Brokerage firm Motilal Oswal Institutional Equities has a "buy" call on the stock of Phoenix Mills as malls begin to restart operations. The firm sees an upside potential of 21 per cent in the stock and has set a target of Rs 746, against the current market price of Rs 614.
"Due to the COVID-19 led crisis, real estate segments such as retail, residential and hospitality faced near-term challenges. However, the commercial segment has shown resilience. Further, the latest directive by the Government of Maharashtra to commence mall operations from the first week of Aug'20 bodes well for Phoenix Mills.
The company still remains one of the best proxy plays on India's consumption story in the medium-to-long term. Maintain Buy due to favorable risk-reward," Motilal Oswal Institutional Equities has said in its research report.
Revenues declined 78 per cent, year-on-year, Rs 1347 million, while EBITDA margin was up 460 basis points, year-on-year to 52.2% . Net level losses stood at Rs 424 million against net profit of Rs 1,304 million.
Valuation and view
"Near-term challenges for the company include (a) uncertainty surrounding recommencement of operations in other two malls (Palladium and PMC Chennai), (b) restrictions on Cinemas, F&B and Family Entertainment (~20-25% gross leasable area (GLA) and key footfall drivers) and subdued hospitality segment, and (c) slower-than-expected traction in residential segment. We, thus, have lowered our earnings estimate for FY21 by 9% while broadly maintaining our estimates for FY22E. We value Phoenix Mills retail assets based on DCF-based NAV approach, assuming a cap rate of 9.5% and discount rate of 13.5%. Maintain Buy with an SOTP-based target price of Rs 746," Motilal Oswal report states.