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Buy Phoenix Mills; target of Rs 605: Axis Direct

November 27
20:42 2017

Axis Direct’s research report on Phoenix Mills

Rental income collectively grew 9% YoY, despite slower consumption growth of 4% YoY (vs. 19% YoY in Q1), on account of refurbishment of 50k sf at High Street Phoenix (HSP). Development business remained muted with new sales weak at Rs 0.1 bn due to no new launches, with collections declining to Rs 0.3 bn (0.6 bn in Q1).

Outlook

Visibility on growth in the mid-term remains strong, driven by (1) rental renewals (~1.8 msf/~35% of its leasable area up for renewal over FY18-20) at significantly higher Minimum Guarantees (MG) with better revenue share terms, (2) Chennai Palladium (0.22 msf), (3) addition of Pune mall to its portfolio & (4) CPPIB^ platform with capital commitments of ~Rs 14 bn to be deployed for growth. Development business can generate net cash flow of Rs 25-30 bn over next 5-6 years, which could be used to fund growth/ deleveraging. Maintain BUY.

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