Q4FY23 Review: Phoenix Mills: Healthy rebound in consumption

26 May 2023 , 12:29 PM

Phoenix Mills (PHNX) reported healthy rebound in consumption for April. Mgmt has guided to 12.5% YoY LTL consumption (and rental) growth for FY24. Retail margins have improved in FY23 on the back of renewals, churns and improvement in trading occupancy. Hospitality segment continues to deliver record performance, driven by occupancy/ARRs. Earnings growth visibility over FY24/25 is high with PHNX stabilising ~4msf of malls over next 2-4 quarters, driving >40% increase in rental income over this period.

Strong Ebitda growth in 4Q; April consumption improves: 

PHNX has reported strength in April consumption at 10% YoY and 6.6% on 4yr Cagr basis. Like-to-like FY23 consumption/rental/Ebitda growth was 6.0/4.8/6.9% respectively. Ebitda growth was higher than rental growth, driven by new leasing and renewals of 2.2msf across operational portfolio, and improvement in trading occupancy. Hospitality segment continued to deliver record performance with St Regis (Mumbai) occupancy and ARRs at 84%/Rs19,334 respectively. Residential segment also delivered ~50% YoY growth in pre-sales for FY23 to Rs4.7bn.

FY24 outlook robust: 

On the concall, management guided to delivering a ~12.5% like-to-like consumption growth across Retail mall portfolio for FY24. This will be partly driven by improvement in trading occupancy, and continued renewals and churn of tenants. Rental growth is expected to be broadly in line with consumption growth. Further, PHNX has commenced new malls at Indore and Ahmedabad that are in the ramp-up stage; and will likely start Bangalore and Pune malls in next 1-2 quarters — all of which (~4msf) will add to the consumption and rentals over FY24/25.

Near-term earnings visibility strong: 

PHNX has 5.1msf of offices coming up (all non-SEZ); so far, mgmt seems to be witnessing decent traction on leasing. On Multiplexes (8-9% area), PHNX believes their offerings are differentiated and continues to see interest. Beyond the steady retail mall addition of >1msf annually, PHNX has acquired a land in Kolkata for residential use and a land in NCR for warehousing. Analysts of IIFL Capital Services build 30% PAT Cagr over FY20-25. 

Analysts of IIFL Capital Services NAV of Rs1,540 does not build any business development value in Retail or other businesses.