Neutral Phoenix Mills; target of Rs 3,220: Motilal Oswal

Neutral

Motilal Oswal's research report on Phoenix Mills

During the 10-year period from FY14 to FY24, PHNX’s retail portfolio reported a 12% CAGR in consumption, aided by 8% like-for-like growth in existing malls and the launch of new malls in Lucknow, Indore, and Ahmedabad. Moreover, the company’s retail rental income also witnessed 12% CAGR over the same period, aligning closely with the growth in consumption. We expect the healthy growth momentum to continue at least for a year, largely driven by ramp-up in new malls. As of Mar-24, the leased occupancy at PHNX’s retail portfolio stood at 97%, while trading occupancy stood at 88% with new malls opened in the last 12 months trading at an occupancy of 71%.

Outlook

We believe the company’s growth trajectory in the near term remains intact, given the ramp-up in new malls and expansion of office portfolio. But the current valuations indicate that near-term growth is priced in. Moreover, while the management’s target of adding one new mall every year provides healthy growth visibility, we believe the pace of growth would taper off beyond FY26 as the base effect would kick in. We adopt a multiple-based approach, valuing the retail business at a blended EV/EBITDA of 21x (20x for matured malls and 25x for new malls), implying a value of INR513b for the mall portfolio. Our overall SoTP-based TP stands at INR 3,220, which indicates 9% upside potential. We reiterate our Neutral rating on the stock.

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