“BUY” This Mid Cap Realty Stock With A Target Price of Rs. 1231: ICICI Securities

The Phoenix Mills stock has been assigned a buy call by ICICI Securities Limited, with a target price of Rs 1,231/share. For its gigantic commercial malls, complexes, business spaces, or hospitality facilities, Phoenix Mills Ltd is the market leader in India. Mumbai, Bengaluru, Chennai, Pune, Raipur, Agra, Indore, Lucknow, Bareilly, and Ahmedabad are among the companys real estate holdings. According to the brokerage In Q2FY22, consumption across PHNXs malls stood at Rs10.1bn vs. Rs4.7bn in Q2FY21 and 63% of Q2FY20 (pre-Covid) on LTL basis owing to reopening of malls across India in a calibrated manner. This momentum has carried forward into Oct21 where PHNX has clocked consumption of Rs6.7bn or 91% of Oct19 levels with Nov21 seeing consumption of Rs6.6bn or 116% of Nov19 levels. With incremental consumption from multiplexes yet to contribute meaningfully, we expect consumption to trend higher in Q4FY22 barring any fresh Covid induced mall closures or drop in footfalls. We believe that sustained consumption recovery would flow into rental increases from FY23E onwards. ICICI Securities has noted in its research report that Phoenix has entered into an agreement with CPPIB in Nov21 wherein CPPIB will cumulatively infuse Rs13.5bn for a 49% equity stake in The Rise project at Lower Parel, Mumbai comprising of 1.0msf of offices and 0.2msf of retail. Of the estimated project CAPEX of Rs11.5bn (ex-land), Rs3.5bn has been incurred towards FSI premium/approval costs. CPPIB has infused Rs7.8bn as its first tranche of investment for a 35.9% stake which is sufficient to fund balance capex of Rs8.0bn over FY22-26E. According to the research analysis of the brokerage Phoenix will have ~13msf operational mall space by FY26E (6.9msf currently operational). We expect PHNX to achieve a 14% rental income CAGR (ex-new Kolkata asset) over FY20-25E resulting in Rs19.5bn of rental income in FY25E vs. ~Rs10bn in FY20. Of the Rs19.5bn of gross rental income in FY25E, PHNX share is ~70% or Rs13.8bn.Advertisement The brokerage has noted that We like PHNX because: (1) it has a strong brand recall and the market leader in malls across India, (2) it has a strong pipeline of projects and (3) it is a derivative play on the Indian consumption story. We have valued PHNX on SoTP basis with a combination of DCF-based NAV on an FY22E basis assuming a cap rate of 8% for rental assets. According to the positive call of ICICI Securities We reiterate our BUY rating with an unchanged Mar-22 SoTP based target price of Rs1,231/share which includes Phoenix Rise office and retail project of 1.2msf at High Street Phoenix and assume 30% like-to-like retail rental income loss in FY22E as compared to FY20 and incorporate the first tranche of GIC fund infusion of Rs11.1bn in the identified asset SPVs and the first round of CPPIB infusion of Rs7.8bn in The Rise, Lower Parel project SPV. We retain our 10% premium to NAV considering growth opportunities from growth capital raised from GIC PE and CPPIB platform deals. The stock has been picked from the brokerage report of ICICI Securities Limited. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.