PNJ Update – BUY

PHU NHUAN JEWELRY JSC (PNJ VN)

Growth was seen in 1H2024 on the back of skyrocketed 24K gold revenue and a recovery in the retail and wholesale segments on a low base in the same period last year. This momentum is projected to extend in 2H2024 thanks to the year-end shopping season/festivals and a better outlook expected for 2025. Moving target price to 2025 at VND114,400/share with an BUY rating.

PNJ announced 1H2024 revenue at VND22,113bn (+34.3% YoY) and EAT at VND1,167bn (+7.4% YoY), completing 52% of our full-year projections.

The retail segment, the key earner bringing in 49% of the company’s revenue, grew by 14% YoY. By the end of June 2024, PNJ had 405 stores (YE2023: 400) in operation. 

The wholesale segment posted 20% YoY revenue growth following a stagnant year 2023, contributing 8.2% to the overall revenue result in 1H2024.  

24K gold sales surged by 80.8% YoY in 1H2024 thanks to acceleration of the domestic gold price and soaring demand. However, given the government’s measures to cool down the 24K gold market and tightened regulations on gold trading activity, the segment’s growth showed signs of slowdown from June 2024 (+10.8% YoY).

The company’s gross margin slid to 16.4% in 1H2024, versus 18.9% in 1H2023, while the SG&A expenses to gross profit ratio inflated to 59.0% (1H2023: 54.9%). 

Inventories contracted by 11.2% compared to that at YE2023, which could explain a substantial decline in the company’s debt in 1H2024. The net debt to equity ratio turned from 6% at YE2023 to -12% at the end of 1H2024 (i.e from net debt to net cash).  

For 2024 and looking to 2025, our respective projections for PNJ’s net revenue and EAT growth are 25.5%/14.2% YoY for 2024 and 6.0%/15.6% YoY for 2025, almost unchanged from the prior update. Our target price for PNJ by the end of 2025 is VND114,400/share, equivalent to a total return of 23.5%.

View details in the attachment below.