Q1FY17 saw a muted addition of 3000-4000 members and 1 new gym only. The heat wave in India during the month of April the growth of the business- revenues grew by a mere 11.9%. • Over the last four-six quarters, franchisee has become an integral part of the company’s operations. Out of the 177 gyms owned/ operated by it, almost 50-55 gyms are in the franchisee model. Going ahead, the company plans to add another 12-15 gyms under the same model which will be operational within the next three quarters.
Valuation:. The intention to forg venture with David Lloyd Leisure (Europe’s leading premium sports, health and leisure group) for the development of 7-10 clubs in India along with demerger - one focusing on gyms and the other focusing on properties and value added services- is symptomatic of renewed business focus. Transformation into a wellness company (better services and infrastructure) will further make its offerings more eclectic. Growing disposable income and awareness regarding fitness augurs well for the business expansion. Average earnings growth of 21.5% over the next two years is doubtless worthy of notice. We retain ‘buy’ rating on the stock with a revised target of Rs. 338 (previous target Rs 319) implying a 12x FY18e EPS over a period of 9-12 months. (PEG ratio: 0.6)