Phoenix Mills: Healthy consumption growth

10 Jul 2023 , 10:29 AM

Recommendation: Add; Target price: Rs 1650

 

Phoenix Mills (PHNX) reported a headline growth of 18% YoY in retail consumption for Q1FY24; Like to like (LTL) consumption growth was 9% YoY/10% (adjusted for closures). Rental collections grew 7.7% QoQ. Hospitality portfolio continues to witness strong ARRs and healthy occupancy, marginally down QoQ. There is strong earnings growth visibility over FY24/25, with PHNX stabilising ~4msf of malls over next 2-3 quarters, driving >40% increase in rental income over this period. By FY26, PHNX will double its Retail portfolio, and will add >1msf p.a. of retail space thereafter. Analysts of IIFL Capital Services build 30% PAT Cagr over FY20-25; retain ADD.

Healthy retail consumption for Q1FY24: 

PHNX reported decent consumption growth of 18% YoY. However, on a LTL basis (adjusted for new malls), it was 9%. Mgmt shared that the overall consumption was negatively impacted by ~1% on LTL basis, due to renovation at Phoenix Palladium, Mumbai. PMC Chennai and Palassio Lucknow reported the strongest growth at 13% each. Across the legacy portfolio of Palladium, PMC Bangalore, trading occupancy saw improvement QoQ. PHNX also reported rental collections of Rs6.2bn (+18% YoY) for Q1FY24 (including rental income, CAM recovery and GST). 

New malls ramping up well; hotels witness marginal dip QoQ: 

PHNX saw strong ramp-up in trading occupancy to 86% & 60% at the Indore and Ahmedabad malls respectively (vs 70% & 43% respectively in March’23). This will move towards 93/94% of leased occupancy over next few quarters. In the Hospitality portfolio, St. Regis Mumbai reported healthy occupancy and ARRs at 82% and Rs16,504 respectively, which was down QoQ largely due to seasonality. Commercial portfolio witnessed gross/net leasing of 0.14/0.09msf. Residential sales were strong at Rs1,351mn.

Near-term earnings visibility high; ADD: 

PHNX’s new malls at Indore, Ahmedabad, Pune and Bangalore (~4msf), will add >Rs6bn to gross rentals (PHNX share 50%); to be stabilised fully by FY25. Further, malls at Kolkata and Surat are also being developed, which will commence operations beyond FY25. PHNX has also acquired land in Kolkata for Residential and in NCR for Warehousing. Analysts of IIFL Capital Services build 30% PAT Cagr over FY20-25, and increase their TP to Rs1,650.