PHNX's third-quarter result highlights consistency in its operational performance amid a subdued macro environment. The traction in its key retail assets is particularly impressive. We find comfort in the company's strong track record of execution/operations, scalability and robust cash generation. This, along with the affirmative guidance around consumption, reinforces our positive stance on the company. Maintain ‘Buy’ with a target price of `1,015.
Revenue increased 16% Y-o-Y to `5,118 m (our estimate: `4,968 m) in 3QFY20. EBITDA was up 17% Y-o-Y at `2,593 m (our estimate: `2,590 m), with the margin coming in flat at 50.7% (our estimate: 52.1%).
Adj. PAT increased 30% Y-o-Y to `919 m (our estimate: `769m). Retail revenue was up 11% Y-o-Y at `3,218m, while residential revenue surged 142% Y-o-Y to `481 m, largely driven by revenue recognition at One Bangalore West and Kessaku.
The commercial segment grew 2% Y-o-Y to Rs 334 m, while hospitality revenue increased 11% Y-o-Y to Rs 1,085 m.
Retail consumption grew 10% Y-o-Y, largely driven by key assets like PMC, Bangalore (+14% YoY), PMC Pune (+10%) and PMC Mumbai (+10%). Category wise, the growth was strong in entertainment (+19%), beauty & cosmetics (+8%),electronics (+13%), jewellery (+15%) and F&B (+7%).
In January, the Maharashtra Cabinet cleared the proposal to keep Mumbai open 24×7. This development is likely to positively impact consumption across PHNX's retail assets in Mumbai over the long term. Consumption growth so far in 4QFY20 is strong at 8-10% across its key retail assets.
PHNX is on track to complete its under construction leasing assets (five retail malls and two commercial assets). The pre-leasing trend, both in terms of occupancy ramp-up and rent for these assets, has been healthy.
We believe that PHNX provides a unique way to play India's retail growth story due to its strong track record of execution and operations, scalability and robust cash generation.
We value PHNX's retail assets based on DCF-based NAV approach, assuming a cap rate of 8.0% and a discount rate of 12.5%. Maintain ‘Buy’ with an SOTP based target price of INR1,015.