Result Update: The Phoenix Mills Ltd - ACCUMULATE - TP Rs.707 - Kotak

Phoenix Mills Ltd's results were in line with our estimates led by improvement in rental revenues. Rental growth was driven by the strong operational performance of Market City malls -PMC Chennai, PMC Pune & PMC Mumbai as well as High Street Phoenix & Palladium. Commercial and hospitality segment also registered 35%/6% YoY growth respectively led by improvement in rentals and ARRs. Growth going ahead is likely to be led by improvement in rentals as well as uptick in residential segment revenue booking.

Key highlights

- Retail segment revenues are likely to witness healthy improvement going forward with rental renegotiations and consumption improvement. Residential segment revenues are likely to improve with improvement in market activity in its key regions.

- Average interest rate of debt has come down YoY with refinancing as well as rating improvements but sequentially it has now started to move up.

- Company has closed 4 acquisitions which include land parcels in Bangalore, Ahmedabad, under construction retail assets in Lucknow and Indore between April-July 2018 which is in line with its growth strategy of increasing retail led mixed use development area going forward.

Valuation and outlook

At current price of Rs 640, stock is trading at 35.7x and 31.1x P/E and 15.1x and 14.1x EV/EBITDA on FY19/20 consolidated estimates respectively. We continue to remain positive on the company and tweak our estimates to factor in higher capex and higher investments done from CPPIB. We arrive at a revised price target of Rs 707 (Rs 676 earlier) on FY20 estimates. Owing to limited upside, we maintain ACCUMULATE rating on the stock.

Shares of The Phoenix Mills Ltd was last trading in BSE at Rs.649.55 as compared to the previous close of Rs. 645. The total number of shares traded during the day was 369 in over 69 trades.

The stock hit an intraday high of Rs. 649.55 and intraday low of 640. The net turnover during the day was Rs. 238312.

Source : Equity Bulls

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