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PNJ Update – BUY
08/11/2024 - 2:03:34 CHPHU NHUAN JEWELRY JSC (PNJ VN)
Although a positive rebound in the retail segment kept propping up the company’s sales growth regardless of a slump in the 24K gold segment in 3Q2024, we revised down 2024-2025 EBT projections by 5% and 6% respectively to reflect a narrower 24K gold-excluded gross margin due to higher costs for sourcing materials. However, diminution in the 24K gold business may facilitate a healthier financial structure and cashflow. Maintain a target price of VND113,400/shr at YE2025. BUY.
PNJ announced 3Q2024 revenue at VND7,130bn (+3.1% YoY) and EBT at VND318bn (+1.5% YoY), lower than our expectation. On a cumulative basis, net revenue grew by 25.1% YoY, to VND29,242bn, and EBT climbed by 5.6% YoY, to VND1,787bn.
The retail segment sustained a recovery since the beginning of the year. Bringing in 54.5% of the overall revenue, retail revenue jumped by 20.1% YoY in 3Q and 15.9% YoY in 9M2024. The company plans to launch a new product segment, jewelry for men, in 4Q2024, which could be expanded after the trial phase.
Wholesale sales moved in the same trajectory with 30.2% YoY growth following a stagnant year 2023, contributing 9.5% to the overall revenue in 9M2024.
24K gold sales tumbled by 46% YoY in 3Q given the government’s measures to cool down the 24K gold market and tightened regulations on gold trading activity. Nevertheless, the segment still reported 44.1% YoY growth in 9M2024 mostly thanks to acceleration of the domestic gold price and soaring demand in 1H.
Weak earnings performance stemmed primarily from a narrower gross margin. Gross margin shrank to 16.7% in 9M2024 (9M2023: 18.4%) despite strengthening from 16.4% in 1H given changes in 24K sales contribution. We estimate that the 24K gold-excluded gross margin reduced to 24.7% in 9M2024 from 25.9% in 9M2023, mainly explained by higher costs for sourcing materials and restructuring inventories. The restructuring aims at better efficiency of inventory structure and to find an appropriate rate for recycling old products into materials amid limited materials supply.
We project net revenue and EBT for PNJ in 2024 at VND38,549bn (+15.1% YoY) and VND2,687bn (+8.0% YoY), 5% lower than the prior update. The respective growth is projected at -8.4% YoY (as a result of an expected plummet in 24K gold sales) and 14.4% YoY in 2025. Our target price for PNJ by YE2025 is VND113,400/share, equivalent to a total return of 23.7%.
View details in the attachment below.
