Buy Phoenix Mills Ltd For Target Rs.1020 - ICICI Direct
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Maharashtra malls reopening to be key…
About the stock: Phoenix Mills Ltd (PML) is a leading retail mall developer and operator in India. It is into retail-led, mixed-use properties and has developed 17.5+ mn sq ft of retail, commercial, hospitality, and residential asset class.
* PML has an operational retail area of ~7 mn sq ft spread over nine operational malls and is developing another five malls with 6+ mn sq ft of retail space. It has a GLA of 1.6 mn sq ft in the commercial segment. It plans to add 5.3 mn sq ft of commercial office space.
Q1FY22 Results: PML’s Q1FY22 results were impacted by lockdowns.
* Retail revenues grew ~12% YoY but were down ~57% QoQ at | 115.3 crore while hospitality revenues were up 57% YoY but declined ~49% QoQ at | 15.1 crore. Commercial remained a resilient segment, which witnessed revenue growth of ~61% YoY at | 36.2 crore. Revenue recognition of | 37.6 crore in residential segment vs. nil revenues in Q1FY21
* EBITDA margins at 37.3% were down ~15 percentage points owing to negative operating leverage, resulting in losses at the bottomline level
What should investors do?
PML’s share price has grown 121% over the past five years (from ~| 396 in August 2016 to ~| 877 levels in August 2021).
* We maintain our BUY rating on the company
Target Price and Valuation: We value PML at | 1020/share.
Key triggers for future price performance:
* Focused on core competence in development and operation of retail malls; under-development retail GLA of ~6 mn sq ft to aid growth. Over the medium term, we expect retail rental income to grow at a CAGR of ~16% to | 2175 crore in FY20-25E
* Decline in Covid-19 cases and reopening of economies to fully operationalise its mall and hospitality asset; rentals and ARR to improve
* Healthy balance sheet and strategic expansion plans to add 1 msf of retail area annually.
Alternate Stock Idea: Besides PML, we like Oberoi Realty in the real estate space.
* Quality play on MMR premium real estate
* BUY with a target price of | 830
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