PNJ — 4Q24 AM — Key Takeaways

Takeaways from yesterday’s analyst call. Attendees expressed concern about the gold supply shortage and how PNJ can boost sales if jewelry demand remains persistently weak in 2025E.

Details

2024 results. Full-year revenues fulfilled 99% of our 2024E sales forecast to reach VND 37.8tn (+14.1% YoY) and exceeded guidance by 2%. Total revenue growth was driven by +14% YoY expansion of jewelry retail sales and a 35% YoY growth of wholesale revenue. PNJ’s 2024A PATMI was VND 2.1tn (+7.3% YoY), fulfilling 96% of our 2024E earnings forecast and exceeding full-year guidance by 1%.

Sales growth has spiked in February. Management disclosed record high sales for God of Wealth Day and Valentine’s Day. This is a positive result given that Vietnamese gold buyers typically seek gold bullion on God of Wealth Day, while PNJ mostly produces jewelry for these occasions.

How long will gold supply shortage persist and how can PNJ address it? The ongoing gold shortage has been fueled by rising prices, which are fueling expectations of further price increases and thus discouraging suppliers from selling their inventory. The company continues to recycle inventory for jewelry production and is preparing plans to increase branded jewelry imports (currently 20% of inventory). We believe that the entire industry, including PNJ, are waiting for gold market policy to address the issue, but when this might happen remains unclear.

How can PNJ boost jewelry demand in the context of weak consumption? PNJ’s renewed focus on jewelry has been challenging, as demand for gold bullion remains high. PNJ aims to strategically introduce new jewelry items, including lines with reduced gold content, to maintain relative product pricing stability and increase market absorption.

2025E outlook? Guidance will be disclosed at the AGM. More generally, PNJ plans to maintain its focus on the high margin jewelry retail segment, with plans to expand its footprint by 12-25 outlets in 2025.

Our view

Reiterate BUY with target price of VND 125,200, implying +31% 12-month TSR. We continue to like PNJ for its leading jewelry retail business, which should pick up cyclically along with middle class consumer sentiment.

We expect margins to improve in 1H25 due to a reduced contribution of 24K gold (vs 1H24) as well as higher operating efficiencies in jewelry production and sales & marketing activities.

Upside risk: Announcement of policy changes on physical gold market management would help to address the supply constraints.

Downside risks: (1) Prolonged gold supply shortage and (2) persistently weak jewelry demand.

See the link for more details: PNJ – Express note – 4Q24 AM