Maintain BUY on Phoenix Mills - Accelerated recovery - HDFC Securities

Mr. Parikshit D Kandpal, CFA, HDFC Securities and Mr. Chintan Parikh, Institutional Research Analyst, HDFC Securities

Phoenix Mills (PHNX) revenue/APAT, at INR 2/-0.26bn, was 26/(15)% beat/(miss). Consumption degrew 86% QoQ to INR 2.6bn (the lockdown impact). Post opening, malls (Maharashtra malls yet to open) saw accelerated recovery with consumption in July-21 (ex-Maharashtra) at 93% of July-19 level and 120% of Mar-21. We expect a similar trend for Maharashtra malls once they receive the green signal to trade. PHNX continues to see a significant leasing traction in under construction malls and is seeking greenfield/brownfield acquisition opportunities, given strong cash balance. We have incorporated Kolkata mall and project Rise's in our SOTP valuation and increase our PHNX TP to INR 1,188/sh. We maintain BUY and tweak our FY22/FY23 EPS estimates by -18/+4.6% to account for near term COVID-led uncertainty.

Financial highlights: Revenue: INR 2bn (+52/-47% YoY/QoQ, 26% beat). EBITDA: INR 761mn (+8.4/-56% YoY/QoQ, 4% beat). EBITDA margin: 37.3% (-14.8/-7.7% bps YoY/QoQ, vs 45.2% est.). RPAT/APAT: INR -262mn (+38%/- 2.6x YoY/QoQ), 15% miss). Retail rental income came in at INR 870mn (+3.2% YoY) with EBITDA at INR 919mn (+21% YoY). PHNX is confident of achieving more than INR 1bn of commercial EBITDA for full year.

Retail rental potential robust: Consumption in Q1FY22 was at INR 2.6bn vs INR 14.4bn in the previous quarter. Consumption in July-21 was INR 2bn (93% of pre-covid level). Rentals are expected to normalise by 2HFY22 start. Commercial occupancy was at 62% with collections at 92%. All four under- construction malls are expected to be 50-85% leased out by FY22-23. Lower parel property, after reconfiguration/expansion, now has an additional 0.2msf of retail space with further 0.3msf coming from Project Rise by FY25.

Comfortable liquidity position; eyeing higher Capex: Consolidated net debt group level/PML share stood at INR 26.9/16.8bn. The cost of debt was down to 7.9% from 8.17% QoQ. Receipts from CPPIB and GIC, at INR 15bn, took liquidity to INR 17bn (vs INR 6bn for Q4FY21). PHNX is pursuing an addition of 1msf GLA for every year beyond FY24 and Kolkata was the first acquisition. PHNX continues to explore greenfield/brownfield acquisitions to deliver growth beyond FY24, largely funded through internal accruals.

Shares of The Phoenix Mills Ltd., was last trading in BSE at Rs. 862.55 as compared to the previous close of Rs. 883.85. The total number of shares traded during the day was 8643 in over 958 trades.

The stock hit an intraday high of Rs. 896.45 and intraday low of 855.4. The net turnover during the day was Rs. 7525824.

Source : Equity Bulls

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