Phoenix Mills primed for success after robust Q3 and Budget boost

The stock of mall developer and commercial real estate major, The Phoenix Mills (Phoenix), is up 26 per cent since its business update in the third week of January. The gains came on strong December quarter performance and the consumption boost in the Budget which is expected to help the company sustain its growth trends.

 

The company bucked the slowdown in the discretionary space by reporting a robust performance for its mall portfolio in the December quarter. Phoenix posted a 21 per cent growth year-on-year (Y-o-Y) and 22 per cent sequentially to Rs 3,998 crore for its mall (retailer sales) properties, riding on demand during the festive season.

 

Analysts led by Parikshit D Kandpal of HDFC Securities point out that the recovery in demand for multiplexes within malls is fuelled by a strong pipeline of film releases and growing consumer enthusiasm for out-of-home entertainment and augurs well for consumption. This resurgence has contributed significantly to footfalls and overall consumption growth in retail spaces, they add.

 

On a like-to-like (LTL) basis (excluding Phoenix Mall of the Millennium, Pune and Phoenix Mall of Asia, Bengaluru), consumption saw a growth of 10 per cent over the year-ago quarter. This was driven by a strong festive season and led by PMC Mumbai, PMC Pune, Phoenix Palassio, and the continued ramp-up at Phoenix Mall of the Millennium and Phoenix Mall of Asia (launched in September and October 2023, respectively).  

 

In Q2, LTL consumption had risen 5 per cent Y-o-Y and mature malls had witnessed consumption growth of just 2.5 per cent Y-o-Y. Consumption figures for the first nine months of FY25 increased 23 per cent Y-o-Y to Rs 10,504 crore while on an LTL basis, this was up 8 per cent.

 

In Q3FY25, jewellery was the best-performing segment with 26 per cent growth Y-o-Y and accounted for 15 per cent of overall consumption. The other major segments which boosted sales were fashion and accessories, which grew 13 per cent and contributed 55 per cent of consumption.

 

The company reported an overall revenue of Rs 975 crore which was flat on a Y-o-Y as well as sequential basis. However, excluding the residential business, Phoenix reported operating revenue of Rs 870 crore which was 22 per cent higher than the year-ago quarter. Both the operating, and net profit were flattish/marginally down over the year-ago quarter while rising 3-6 per cent sequentially.

 

The company plans to expand its retail portfolio from the current 11 million square feet (msf) to over 14 million square feet by 2027, driven by new projects such as retail-led mixed-use developments in Thane and Chandigarh/Mohali, and densification initiatives in Whitefield, Bengaluru. Its commercial office space too is set to expand, riding on robust demand in prime urban markets. New acquisitions will boost its expansions beyond FY27 as the company seeks to double its retail footprint by FY30.

 

Brokerages are positive on the stock. JM Financial Research says that the company continues to provide healthy visibility with a large pipeline of six assets. However, analysts led by Sumit Kumar of the brokerage believe that the near-term earnings trajectory, led by densification of existing retail assets and significant expansion of the office portfolio, is adequately captured in the current market price. The brokerage has maintained its ‘hold’ rating.

 

HDFC Securities has a buy rating, given the revival in consumption, captive mall expansion, the addition of office space, a strong business development pipeline, and lower net debt.