HDFC Securities has upgraded to 'Buy' from 'Neutral' on Phoenix Mills (PHNX) with target price of Rs 406 in its report.
Commenting on the investment rationale, the stock broker said, ''The Phoenix Mills annual report highlights management expectation of strong YoY consumption growth of 30% across its malls in FY15E, after seeing a 60% YoY rise in FY14 consumption to Rs 40.4 billion.
This in turn is expected to translate into 15-20% rental income growth in FY15E through a mix of 7-8% increase in rentals and leasing ramp up with balance through revenue share kicking in as consumption ramps up.''
''We believe that with an expected revival in discretionary spends from 2HFY15E onwards, PHNX is well positioned to ride the growth in consumption through its mall assets. We model PHNX rental income share of Rs 5.6bn for FY15E and Rs 6.2 billion for FY16E as Market City malls achieve higher occupancies and rental renegotiations at HSP,'' it said.
''We revise our TP to Rs 406/share (earlier Rs 281/sh) and upgrade the stock to BUY from Neutral earlier as we roll over our NAV to FY16E basis, reduce post-tax cap rate to 9% (10% earlier) and assume higher rental income across malls over FY15-17E,'' it added.
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