Phoenix Mills: Revival in consumption encouraging

Phoenix Mills (PHNX) reported a meaningful improvement in consumption for Q4FY24 at 9% (like for like)/ 7.6% (on adjusted basis), with reported consumption up 27% YoY due to start of new malls at Bangalore, Pune, Indore and Ahmedabad. FY24 consumption was up 22%/8% on reported/LFL basis respectively. New malls continue to ramp up well. St Regis hotel witnessed a strong 15% YoY RevPar growth. PHNX is expected to clock ~20% earnings Cagr over FY24-26, and the earnings visibility is driven by stabilisation of recently completed ~4.2msf of malls, over the next three to four quarters, followed by first leg of office portfolio (~2 of 5msf) coming up for leasing in FY25. Retain ADD with a revised TP of Rs3,130 (3% upside).

Consumption improvement encouraging:

PHNX reported like for like consumption growth of 9% YoY/ 7.6% (on adjusted basis); with full year FY24 consumption growth of 8% YoY. Reported consumption growth for FY24 however was up 22% YoY due to start of 4 malls over last 12-15 months. Within the Office portfolio, occupancy was lower QoQ at ~70%, however over FY24 occupancy levels have improved ~740bps. St Regis continues to report record ARRs, Rs21,199 in Q4; up 10% YoY; with Occupancy also witnessing a sharp improvement of 400bps YoY; driven by strong corporate led demand.

New malls ramping up well:

PHNX saw a strong ramp-up in trading occupancy to 76% & 86% at its Pune and Ahmedabad mall respectively (vs 60% & 78% respectively in Q3). Trading occupancy for Indore mall was up marginally QoQ. The new Bangalore mall (Mall of Asia) has also witnessed a steady ramp up, albeit will be slower due to higher share of premium/luxury brands. Analysts of IIFL Capital Services estimate that these four malls will add ~4.2msf, and >Rs7bn to gross rentals (PHNX share 50%) to be stabilised fully by end -FY25.

Strong growth trajectory to continue; ADD:

Analysts of IIFL Capital Services see strong visibility on continued growth over next few years, driven by 1) stabilisation of 4.2msf of 4 new malls over FY25-26; 2) completion and leasing of ~5msf of offices across Bangalore, Chennai and Pune driving rentals FY26 onwards, and the Mumbai (Rise project) expected to start in FY28; 3) next leg of brownfield/greenfield retail to start coming by FY26. Re-iterate ADD based on NAV based TP of Rs3130, implying 35x of FY26 EPS.