The Phoenix Mills - Long term growth story remains intact - ICICI Securities

The Phoenix Mills' (PHNX) Q4FY21 mall consumption of Rs14.4bn was up 5% QoQ and stood at 90% of Q4FY20 levels on like-to-like (LTL) basis. For FY21, mall consumption of Rs33.3bn was at 69% of FY20 levels while rental income (ex-CAM) of Rs5.6bn stood at 55% of FY20 levels. We assume a 25% LTL rental income loss for FY22E owing to mall shutdowns in H1FY22 and retain our FY23E estimates as we believe that the long-term growth story for Grade A malls in India remains intact. We retain our BUY rating with a revised Mar-22 SoTP based target price of Rs1,026/share (earlier Rs1,042/share) incorporating CPPIB fund infusion in new Kolkata mall and retain our 10% premium to NAV considering likely closure of GIC PE platform deal by Sep'21. Key risks to our call are an extended second Covid wave impacting mall consumption and fall in mall occupancies and rentals.

- Q4FY21 sees strong consumption recovery, Covid woes return from Q1FY22: PHNX reported Q4FY21 consumption of Rs14.4bn which stood at 90% of Q4FY20 consumption on LTL basis while rental income stood at Rs2.2bn or 97% of Q4FY20 levels. For FY21, mall consumption of Rs33.3bn was at 69% of FY20 levels while rental income of Rs5.6bn stood at 55% of FY20 levels. Heading into FY22E, the retail consumption recovery has been hindered by a fresh round of mall shutdowns across India owing to the second Covid wave. While it is difficult to predict the exact trajectory of consumption recovery in FY22E, we have built-in a 25% LTL rental income loss for FY22E of Rs2.5bn assuming rental waivers similar to FY21. As per PHNX management, rental negotiations will be discussed when malls reopen and majority of the tenant expiries in H1FY22 have been extended.

- CPPIB to infuse funds in Kolkata mall, GIC deal closure expected soon: PHNX has announced that CPPIB is expected to infuse up to Rs5.6bn in its new Kolkata mall, of which initial fund infusion of Rs3.84bn in two tranches will result in CPPIB owing a 49% stake in the mall SPV. PHNX and CPPIB have also committed an additional Rs8bn to their existing platform in the Island Star SPV towards completion of projects (Rs16-17bn of balance capex). Further, PHNX's potential platform deal with GIC PE is at an advanced stage and deal closure could be announced within a quarter.

- Estimated rental income CAGR of 14% over FY20-25E: At a portfolio level, PHNX will have ~11msf operational mall space by FY23-24E (6.9msf currently operational including Palassio, Lucknow). We expect PHNX to achieve a 14% rental income CAGR (ex-new Kolkata asset) at a portfolio level over FY20-25E which may result in PHNX clocking Rs19.5bn of rental income in FY25E vs. ~Rs10bn in FY20. Of the Rs19.5bn of gross rental income in FY25E, PHNX share is ~75% or Rs14.7bn.

Shares of The Phoenix Mills Ltd was last trading in BSE at Rs.787.35 as compared to the previous close of Rs. 790.55. The total number of shares traded during the day was 2975 in over 419 trades.

The stock hit an intraday high of Rs. 814.85 and intraday low of 785.5. The net turnover during the day was Rs. 2353441.

Source : Equity Bulls

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