PNJ – It’s still shining

Target price: 118,500

Upside: 19%

Event catalyst:

• Gold jewelry remains the jewel in the crown.
• Other products cannot have significant impact on valuation.
• The low valuation could be due to negative Dong A Bank-related sentiment, but we think that FOL restrictions are the main reason.

Gold jewelry is likely to keep shining. We expect this segment to post double-digit (15%-20%) same-store sales growth over the next 5 years, with total sales further boosted by the addition of 130 new stores during the period. Our positive view is supported by the high segmentation of the jewelry market (with 50% of market share in the hands of pop-and-mom stores) and dominant position of PNJ in terms of both scale and product variety.

Other products fail to glitter so far, but watch this space. Although the wristwatch business remains small, we think this segment offers the most potential outside of gold jewelry and thus merits monitoring. Larger scale for this business could lead to more beneficial pricing from suppliers, and the company could become a direct retailer for watch brands. By contrast, we don’t see much room for silver jewelry and gold bars to grow much in the near future given this business’s current lackluster performance and management’s business strategy.

Lackluster share price performance could be due to negative newsflow related to Dong A Bank as well as foreign ownership concerns. We see these issues as exogenous to PNJ’s fundamentals, which are quite strong in our view.

Our view: We expect PNJ to maintain double-digit growth going forward as it accrues its share of the fragmented gold jewelry market. We believe the market is mispricing PNJ; admittedly, the stock has lost some of its luster for foreign investors given FOL-related liquidity issues. We initiate coverage on PNJ with a BUY recommendation and target price of VND 118,500.

Please access the link for our complete report: PNJ_Initiation report_Final

Analyst: Quang Vo, quang.vo@yuanta.com.vn