Motilal Oswal Initiates 'Buy' On This Mid-Cap Retail Real Estate Stock, Sees Upside Of 25%

Motilal Oswal is bullish on Phoenix Mills stock, it believes the mid-cap company stock can surge by nearly 25%. This Mumbai-based company is India's leading retail mall developer and operator with approximately 0.64 million square meters of retail space spread across 9 malls in 6 gateway cities of India.

The company recently posted its Q4 FY23 results and they were stupendous. Based on the quarterly numbers the stock-broking firm feels that the mid-cap company's growth trend will likely sustain going forward.

Fourth Quarter March performance

Phoenix Mills reported revenue of Rs 7.3 billion, up 47% YoY/7% QoQ, 6% higher than the stock broking firm's estimate in 4QFY23. Revenue growth was driven by a 45% YoY increase in the retail segment to Rs 4.9b and a 2.5x jump in Hospitality revenue to Rs 1.4b during the quarter.

FY23 revenue surged 78% YoY to Rs 26.4 billion with the retail segment contributing Rs 18 billion to the total revenue (up 86% YoY). The hospitality segment's revenue nearly tripled to Rs 4.8 billion during the year.

Company Guidance

The brokerage house in the research noted mentioned that the company expects consumption across its retail portfolio to grow to Rs 115 billion of which Rs 12 billion will be contributed by Indore and Ahmedabad malls.

Thus LFL growth is expected to be 12.5%. Adjusting for inflation and timing difference of occupancy, trading density is expected to increase 8-10%. Trading occupancy at existing malls should ramp up to 93-95% by Diwali.

The Bangalore and Pune malls are 90% leased out, they are likely to reach 85-90% trading occupancy in 8-9 months. The company's office portfolio space is expected to grow to 7.2msf by FY27 gradually with 0.9msf to be delivered in FY24, 1.7msf in FY25, 1.5msf in FY26, and balance in FY27.

Valution & Rating

The company's Indore and Ahmedabad trading occupancy is likely to scale up to leased occupancy of 93% by 3QFY24. Motilal Oswal believes this indicates the company's ability to quickly stabilize the assets.

With healthy pre-leasing of >90% in its upcoming retail portfolio, its commercial EBITDA is expected to report a 34% CAGR over FY23-25. "We roll forward our valuation to Mar'25E and raise our target price to Rs 1,750 (from Rs 1,700). Reiterate Buy," the stock broking firm added.

Stock Movement

The share price of Phoenix Mills stock rallied by a whopping 5.77% to end at Rs 1479.55 in Friday's trade. In the last one year, the share has increased rapidly by 34.74%, and in the last three years, it has surged by 203.22%.

Disclaimer
The stock has been picked up from the brokerage report of Motilal Oswal. Greynium Information Technologies, the author, or the brokerage firm will not be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.