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Growth outlook remains healthy Consumption growth to drive retail scale-up

* In 1QFY27, Phoenix Mills (PHNX) reported rental income of INR5.9b, up 17% YoY, while retail EBITDA stood at INR6.2b, up 17% YoY. We bake in a 10% CAGR in rental income to reach INR25.9b over FY26-28E.

* Consumption increased 32% YoY to INR47.3b, driven by healthy traction across the operational portfolio. Newer malls, including Phoenix Mall of Asia, Bengaluru (+96% YoY) and Phoenix Mall of the Millennium, Pune (+34% YoY), continued to scale up well.

* Consumption growth was supported by resilient demand from the electronics segment, which grew 61% YoY, followed by the jewelry segment, which posted 55% YoY consumption growth. Other segments, such as FnB and Fashion, continued to perform well, growing at 26% and 24% YoY, respectively. The company expects retail to scale up to >18msf in GLA from current levels of 11.5msf by FY30

Leasing traction strengthens office portfolio growth

* Income from commercial offices in 1QFY267 stood at INR750m, up 44% YoY, and EBITDA came in at INR420m, up 31% YoY. Margin stood at 56%, down 9pp YoY. We expect income from the office segment to reach INR7.3b by FY28.

* In 1QFY27, operational office assets recorded 72% occupancy, while the established office assets in Mumbai and Pune (combined GLA of ~2.0 msf) maintained a healthy 84% occupancy. Leased occupancy across new developments (combined GLA of ~2.9 msf) stood at 79% in Pune, 63% in Bengaluru, and 40% in Chennai.

* The company expects its office portfolio to scale up to 9msf of GLA by FY30 from the current levels of ~5msf.

Broadly in-line 1Q performance; estimates maintained

* Aided by asset additions, rental escalations, improving occupancy at the retail and office portfolio, and stronger consumption growth, we expect a revenue CAGR of 14% over FY26-28, reaching INR57.3b.

* In 1QFY27, PHNX reported revenue of INR10.7b, up 13% YoY, while EBITDA came in at INR6.4b, up 14% YoY. EBITDA margin stood at 59.7%, up 50bp YoY. Reported PAT stood at INR3.0b, up 23% YoY. PAT margin stood at 27.6%.

* Operating free cash flow (after interest and taxes) in 1QFY27 was INR6.0b, up 20% YoY. Excluding the residential business, it stood at INR5.8b, up 31% YoY. Consolidated net debt stood at INR36.6b (vs. INR31.6b in 4QFY26).

Valuation and view

* In the retail portfolio, while new malls continue to ramp up well, PHNX is implementing measures to accelerate consumption at the mature malls. These initiatives, along with a further increase in trading occupancy, are expected to help PHNX sustain healthy traction in consumption. New asset additions in the coming years would further lead to better growth in rental income over the medium term.

* Further, the office portfolio has ramped up well, whereas the Hospitality segment continues to remain resilient.

* While we maintain our estimates, we roll forward to FY28E and reiterate our BUY rating on the stock with a TP of INR2,200, valued on an SoTP basis.

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