IGI Logo

Strong consumption growth sustains in Aug’22

The Phoenix Mills (PHNX) saw Aug’22 like-to-like (LTL) consumption across malls at Rs6.7bn or 114% of Aug’19 levels and mirrors the Jul’22 LTL consumption growth which was at 120% of Jul’19 levels on the back of retailers’ End of Season sale. In Q1FY23 (Apr-Jun’22), LTL consumption across malls stood at Rs19.8bn or 111% of Apr-Jun’19 (Q1FY20) levels which translated into Q1FY23 retail LTL EBITDA of Rs2.9bn or 115% of Q1FY20 levels. Owing to continued consumption strength, we model for FY23E rental income of Rs13.7bn (Rs12.2bn on LTL basis vs. Rs10.3bn in FY20). With Indore and Ahmedabad malls to open in FY23E and Pune (Wakad) and Bengaluru (Hebbal) in FY24E, we expect 17% rental income CAGR over FY20-25E. We reiterate our BUY rating with an unchanged target price of Rs1,645/share based on 20% premium to our Mar’23E NAV of Rs1,371/share which includes increase in Palladium, Mumbai leasable area and considers growth opportunities from new office capex and new malls (including Surat). Key risks to our call are a fresh Covid wave impacting mall consumption and fall in mall occupancies and rentals.

* Consumption recovery firmly on track: In Q3FY22, LTL consumption across PHNX’s malls stood at Rs18.4bn or 89% of Q3FY20 levels. In Jan’22, LTL consumption stood at 70% of Jan’20 levels in spite of Omicron disruption in mall operations for the month, and in Feb’22, consumption levels were back to 94% of pre-Covid levels. In Mar’22, consumption across malls stood at Rs5.6bn or 105% of Mar’19 levels on LTL basis (Mar’20 saw mall shutdowns hence not comparable) while Q4FY22 consumption of Rs14.8bn stood at 91% of Q4FY19 levels on LTL basis. This momentum carried forward into Q1FY23 (Apr-Jun’22) with LTL consumption across malls at Rs19.8bn or 111% of Apr-Jun’19 (Q1FY20) levels) and continued in Jul’22 where LTL consumption stood at 120% of Jul’19 levels aided by retailers’ End of Season sale. In Aug’22, overall consumption across malls stood at Rs7.4bn while LTL consumption stood at Rs6.7bn or 114% of Aug’19 levels.

* Consumption growth has started flowing into rentals: With a strong bounce back in consumption across categories in Q1FY23, retail rental collections (including CAM) increased by 10% QoQ to Rs5.3bn and Phoenix Palladium saw addition of 0.15msf of new Gross Leasable Area in Q1FY23.

* Estimated rental income CAGR of 17% over FY20-25E: PHNX will have ~13msf operational mall space by FY26E (6.9msf currently operational). We expect PHNX to achieve a 17% rental income CAGR (ex-new Kolkata asset) over FY20-25E, resulting in Rs22.4bn of rental income in FY25E vs. ~Rs10.3bn in FY20. Of the Rs22.4bn of gross rental income in FY25E, PHNX’s share is ~77% or Rs17.3bn.

To Read Complete Report & Disclaimer Click Here

For More ICICI Securities Disclaimer https://www.icicisecurities.com/AboutUs.aspx About=7

SEBI Registration Number INZ000183631

Above views are of the author and not of the website kindly read disclaimer