Buy Phoenix Mills; target of Rs 699: Motilal Oswal

Motilal Oswal's research report on Phoenix Mills

PHNX’s revenue increased 9.2% YoY to INR4,047m (our estimate: INR4,311m) in 2QFY19, primarily driven by Retail segment (+11% to INR2,839m). EBITDA grew 11% YoY to INR1,981m (our estimate: INR2,104m), with the margin expanding 80bp YoY to 49% (our estimate: 48.8%). We note that other comprehensive income for 2QFY19/1HFY19 includes a realized gain of INR358m on the sale of investments of 0.5m equity shares of Graphite India. Interest expense of INR917m (+7% YoY) came in higher than our estimate of INR865m. Consequently, PAT of INR620m (48.5% YoY) missed our estimate of INR664m.

Outlook

We value PHNX’s retail assets based on DCF-based NAV approach, assuming a cap rate of 8.5% (HSP - 8%) and a discount rate of 13.5%. We maintain Buy with an SOTP-based TP of INR699 (upside 16%).