New assets, expansion to drive growth for mall firm Phoenix Mills

Brokerages expect double digit earnings growth over the next three years

Acquisitions, expansion and additions offer growth and revenue visibility for India’s largest listed mall operator, Phoenix Mills.
The company recently acquired a seven-acre parcel in Surat, Gujarat, for Rs 510 crore, to set up a million square feet mall that will be commissioned in FY27. This will be the company’s second mall in the state. The one in Ahmedabad is leased out and will open next month.

Phoenix Citadel Indore opened earlier this month, and the company expects to have two other assets ready in FY24. Murtuza Arsiwalla and Prateek Barsagade, analysts with Kotak Institutional Equities, said that the company is constructing four malls with an area of 4.1 million square feet at a cost of Rs 4,000 crore. The company has partnered with CPP IB for two projects in Kolkata (1 million square feet) and a project in Mumbai’s High Street Phoenix, which is a mixed development asset and has an area of 1.1 million square feet. The acquisition in Surat lends further visibility for growth, said the analysts.

Consumption is strong and brokerages believe that the company’s growth will sustain. The company reported like-for-like consumption across its malls at Rs 630 crore this November, rising 13 per cent from November 2019 (pre-Covid) levels. Growth, however, is lower than October given the festival season. Consumption growth for the year-to-date (April to November) has increased 15 per cent from pre-Covid period. Rentals for the year-to-date period stood at Rs 1,220 crore.

The company expects to expand its operational mall space in retail to about 13 million square feet by FY26, compared to 6.9 million square feet now. It aims to grow its commercial portfolio from 2 million square feet more than three-fold to about 7.1 million square feet. In addition to the 395-room St Regis Hotel in Mumbai, its hospitality assets include the Agra property, Courtyard by Marriott, with a total of 588 rooms. It plans to add another 400 rooms with the addition of the Grand Hyatt at Bengaluru. The two hotels saw significant room occupancy in November; St Regis recorded its highest ever revenues with revenue per available room at Rs 14,884.

Adhidev Chattopadhyay, of ICICI Securities, expected the company to achieve a 17 per cent annual rental income growth (excluding the new Kolkata asset) over FY 20-25, resulting in Rs 2,240 crore of rental income in FY25 as compared to Rs 1,030 crore in FY20.  Of the Rs 2,240 crore of gross rental income in FY25, the company’s share is 77 per cent or Rs 1,730 crore. ICICI Securities has a target price of Rs 1,638 per share.

Kotak Securities expected the company’s operating profit to post a compounded annual growth of 45 per cent plus over FY22-25. The commissioning of the Kolkata asset, Phoenix Rise in Mumbai and commercial office space will likely keep the earnings trajectory in strong double digits. The brokerage has an add rating on the stock with a target price of Rs 1,640 per share.

The stock is down 6 per cent from its monthly highs and is currently trading at around Rs 1,402 could be looked at on dips.