PNJ — Company Update — Sep 2022

PNJ recorded positive results in 8M22 with revenue of VND 23.0tn (+87.6% YoY) and PATMI of VND 1.2tn (+99.4% YoY). The retail business remains the key growth driver, as retail segment sales grew by +96.2% YoY in 8M22 to account for 59.7% of total revenue, +2.5ppt vs 8M21.

Jewelry business is a proxy on middle class growth, which we see as Vietnam’s single most compelling underlying investment theme. Persistent wealth creation means that more than one million people enter the middle class each year, which should support jewelry demand.

PNJ plans to open 35-40 new stores in 2022E (+10-12% YoY) to reach 375-380 stores. Management targets 500 stores by 2025, for retail store CAGR of 13.6% in 2022E-25E. We expect PNJ is now expanding its production capacity by 50% to 6.0 million items per year by 2023E.

Model revisit. We increase our revenue forecasts by +35.9% to VND 32.4tn for 2022E (implying growth of +65.4% YoY) and by +38.3% to VND 37.6tn (+16.1% YoY) for 2023E. However, we cut our margin assumptions due to changes in our sales mix assumptions. As a result, we nudge up our PATMI forecasts by +1.9% to VND 1.8tn (+75.3% YoY) for 2022E and by +0.7% to VND 2.2tn (+20.8% YoY) for 2023E.

We reiterate BUY on PNJ with increased target price of VND 135,453, which implies 2023E P/E of 12.8x, in line with the median of regional peers. Our new target price implies +21% 12-month TSR

For the complete report, please access here: PNJ – Company Update – Sep 2022