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The Phoenix Mills Ltd - BUY - TP Rs.594 - Result Update - Kotak

Posted On: 2017-11-15 19:12:52

- Revenues of the company during the quarter were lower than our estimates due to lower revenue booking in residential real estate segment. Also, Chennai Market city ceased to be the subsidiary of the company and hence its numbers are not consolidated in Q2FY18 financials. Margins stood strong at 48% on improvement in rentals across market cities. Net profit performance was impacted by higher tax expense.

- Rentals have witnessed an improvement across its malls and further rental renegotiation is expected in the coming years at higher rates. Company has also completed the buyout of remaining stakes in other market cities (except Chennai market city) and further free cash flows are likely to be utilized for debt reduction. CPPIB funds are being deployed for land purchases and company expects to add nearly 3-4 malls in next 4-5 years. Matured asset portfolio is likely to increase cash flows further which enables the company to add further malls in its portfolio. Going ahead, the focus of the company will be on new investments post funding by CPPIB along with debt reduction.

- We revise our estimates to factor in H1FY18 performance as well as higher stake in its market cities. We believe that renegotiation of rentals across malls, debt reduction coupled with lower interest rates is likely to aid net profit growth going forward. We also value the initial investment of CPPIB of Rs 7.24 bn at 1x book value since investments have commenced in various projects. We arrive at a revised price target of Rs 594 (Rs 527 earlier) based on sum of the parts valuation on FY19 estimates. We upgrade the stock to BUY from ACCUMULATE earlier.

Shares of The Phoenix Mills Ltd was last trading in BSE at Rs.507.8 as compared to the previous close of Rs. 507.05. The total number of shares traded during the day was 20761 in over 214 trades.

The stock hit an intraday high of Rs. 514 and intraday low of 505.4. The net turnover during the day was Rs. 10554208.


Source: Equity Bulls

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