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Hello Readers

It took a gap to bring up our new Investment Idea, but the wait is worth it. Talwalkars Better Value Fitness is into the health/gym/lifestyle space. The company possesses India’s largest chain of health clubs and is the only listed entity of the sector. With the changing society, I believe that the company has excellent future prospects. Its offers Gym, Yoga, Weight Management Programs, Aerobics, Spa, Massage, Steam Zumba, Nuform and many other versatile health and fitness programs. Also it provides nutritional supplements and apparels under its own brand name.

Talking about the Industry, several factors came before me which really convinced me the huge potential this space has to offer. A Country like Brazil accounts for only 1/6th of Indian population and still it comprises of 8 times more health clubs then in India. With the rapid urbanization and increase in per capita income, the health clubs numbers are expected to improve at a great extent.  Rapid urbanization has resulted in an increase in lifestyle diseases like diabetes, obesity which further has pushed the folks towards yoga, gym, aerobics etc etc. and the same is expected to continue. Moreover, the young generation too is moving towards gyms making it a part of their lifestyle.

Health clubs therefore have a huge growth potential in India, with the economic growth and increase in per capita income the Industry is expected to grow at a CAGR of above 20 percent, and Talwalkers being the only listed entity of the space has potential to grab opportunities coming forth.


The Company

In 1932, Mr. Vishnupant Talwalkar opened the doors of Talkwalkars Better Value Fitness Limited, or Talwalkars to the city of Mumbai.  Today, they have evolved to become India’s largest chain of health centers with over 150 ultramodern gyms spanning 80 cities across the country and a growing customer base. They have even crossed the waters to acquire 12 gyms in Sri Lanka. Talwalkars not only offers its customers the latest technology in fitness but also the expertise and flexibility of Talwalkars which has made it a brand name in the fitness industry.



Fundamentals

Talking about the revenues, the company has grew at an exception CAGR of around 23% in last 5 year, while it is among very few companies which has a net profit margin of 20 percent plus consistently.

At current market price the P.E ratio stands 14, which i believe is too low for such an high margin & consistent business with a brighter future ahead.

The Company has proposed to demerge into two companies - Gym Co. & Lifestyle Co. Both will be listed, the Gym business will operate under the existing name. This will improve the company's financials as it would reduce the debts pertaining to clubs, properties & non-gym businesses. Moreover, the demerger would result in better management and expansion of activities.

It has an above average Return on Capital Employed (around 11) , good cash generating capability. However, investors may worry about the rising debts, which has doubled in past 5 years. One has to understand the company is in expansion phase, lot of cash outflow has been there due to new health clubs being opened. It has added 35 Gyms in 2017, currently it has 211 gyms and it aims to take the figure to 300 in coming years. The Company with huge margins and a wide market to penetrate can handle the debts easily once it slows down the expansion.

I would say if one is in search of space, which could give multifold returns in upcoming 5 years, it can be a perfect bet.

Technicals

The Stock is in a uptrend, making higher lows & higher bottoms consistently with any major upmove awaited, look below


The stock currently has major support around 280, which is its 50 DMA . Also a horizontal line drawn at 280 clearly indicates that these levels have acted as a support and resistance at various instances. Therefore the level is crucial, therefore we will mark it as our Stop loss.


Conclusion

The Company has been showing tremendous growth throughout, even if we ignore growth, it is undervalued at current levels. One can go long at CMP 300. Investors can place 282 as their stop loss, therefore the risk reward ratio is favorable here.

Note: The Above is just a information available in public domain and therefore, should not be taken as a research report.

Registration status with SEBI:  I am not registered with SEBI under the (Research Analyst) regulations 2014 and as per clarifications provided by SEBI: “Any person who makes recommendation or offers an opinion concerning securities or public offers only through public media is not required to obtain registration as research analyst under RA Regulations.


Disclosure : I am looking for having position in the stock, currently I do not hold any shares of Talwalkars in my portfolio.

Post a Comment

I made profits by buying at 303 & selling @ 327..thanks a lot..ur recommendations always works...keep up the good work..

Thanks Deepu Ji.... if markets correct, can grab talwalkars at lower levels for longer term....cheers for the profits !!!

Myra K. Deberry November 06, 2017

thanku

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