20/12/2023 - 18:17
PNJ – November results update
Details:
Sales & PAT both positive in November… Total monthly sales increased by +3.5% MoM/+23.1% YoY to reach VND 3.1tn, with Nov PAT increasing by +3.1% MoM/+30.1% YoY to reach VND 199bn. 24K gold sales in Nov increased by an astounding +41% MoM / 89% YoY.
… signaling a reduced pace of the overall YTD slowdown. Retail sales decreased by -8.0% YoY in 11M23 (compared to -9.4% YoY in 10M23) and YTD wholesale revenues fell by -31.6% YoY (vs. -32.0% in 10M23). By contrast, 24k gold sales grew +13.8% YoY in 11M23 (vs. +7.9% YoY in 10M23), and sales of other items increased by +11.8% YoY in 11M23.
Retail network expansion continues. PNJ added 42 new outlets and closed 8 poorly performing outlets in 11M23. As a result, PNJ currently has 398 retail outlets: 386 PNJ Gold, 3 CAO, 3 PNJ Art, 5 PNJ Style, and 1 PNJ Watch outlets. The company has thus exceeded its target to open 20-25 new stores in 2023.
Margins remain solid. 11M23 gross margin reached 18.3% (+0.9ppt YoY) and net margins reached 5.3% (+0.6ppt YoY).
Our view:
The recovery in overall sales momentum has been driven primarily by (1) the expansion strategy and (2) rising gold prices, in our view. Average monthly sales per store have improved since Sept, and the Nov 2023 figure has exceeded that of Nov 2022 by +12% (please see Fig.5). In addition, rising gold prices appear to be driving 24K gold demand, which accounts for 30.7% of total sales in 11M23 (+5.1ppt YoY).
PNJ has fulfilled 92% of our 2023E forecast of VND 32.1tn and nearly exceeded our PAT forecast of VND 1.7tn. As a reminder, we revised down our revenues and earnings forecasts in our update of Oct 27 after dialing down our assumptions, perhaps by a bit too much.
We expect the positive growth momentum of recent months to be prolonged into the Tet holidays. The business may be exiting a cyclical slump, and we continue to view the stock as a key beneficiary of the longer term growth of Vietnam’s middle class.
We reiterate BUY on PNJ with target price of VND 90,100, implying +14% 12-month TSR. PNJ currently trades at a reasonable 13.1x 2023E PE multiple, which is slightly below its 5-year average level of 14.2x.
