Hold Talwalkars Better Value Fitness; target of Rs 315: ICICI Direct

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26 Aug, 2025 12:21

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ICICI Direct's research report on Talwalkars Better Value Fitness

Talwalkars’ Q1FY18 results are not directly comparable with our estimates due to adoption of new accounting standard (Ind-As). Under Ind-As, the company reported revenues net of service tax. Adjusting for service tax, revenues increased 12.9% YoY to  Rs 56.7 crore (marginally below I-direct estimate of  Rs 59.7 crore) mainly led by a rise in value added services. EBITDA margin, PAT were in line with our estimates The proposed re-organisation of TBVF’s business into Gym Co and Lifestyle Co is likely to happen by Q3FY18E. TBVF has also acquired a 51.0% stake in Mickey Mehta Health Beyond Fitness. This acquisition will help TBVF further widen its value-added services The company has issued 13 lakh equity shares to promoters on a preferential basis at a price of Rs 318.3/share for ~41.4 crore.

Outlook

The growth visibility continues to remain healthy in the gym segment. Further, TBVF is taking various measures to reduce operating cost (like consolidation of gyms, reduction in rentals, utilising time slots more efficiently and widening bouquet of value-added services), which will boost margins in coming years. However, due to aggressive expansion, the company is unable to maintain positive cash flow and has kept leverage high, which is a key concern. As a result, although we remain positive on the stock from a long term, near term concerns prompt us to maintain HOLD rating on the stock with a revised target price of  Rs 315.
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