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Higher-than-expected margin leads to EBITDA beat

* Phoenix Mills (PHNX) reported revenue of INR7.3b, up 47% YoY/7% QoQ (6% above our estimate) in 4QFY23. Revenue growth was driven by 45% YoY increase in retail segment to INR4.9b and 2.5x jump in Hospitality revenue to INR1.4b during the quarter.

* FY23 revenue surged 78% YoY to INR26.4b with retail segment contributing INR18b to the total revenue (up 86% YoY). Hospitality segment’s revenue nearly tripled to INR4.8b during the year.

* EBITDA jumped 79% YoY to INR4.3b (15% above our estimate) and PHNX clocked an EBITDA margin of 59%, up 10pp YoY in 4QFY23. Despite commissioning of two new malls in the last four months, its EBITDA margin improved 300bp QoQ due to healthy margin in the hospitality segment and increase in trading occupancy across its malls in the portfolio.

* PHNX reported INR0.5b of exceptional gain due to an FSI grant received from local municipal body. Adjusted for the exceptional gain, its PAT doubled YoY and was up 17% QoQ to INR2b (37% above our estimate)

* The company generated an OCF of INR17.7b and incurred INR23.0b of capex and land investments. Gross debt remained flat at INR40b but net debt rose by INR2b to INR23b (INR18b at PHNX share).

Retail portfolio on track for 20% CAGR over the next two years

* Consumption across PHNX’s mall portfolio increased 32% YoY to INR22b and 28% on an LFL basis. FY23 consumption of INR92.5b was 33% ahead of FY20 (pre-Covid) run-rate (19% on LFL basis) and surpassed management guidance of INR90b. Healthy growth momentum sustained in Apr’23 as consumption rose 18% YoY (+10% on LFL basis) to INR8.5b.

* Retail income was up 36% YoY to INR3.4b as trading occupancy across the mall portfolio improved 400-800bp. Retail EBITDA stood at INR3.5b, up 38% YoY, clocking a margin of 103% over rental income and 76% over total income (up 200bp QoQ and YoY each).

* The company will deliver its ongoing mall at Pune and Bengaluru in 1HFY24. Trading occupancy at additional rentals from these malls and ramp-up of trading occupancy at its recently delivered mall in Indore and Ahmedabad as well as some of the existing malls in Pune, Mumbai and Chennai will lead to 28% CAGR in retail rental income to reach INR21b over FY23-25

Hospitality segment continues to exhibit sustained momentum

* Strong growth momentum at PHNX’s hotel portfolio is sustained as it continues to deliver record performance across all key parameters such as occupancy, ARR, revenue, EBITDA and margins.

* Blended portfolio revenue increased 17% QoQ to INR1.5b as St Regis reported occupancy of 84% (up 300bp) and the same for Marriott Agra sustained at record 79%. ARR for St. Regis increased 18% YoY to ~INR19,300 while it remained flat for Marriott Agra at ~INR5,720. EBITDA margin of St. Regis was at a record 50% (up 500bp QoQ).

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