Buy Phoenix Mills Ltd For Target Rs.1200 - ICICI Direct
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Strong consumption recovery…
About the stock: Phoenix Mills (PML) is a leading retail mall developers and operators 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 developing another five malls with ~6 mn sq ft of retail space. It has a GLA of 1.6 mn sq ft in commercial segment. It plans to add 4.6 mn sq ft of commercial office space
Q2FY22 Results: PML reported a strong operating performance.
* Reported revenues grew ~72.8% YoY to | 371.3 crore. Retail revenues grew ~71.6% YoY at | 233.5 crore while hospitality revenues were up ~275% YoY at | 34.5 crore. While Q2 consumption was at ~74% of pre-Covid, October 2021 consumption across retail portfolio was at ~| 660 crore, at 90% of October 2019. Commercial remained a resilient segment, which witnessed revenues growth of ~70% YoY at | 42.1 crore
* EBITDA margins were up 750 bps YoY to 50.2%. The company reported a PAT of | 59.5 crore, vs. losses in base quarter
What should investors do? PML’s share price has grown 173% over the past five years (from ~| 372 in October 2016 to ~| 1011 levels in October 2021).
* We maintain our BUY rating on the company
Target Price and Valuation: We value PML at | 1200/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 ~13.5% to | 1913 crore in FY20-25E
* Decline in Covid-19 cases and re-opening 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 Mahindra Lifespace in real estate space.
* A play on residential expanding real estate portfolio
* BUY with a target price of | 335
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