Buy Phoenix Mills Ltd. target Rs 732 : Motilal Oswal Financial Services
Buy Phoenix Mills for a price target of Rs 732.
Phoenix Mills (PHNX) has an operational history of more than 100 years. A textile manufacturer at inception, the company has reinvented itself as a retail-led mixed-use mall developer. Its diversified portfolio of businesses comprises: (a) Retail mall development (enjoys a leadership position in cities where it operates) and (b) Hospitality, Residential and Commercial (together contributed 35% of revenue as of FY17).
PHNX – a pioneer in developing and operating malls – has become a partner of choice for retailers in India due to its impressive track record of consumption-led growth and strong portfolio of eight malls (6msf) spread across the top cities in India. This apart, the company specializes in mall management, an area where its competitors lag. Thus, we believe that it offers a unique opportunity for any retailer (both domestic and global) looking to expand rapidly in India. All this makes PHNX a ‘specialist’ play on India’s promising consumption growth story.
CPPIB has recently infused equity capital of Rs 1660 crore (in tranches) in its subsidiary, Island Star Developers, and with leverage of 1:1, it will create a war chest of Rs 3200 crore, gearing up the company for the next leg of growth. PHNX plans to acquire and build up to four new malls.
Motilal Oswal Financial Services expects PHNX to generate cash flows from operations of Rs 2380 crore over FY18-20.These cash flows can be deployed toward (i) acquiring ready/under-construction mall, (ii) unlocking development potential of 4.6msf in its existing land parcels and (iii) reducing debt.
The brokerage house expects PHNX to record a CAGR (FY18-20) of 15% in revenue, 16% in EBITDA and 37% in PAT.