Berenberg raises Gym Group target price, cites multi‑year growth potential

(Sharecast News) - Analysts at Berenberg hiked their target price for The Gym Group from 255p to 295p on Friday, saying the lowcost operator offered a multiyear growth story in an underpenetrated market and remains attractively valued.

Berenberg kept its 'buy' rating on the stock, arguing the market continues to underestimate the company's position and longterm freecashflow potential, and highlighted that lowcost gyms currently account for 4.7% of the UK population, with analysis suggesting a 10-20 year runway for new openings as penetration moves towards 8% and potentially higher, in line with levels seen in Scandinavia and the US.

It also noted The Gym Group generated £38m of free cash flow before growth capex in FY25 and could produce more than £164m annually at maturity.

The German bank said demand drivers remain supportive, with the chain heavily indexed to Gen Z and Gen Alpha - demographics that prioritise health and fitness and tend to be influenced by social media and strengthtraining trends.

Costs have been well managed, though Berenberg said it remains cautious given ongoing inflation. It expects margins to be slightly lower yearonyear but sees scope for up to 28% underlying earningslessnormalisedrent margins in a more optimistic scenario, which could drive 6% to 22% upgrades to consensus. Key KPIs also screened positively, with revenue per member and average revenue per gym improving.

Berenberg added that its blended discounted cashflow approach supported its new 295p target price, noting valuation multiples remain below historical levels and peer benchmarks.

Reporting by Iain Gilbert at Sharecast.com