PNJ — Express note — Sep 2024

PNJ continues to post strong revenue growth in 3Q24 and 9M24, driven by solid jewelry retail and wholesale segments. However, net margin remains low, caused by increased expenses for business expansion and taxes.

Details

3Q24 revenue reached VND 7.1tn (-25% QoQ / +3% YoY) and 9M24 revenue reached VND 29.2tn (+25% YoY). Reduced gold bullion sales led to the QoQ decline in 3Q24, while the YoY increase in 3Q24 (and, to a lesser extent, 9M24) was underpinned by the solid growth of the jewelry retail and wholesale segments.

Gross margin improved…, reaching 17.5% in 3Q24 (+1.9ppt QoQ / +0.2 ppt YoY) on a higher contribution from jewelry retail, which accounted for 70% of 3Q24 total sales (+22ppt QoQ / +11ppt YoY).

…but net margin remained low in 3Q24. 3Q24 after-tax profit was VND 216bn (-50% QoQ / -15% YoY). The YoY decline was due to increases in SG&A expenses (+9% YoY) and tax payments (+71% YoY). As such, 3Q24 net margin was only 3.0% (-1.5ppt QoQ / -0.7ppt YoY).

9M24 PAT still slightly improved YoY, reaching VND 1,382bn (+3.2% YoY). 9M24 gross margin was 16.7% (-1.7ppt YoY) and net margin was 4.7% (-1.0ppt YoY).

A net of 13 new outlets were added in 3Q24 and 18 outlets were opened in 9M24. PNJ newly added 29 stores and closed 11 stores in 9M24, bringing its network to 418 retail outlets nationwide: 409 PNJ Gold, 3 CAO, 5 PNJ Style, and 1 wholesale center.

Our view

PNJ’s share price has been weak since our update published on Sep 4, possibly due to the gold price surge (spot gold price increased by c.10% since Sep 4), which is indeed a downside risk to our view.

We like PNJ for its jewelry retail segment and not as a “play” on gold. We retain our positive view on the core jewelry retail business, which has actually re-emerged as the key sales growth driver in 3Q24, in line with our expectations. 3Q24 revenues were 3.6% higher than our forecast and after-tax profits was 1.7% lower than our forecast.

We reiterate BUY on PNJ with target price of VND 125,200, implying a +36.5% 12-month TSR.

Please see the link for more details: PNJ – Express note – Sep 2024