Q2FY24 Review: Phoenix Mills: Healthy consumption; strong scale-up ahead

10 Nov 2023 , 10:28 AM

Phoenix Mills reported a revenue/PAT growth of 34/36% YoY, broadly inline with estimates. Retail revenue and ebitda grew 8%/11% YoY, inline with consumption growth of ~10% for the quarter. Mgmt expects H2 to fare better with Q3 being the strongest, and also with the recent startup of malls in Bangalore and Pune. Residential and Hospitality segments continue to report strong operational performance. PHNX expects strong ramp up in its commercial portfolio over next 3-4 years; and will add >1msf of retail mall annually FY24 onwards. Analysts of IIFL Capital Services build 25% PAT Cagr over FY23-26; they build the recent Thane acquisition in their NAV and revise their TP to Rs2100. Retain ADD. 

Healthy consumption growth and outlook: 

PHNX reported healthy consumption growth of 20% YoY; 10% on like-to-like basis. Within segments, Multiplexes and Hypermarkets have rebound with 22% and 51% growth respectively, while Jewellery, F&B etc., also did well. Residential sales are up 200% YoY to nearly the highest-ever sales since the launch quarter almost a decade back. The St Regis Hotel saw a marginal dip in ARR QoQ, but Q3 line-up is expected to be strong with the festive season and other events. PHNX’s retail rental income and ebitda was up 6%/9% YoY; on a like to like basis it was 8%/11% YoY. 

Capex projects on track: 

PHNX saw a strong ramp-up in trading occupancy to 89% & 74% at its Indore and Ahmedabad mall respectively, it also commenced Pune and Bangalore malls in September and October respectively, and expects occupancy to ramp up to 75-80% by March2024. Across PHNX’s two JVs – with CPP and GIC, the free cashflows generated are likely to be re-invested in growth/existing development. PHNX has invested Rs60bn over last few years on its current expansion leg and would require to invest another Rs48-50bn till 2027. 

Thane acquisition could add 3msf developable area; retain ADD: 

PHNX will see 25% earnings Cagr over FY23-26 largely on strong capacity adds across retail and commercial. It has recently acquired land at Thane for Rs4.3bn; it is still evaluating the development mix especially given strong competition in retail malls in the market. Analysts of IIFL Capital Services build the Thane land acquisition in their NAV and raise their target price to Rs2,100/share.