PNJ Update – NEUTRAL

PHU NHUAN JEWELRY JSC (PNJ VN)

The company reported a 3.1% YoY EAT growth in 2Q, thereby narrowing the earnings decline for the 1H2025 to 4% YoY. Positive results in 2Q were driven by upholding the 24K-excluded gross margin, which outperformed our expectation, in defiance of surging selling and administration expenses. We revise 2025 EAT projection for PNJ up by 10% to VND2,137bn (+1.2% YoY) and move target price to 1H2026 at VND92,000/share, equivalent to a 4.1% total return. Rating NEUTRAL.

PNJ announced 2Q2025 net revenue slumped by 20.3% YoY but EAT rose by 3.2% YoY. On a cumulative basis, net revenue dropped by 22.1% YoY, to VND17,217bn, and EAT fell by 4.0% YoY, to VND1,119bn, in 1H2025, completing 58% of our pre-adjusted EAT projection.

The retail segment climbed by 5.5% YoY in 1H2025 (including 4.6% YoY in 2Q), increasing its sales contribution to 66% at the expense of the 24K gold segment. There were 428 stores in operation as of 1H2025 (-1 store YTD). Despite a few new stores opened, many of them stemmed from restructuring locations to fortify operating efficiency.

24K gold sales tumbled by 59.8% YoY in 1H given the high base in 1H2024, tighter gold supply and PNJ’s priority of gold materials for the jewelry retail segment.

The EAT performance was primarily bolstered by a sustained 24K gold-excluded gross margin, at 26.5% in our estimate, similar to 1H2024. The company’s materials inventory almost doubled YTD, resulting from their proactivity to recycle old products and inventories into materials amid constrained supply and as a preparation for coming quarters’ sales.

Meanwhile, the SG&A expenses as a percentage of gross profit inflated to 61.3% (1H2024: 59.0%) due to faster growth in the numerator, undermining the earnings.

We project net revenue for PNJ at VND33,927bn (-10.3% YoY) and EAT at VND2,137bn (+1.2% YoY) in 2025, 10% higher than our prior update to reflect the encouraging gross margins in 1H.

A draft amendment to Decree No. 24/2012/NĐ-CP has been submitted to the Prime Minister, focusing on reforming the gold market management, particularly suggesting to grant quotas for gold imports and exports and eliminate the State’s monopoly on gold bar production.  Once the amendment is materialized – probably after some more time for approval and issuing subsequent instructions – PNJ likely finds easier in sourcing gold materials both domestically and overseas instead of just domestically at present.