Buy The Phoenix Mills; target of Rs 707: Kotak Securities

Kotak Securities' research report on The Phoenix Mills

Performance of the company during Q1FY19 was in line with our estimates. Rental growth was driven by the strong operational performance of Market City malls -PMC Chennai, PMC Pune & PMC Mumbai as well as High Street Phoenix & Palladium. Commercial and hospitality segment also registered 35%/6% YoY growth respectively led by improvement in rentals and ARRs. High Street Phoenix performance was led by rental improvements as North Sky zone and new F&B outlets which has an area of 50,000 sq ft comprising of nearly 13 retailers has started contributing towards improvement in rental income. Average rentals improved 20% YoY and stand at nearly Rs 387 per sq ft per month for HSP.

Outlook

We continue to remain positive on the company and maintain our price target of Rs 707 based on sum of the parts valuation on FY20 estimates. Owing to adequate upside from current levels, we upgrade the stock to BUY from ACCUMULATE earlier.