PNJ Update – BUY

PHU NHUAN JEWELRY JSC (PNJ VN)

We revised up our projection and target price for 2022 given the company’s stunning growth in 1Q2022 and our positive expectations for the rest of the year. Upgrade recommendation to BUY. Target price VND123,015/shr.

PNJ expects that consumers will have better purchasing power this year versus 2021, according to the company’s management in the recent annual general meeting. PNJ will continue to foster growth by exploiting technology, expanding store network and product categories, and upholding its ability in catching market trends, etc. Despite an estimated market share of more than 50%, the company believes this number could expand further because mid and high-end products tend to be increasingly chosen. Additionally, COVID-19 pandemic might have caused numerous enterprises to face difficulties, creating opportunities for stronger ones like PNJ.

Although potentially higher inflation rates may affect consumers’ purchasing power, they will probably not jump severely in Vietnam, according to some forecasts. We think PNJ may extend its growth thanks to its focus on the mid to high-end customer segment, which is expected to keep enlarging in the future and less sensitive to price fluctuations. Nevertheless, consumer spending may be shared with tourism activities once international flights are re-opened widely, enabling domestic consumers to travel overseas again after two years of restriction. 

Considering the company’s gorgeous performance in 1Q2022 and a more optimistic view on the recovery of economic activities in addition to a low base in 3Q2021, we revised up our revenue and EAT projections for the company to VND28,467bn (+45.6% YoY) and VND1,762bn (+71.2% YoY) in 2022, up by 29% and 35% versus the earlier projections, respectively. Combining DCF and PER methods, we value the stock at VND123k/share, equivalent to a total return of 26.2% at YE2022.