Phoenix Mills: Healthy performance and outlook

11 Oct 2023 , 11:10 AM

Recommendation: Add; Target price: Rs 1950

 

For Q2FY24, Phoenix Mills (PHNX) reported a like-to-like consumption growth of ~10% — marginally above the ~9% reported for Q1. On a YoY basis, the reported growth was 20%, including new malls at Indore and Ahmedabad. Since its launch quarter, Residential sales were the highest; and being a completed project will drive strong near-term cashflows as well. Hospitality portfolio was marginally impacted by seasonality, but the outlook for Q3FY24 looks robust. High earnings growth visibility over FY24-26 is driven by stabilisation of ~4msf of malls over the next three to four quarters. Analysts of IIFL Capital Services build 25% PAT Cagr over FY23-26; ADD with TP of Rs1,950 (5% upside). 

Healthy retail consumption growth in Q3; Aug and Sept fare better: PHNX reported healthy consumption growth of 20% YoY; however, on a like-to-like basis (adjusted for new malls), it was 10%. At 22% YoY, Palassio Lucknow reported the strongest growth, followed by Mumbai malls – Phoenix Palladium and PMC Mumbai at 11% each. July consumption was up 7% (vs 10% for Q2), implying average 12% consumption growth for August and September. Within segments, Multiplexes and Hypermarkets have rebounded, while Jewellery, F&B etc., continue to do 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. 

Strong visibility on growth…: PHNX saw a strong ramp-up in trading occupancy to 89% & 74% at its Indore and Ahmedabad mall respectively (vs 86% & 60% respectively in June’23). This will move towards ~94% of leased occupancy respectively over the next few quarters. Pune mall has commenced operations on 1st Sep, and clocked in trading occupancy of 44%, in line with the performance of Indore and Ahmedabad. Further, Bangalore mall is scheduled to commence on 20th October; analysts of IIFL Capital Services estimate that these four malls will add ~4msf, and >Rs6bn to gross rentals (PHNX share 50%) to be stabilised fully by FY25. 

..and diversification; Retain ADD: While PHNX is developing malls in Kolkata and Surat, which will commence operations after FY25, it has also acquired land in Kolkata for Residential and in NCR for Warehousing. Analysts of IIFL Capital Services build 25% PAT Cagr over FY23-26; increase their TP to Rs1,950.