Basic-Fit It's time to stop adding weights to the bench

Since the beginning of the year Basic Fit has rallied approx. 53%, recovering from lows after the 4Q22 profit warning and the overall market correction. We believe the rally was justified but now we prefer to take a wait and see approach in the short term. Triggers of the rally were higher expected yield per member and member recovery to pre-covid levels. The higher yield per member is the result of premiumization and changes to the membership formulas. We change our recommendation from BUY to HOLD and our TP from EUR 52.0 to EUR 40.0 based on our updated DCF valuation.
We welcome the fact that Basic Fit changed the membership structure in the Benelux soon after positive test results from France. It shows that the membership changes are a success in the short term but we think a cycle of 1 year is necessary to assess the full impact. Basic Fit reported an average revenue per member of EUR 22.86/month over FY22. We estimate an average fitness revenue per member of EUR 23.7/month over FY23. The gradual yield increase continues over FY24-25. This positively impacts club EBITDA by EUR 14m in FY23 and EUR 35m in FY24. As the yield per member increases only gradually, the underlying club EBITDA margin is below pre-covid levels due to a faster uptake of operating costs in FY23 and FY24. Two potential triggers could increase the margins in FY24: 1) Change the membership formula in Spain or Germany and 2) a drop in energy costs. These are not in our base case but could lead to a further rerating of the shares.
We estimate 200 club openings this year in line with CSS. This implies 300 club openings in FY24 and FY25 to reach the 2025 target. In the medium term, we believe the 2025 target of 2000 clubs is ambitious. However, in the long run we believe in Basic Fit's growth story and assume 3000 clubs by 2030 in line with the guidance.