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Healthy performance...

The key highlight for Phoenix Mills (PML) was consumption recovery at retail malls. During Q4FY21, total consumption was at | 1,435 crore (up 5% QoQ; at ~100% (~94% on like to like basis) of Q4FY20). Reported revenues degrew ~3.4% YoY to | 385.9 crore, with core portfolio (commercial + retail + hospitality) revenues down ~14.7% YoY to | 329.5 crore, dragged by weak hospitality performance (down ~66% YoY). Reported EBITDA margin were down 620 bps YoY to 44.9%, given the higher mix of residential revenues.

Lockdown to impact in Q1…but recovery could be quicker

PML rental income in Q4FY21 at | 216.6 crore was at ~97% of Q4FY20 and up 23% QoQ. FY21 rentals at | 563 crore was ~55% of FY20. Additionally, retail collections witnessed sharp improvement (up 42% QoQ) at | 370 crore during Q4FY21. Currently, consumption, footfall remained impacted by lockdowns led closure and PML expects to resume discussions with retailers close to reopening. However, it remains confident that recovery could be much quicker post reopening. We conservatively bake in rentals at | 868 crore (~15% lower than FY20 levels on a like-to-like basis), given the likely waivers. The same is likely to recovery to pre-Covid levels in FY23, coupled with slated renewals led growth. Over the medium term, we expect retail rental income to grow at a CAGR of ~15% to | 2060 crore in FY20-25E.

Kolkata projects to be partnered with CPPIB

The company has partnered with Canada Pension Plan Investment Board (CPPIB) for the Kolkata project. CPPIB has committed to invest ~| 384 crore (with maximum of up to | 560 crore) in tranches (| 180 crore in tranche 1, | 204 crore in tranche 2 upon receipt of necessary approvals) for an ultimate equity stake of 49%. Recall that land parcel has retail development potential of 1 mn sq ft (msf) in phase-1 (total estimated costs (including land) of | 925- 930 crore), which is likely to be operationalised by FY25. CPPIB has also extended further funding of up to | 400 crore (| 800 crore by PML and CPPIB) to the under construction malls at Wakad, Hebbal and Indore and company intends to use it for construction instead of debt.

Valuation & Outlook

PML remains a quasi-play on India’s consumption story, given the quality of assets, healthy balance sheet & strategic expansion plans. The QIP fund raise/investments by GIC/CPPIB has boosted the liquidity & growth ammunition. With only five to six major retail mall developers currently in India, and given it’s USP of operating large format properties efficiently, PML remains a superior player in the medium to long term. We maintain BUY rating with unchanged SoTP based target price of | 950/share.

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