The Phoenix Mills - Consumption crosses pre-Covid levels in Mar'22 - ICICI Securities

The Phoenix Mills (PHNX) has seen Mar'22 consumption across malls at Rs5.6bn or 105% of Mar'19 levels on LTL basis (Mar'20 saw mall shutdowns hence not comparable) while Q4FY22 consumption of Rs14.8bn stood at 91% of Q4FY19 levels on LTL basis. In Jan'22, LTL consumption stood at 70% of Jan'20 levels in spite of Omicron disruption in mall operations for the month, and in Feb'22, consumption levels were back to 94% of pre-Covid levels. We believe that the reopening of multiplexes and lowering of restrictions on F&B have contributed to the improved performance in Mar'22. We model for FY23E rental income of Rs12.7bn (Rs11.0bn on LTL basis vs. Rs10.2bn in FY20). With Indore and Ahmedabad malls to open in FY23E and Pune (Wakad) and Bengaluru (Hebbal) in FY24E, we expect 14% rental income CAGR over FY20-25E. We reiterate our BUY rating with an unchanged target price of Rs1,336/share based on 15% premium to Mar'23E NAV of Rs1,162/share. Key risks to our call are a fresh Covid wave impacting mall consumption and fall in mall occupancies and rentals.

- Consumption recovery firmly on track: In Q2FY22, consumption across PHNX's malls stood at Rs10.1bn or 63% of Q2FY20 (pre-Covid) on LTL basis and this momentum carried forward into Q3FY22 where LTL consumption of Rs18.4bn was at 89% of Q3FY20 levels. In Jan'22, LTL consumption stood at 70% of Jan'20 levels in spite of Omicron disruption in mall operations for the month, and in Feb'22, consumption levels are back to 94% of pre-Covid levels. In Mar'22, consumption across malls stood at Rs5.6bn or 105% of Mar'19 levels on LTL basis (Mar'20 saw mall shutdowns hence not comparable) while Q4FY22 consumption of Rs14.8bn stood at 91% of Q4FY19 levels on LTL basis. We believe that the reopening of multiplexes and lowering of restrictions on F&B have contributed to the improved performance in Mar'22.

- Rental collections back on track from Q4FY22: As per the company, with ~95% of retailers having moved back to pre-Covid minimum guarantee rentals from Jan'22, it has collected retail rental income of Rs4.8bn in Q4FY22 (including CAM) which implies Rs8-9bn of FY22E rental income ex-CAM across assets (20-30% LTL rental income loss on account of waivers). The company may clock FY23E retail rental income of ~Rs12bn (5% LTL growth vs. pre-Covid rentals) excluding Pallasio.

- Estimated rental income CAGR of 14% over FY20-25E: PHNX will have ~13msf operational mall space by FY26E (6.9msf currently operational). We expect PHNX to achieve a 14% rental income CAGR (ex-new Kolkata asset) over FY20-25E, resulting in Rs19.5bn of rental income in FY25E vs. ~Rs10bn in FY20. Of the Rs19.5bn of gross rental income in FY25E, PHNX's share is ~76% or Rs14.8bn.

Shares of The Phoenix Mills Limited was last trading in BSE at Rs. 1071.40 as compared to the previous close of Rs. 1054.85. The total number of shares traded during the day was 5344 in over 990 trades.

The stock hit an intraday high of Rs. 1083.50 and intraday low of 1041.75. The net turnover during the day was Rs. 5731435.00.

Source : Equity Bulls

Keywords

ThePhoenixMills INE211B01039 ICICISecurities