Phoenix Mills Target Price Hiked As HSBC Sees Double-Digit Earnings Growth
The target price on the mall operator was raised to Rs 3,130 apiece from Rs 1,600 apiece earlier, implying an upside of 16.01% from Wednesday's closing price.
HSBC Global Research hiked the target price for Phoenix Mills Ltd. on the expectation that India's premiumisation, densification, and rising per capita income would drive growth in the long term amid a lower cost of capital.
The target price on the mall operator was raised to Rs 3,130 apiece from Rs 1,600 apiece earlier, implying an upside of 16.01% from Wednesday's closing price.
The research firm also raised the company's long-term rental growth to 5% from 4.5% earlier."We now reset our long-term rental growth expectation for the original five malls to 5%, which we still think is reasonably conservative."
Phoenix Mills has the potential for value accretion, said HSBC Global Research after observing the mall operator's history of capital recycling and 'superior' operations.
The mall operator has a strong portfolio, which consists of 89% fixed rentals and 11% variable. The portfolio also entails strong brand names from the network effect, which HSBC Global Research thinks are conducive to stable revenue run rates.
In addition to this, Phoenix Mills has decreased its debt level, and its borrowing costs remained competitive with the "differential over RBI's repo rate at all-time low levels," HSBC Global Research said in a report today.
Lastly, the brokerage said they are now witnessing Phoenix Mills' 3.0 version, which has added five malls in less than four years since 2020 and is now set to open at least two new malls in the next two to three years. HSBC Global Research also sees the expansion of its existing malls.
Key Takeaways
HSBC Global Research maintained 'buy' rating on Phoenix Mills Ltd
The brokerage raised the price target to Rs 3,130 from Rs 1,600.
Phoenix Mills is expected to post high double-digit earnings growth over next three years, HSBC Global Research said.
Faster mall ramp-ups to driver faster FCF conversion, said the brokerage
HSBC Global Research sees long term growth expectation to be at 5% from earlier 4.5%.
Stock was trading at EV/Ebitda multiple of 31.5x for FY24, below peer average of 34 times.