On Monday, JPMorgan adjusted its outlook on Phoenix Mills Ltd (PHNX:IN), reducing the price target significantly to INR 1,470 from the previous INR 2,960. Despite this change, the firm maintained a Neutral rating on the stock. The reevaluation follows Phoenix Mills' reported second-quarter EBITDA of INR 5.2 billion, marking a modest year-over-year increase of 1%.
This performance was attributed to a weaker residential segment. However, excluding the residential business, EBITDA saw a 19% year-over-year growth.
The retail rental segment of Phoenix Mills exhibited a strong year-over-year increase of 22%, with consumption growth closely following at 24%. This uptick is largely due to the performance of new malls. Nonetheless, like-to-like consumption growth was reported to be slower at 5% year-over-year. The analyst noted that the momentum in October remains mixed, and the potential boost in festive demand is a critical factor to monitor.
The company's new mall developments have shown promising results, operating at 87% and 78% within their first year. Although leased occupancy rates remained stable quarter-over-quarter at 97%, there was a notable increase in trading occupancy, which went up by 200 basis points quarter-over-quarter to 92%.
Phoenix Mills is set to expand its footprint with the addition of 0.25 million square feet of space at Palladium, Mumbai, in the second half of 2024. Additionally, the company is on track to commission approximately 2 million square feet of office space across Bengaluru, Pune, and Chennai within the next two years. The operating cash flow after tax and interest for the first half of the fiscal year 2025 stood at INR 8.1 billion.
The firm has ambitious plans to double its annuity area by 2030 through the aggressive acquisition of land parcels. The successful delivery of these projects is considered crucial for future stock price movements. However, with a slowing consumption growth and a current valuation at 22 times the FY26E EV/Attributable EBITDA, JPMorgan suggests that Phoenix Mills' stock appears expensive.
InvestingPro Insights
Phoenix Mills Ltd (PHNX:IN) continues to demonstrate resilience in the real estate sector, as evidenced by its recent performance and future expansion plans. According to InvestingPro data, the company's revenue growth stands at an impressive 37.36% for the last twelve months as of Q2 2024, aligning with the strong retail rental segment growth mentioned in the article.
InvestingPro Tips highlight that Phoenix Mills is a "Prominent player in the Real Estate Management & Development industry," which is reflected in its ambitious plans to double its annuity area by 2030. This expansion strategy could potentially drive future growth, although it's worth noting that the company is currently "Trading at a high earnings multiple."
The company's dividend policy is also noteworthy. An InvestingPro Tip reveals that Phoenix Mills "Has raised its dividend for 3 consecutive years," with a current dividend yield of 5.1%. This consistent dividend growth, standing at 58.34% for the last twelve months, may appeal to income-focused investors.
While JPMorgan has reduced its price target, it's interesting to note that the InvestingPro Fair Value for Phoenix Mills is estimated at 13.09 USD, suggesting potential upside from the current price of 11.13 USD. However, investors should consider that the stock is "Trading at a high P/E ratio relative to near-term earnings growth," which aligns with JPMorgan's view on valuation.
For readers interested in a more comprehensive analysis, InvestingPro offers 15 additional tips for Phoenix Mills, providing a deeper insight into the company's financial health and market position.
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