term rentals. It also completed land acquisition for leisure club in Pune from Kolte Patil group and approvals are expected in the next 4‐5 months. In January 2015, company opened its first premium gym of 10,000 sq ft in Banjara Hills, Hyderabad with basic membership fees of Rs. 22,000 to Rs. 24,000 as compared to the regular Rs. 15,000 to Rs. 18,000 and 80 % of existing customers of Banjara Hills have shifted to the new gym; company would look to open more such premium gyms in metros and Tier I locations with obvious positive implications from a margin perspective. These new initiatives will help the company to leverage on its current asset and enhance the member base without incurring any major capex. Pricing for new initiatives is at a significant premium. This would help the company to improve its margins, going forward. Talwalkars has also tied up with David Lloyd Leisure: which has over 30 years of unmatched experience in the development and operation of leisure and sports clubs. The very same insights and know-how will now be available to Talwalkars for starting and consulting for sports and leisure clubs in India. Improved economic growth could result in increased spending power and benefit the wellness industry going forward. It is expected that the company’s surplus scenario is likely to continue for the next three years & will keep its growth story intact for the coming quarters also.
|SALES (₹ Crs)||209.50||256.60||314.90||386.40|
|NET PROFIT (₹ Cr)||36.60||47.10||55.70||66.90|