December 02, 2016 / 15:09 IST
On 8th November, the Company opened 20 owned Gyms in Bengaluru under its Power World Gym (PWG) brand. These Gyms have been set up with an average capex of Rs 2-2.5mn per Gym. Management anticipates these new Gyms to earn Rs 20-25mn sales per Gym and accrue 25% ROCE within a year. With this move Talwalkars has become second largest player in Bengaluru with 25 Gyms. As on 9th November 2016 Talwalkar has 198 fitness centers across India.
At CMP of Rs 251, Talwalkars is trading at a PE of 8.7x FY18E and EV/EBITDA of 4.1x FY18E. Given the Company's a) strong growth prospects given its leadership position in highly under penetrated and growing market b) 25% PAT CAGR over FY16 -18E and c) average ROE of 16% through FY16-18E, we value the company at 12xFY18E EPS with a target price of Rs 348. We reiterate a BUY rating on the stock for a target price of Rs 348 (upside potential of 39% over the next18 months).
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