24/07/2023 - 08:20
PNJ – Results Update – Jun 2023
We attended PNJ’s 2Q23 analyst meeting today. PNJ reported 2Q23 sales of VND 6.7tn (-17% YoY) and PAT of VND 335bn (-9% YoY). The lower drop in profit vs. revenues was mainly due to cost efficiencies.
Details
Declining sales momentum in most segments in 1H23: Retail sales decreased by -10.3% YoY, wholesale revenues fell by -32% YoY, and 24k gold sales decreased (albeit slightly) by -1.4% YoY. By contrast, sales of other items jumped by +42% YoY.
In 6M23, total sales reached VND 16.5tn (-9.6% YoY) and PAT reached VND 1.1tn (-0.5% YoY). PNJ has fulfilled 46% of its 2023 sales guidance of VND 35.6tn and 56% its PAT guidance of VND 1.9tn, which are both more conservative than our forecasts.
Weak demand across the low-, mid- and high-end segments. Management reckons that total jewelry market sales have declined by c.40% YoY, although this is partly due to the high base of 6M22.
However, PNJ continues its retail network expansion through the market downcycle. PNJ opened 21 new outlets and closed 4 poorly performing outlets in 6M23. As a result, PNJ currently has 381 retail outlets: 360 PNJ Gold, 7 PNJ Silver, 3 CAO, 3 PNJ Art, 5 PNJ Style, and 3 PNJ Watch outlets. The company plans to open 20-25 new stores in 2023.
Margins remain at high levels due to operating cost efficiencies. 6M23 gross margin reached 18.9% (+1.2ppt YoY) and net margin was 6.6% (+0.6ppt YoY).
Our view
We expect the market to recover in late-4Q23 or early-2024E. This is also in line with management’s expectation.
We still believe in PNJ’s long-term growth story given (1) rising middle class wealth — PNJ shared that customers now tend to buy entire collections rather than purchasing each item separately; (2) new product lines to be launched when economy stabilizes — probably in 2024E, in our view; and (3) the ongoing increase in demand for beauty-related products, including in areas outside of the major urban centers.
We forecast 2023E revenues to reach VND 37.6tn (+11% YoY) and 2023E PAT to reach 2.2tn (+21% YoY) with the retail and 24k gold segments as the two key drivers. So far, PNJ has fulfilled 44% of our sales forecast and 50% our PAT forecast for 2023E.
We reiterate BUY on PNJ with target price of VND 101,700, implying +29% 12-month TSR. PNJ trades at 15.2x 2023E PE with 2023E ROE of 26.5%. Notably, the company currently has 0.9% open FOL room, which we see as a highly attractive opportunity for foreign investors.
