Buy Phoenix Mills Ltd For Target Rs.1230 - ICICI Direct
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Strong recovery!
About the stock: Phoenix Mills (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 million square feet (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 2 mn sq ft in the commercial segment. It plans to add 4.2 mn sq ft of commercial office space
Q3FY22 Results: PML reported a strong operating performance.
* Reported revenues grew ~14.5% YoY to | 425 crore, driven by retail and hospitality portfolio. Retail revenues grew ~24.8% YoY at | 278.2 crore while hospitality revenues were up ~136% YoY at | 65.6 crore. We note that retail rental was at ~96% of Q3FY20 (pre-Covid level). Consumption in Q3FY22 (including Phoenix Palassio) was ~100% of Q3FY20. Commercial saw revenue growth of ~16.2% YoY at | 36.6 crore
* EBITDA margins were up 722 bps YoY to 54.2%. Consequently, EBITDA at | 230.5 crore, was up 45.1% YoY. PAT was at | 98.9 crore, up 51.1% YoY
What should investors do? PML’s share price has grown 168% over the past five years (from ~| 352 in January 2017 to ~| 943 levels in January 2022).
* We maintain our BUY rating on the company
Target Price and Valuation: We value PML at | 1230/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% to | 1865 crore in FY20-25E
* Reopening of economy 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 Brigade Enterprises in real estate space.
* A play on well-placed Bengaluru real estate
* BUY with a target price of | 600
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