2023-07-28 19:01:57
Citi started coverage of Smart Fit today with a ‘buy’ recommendation and a target price of BRL 30, a potential upside of 32%.
The thesis is simple.
Smart Fit operates in a fragmented market with very low penetration: that is, only 3% of the Brazilian population is a gym user, once morest more than 15% in the US and Canada, for example.
This should allow the network to double in size by 2029, both in revenue and in the number of gyms.
Smart Fit currently has 1,200 gyms in 14 countries, with 3.8 million customers. Around 70% of these customers are in Brazil and Mexico.
Citi estimates that revenue will grow at an average annual rate of 17% between 2023 and 2028.
In Brazil alone, analyst João Pedro Soares estimates that Edgard Corona’s chain will open an average of 80 gyms per year over the next five years. In Latin America as a whole, the expansion would be 200 gyms per year.
More and more investors see Smartfit as a proven, high-return business model. The company offers low-cost gyms with good infrastructure, which generates very high returns when gyms reach capacity.
Citi said SmartFit is trading today at a price equivalent to 20x its estimated profit for next year, compared to an average of 24x for global companies in this sector.
In addition to the valuation discount, the company should grow its earnings more than these other companies: regarding 30% compared to 20% of these global chains, according to Citi.
1690697371
#Smart #Fit #double #size #years #Citi #starts #buy
