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PNJ – 1H21 results in line but more challenges in 2H – Earnings update

Company Note 26/07/2021    184

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  • 2Q21 revenue and net profit (NP) grew 62.3% yoy/606% yoy to VND4,455bn and VND224bn, respectively.
  • In 1H21, PNJ posted revenue of VND11,637bn (+50.2% yoy) and NP of VND736bn (+67.4% yoy), fulfilling 49.8% of our FY21F forecast.
  • As HCMC and Ha Noi have imposed social distancing since 24 Jul 2021, we estimate revenue will decrease 60-80% yoy over this Jul – Aug.

Market Price

Target Price

Dividend Yield

Rating

Sector

VND91,100

N/A

1.95%

N/A

CONSUMER GOODS

2Q21 recap: strong earnings growth driven by retail and gold bar sale
• In Jun 21, revenue and NP significantly dropped 17.5% yoy and 36.3% yoy to VND1,011bn and VND51bn, respectively, owing to the new outbreak. We estimated 25% of PNJ’s retail stores had to close during Jun 21.
• For 2Q21, revenue grew 62.3% yoy from low base 2Q20, driven by strong growth of retail sale (+78% yoy) and gold bar sale (+85% yoy). Additionally, the effort to boost retail channel through the new concept – Style by PNJ – has shown positive effect.
• 2Q21 gross margin increased by 1.5 pts % yoy to 18.7% thanks to higher revenue contribution from retail channel (61.3% in 2Q21 vs. 55.9% in 2Q20).
• Consequently, 2Q21 net profit robustly grew 7-fold to VND224bn
• For 1H21, net profit reached VND736bn (67.4% yoy), fulfilling 49.8% of our FY21F projection.

Recent Covid-19 outbreak will damage the 2H21 outlook
Following HCMC, Hanoi and several provinces have imposed stricter social distancing for 15 days since mid-Jul 21. PNJ had to close most of its physical stores countrywide, while online business is limited as delivery activities are restricted in both Hanoi and HCMC. We estimate monthly revenue will likely drop 60-80% yoy during Jul – Aug.

Risks and catalysts
Potential re-rating catalysts include 1) faster-than-expected store opening timeline, 2) a better-than-expected recovery after the pandemic, and 3) new projects, which are expected to boost sales. Downside risk to our call is longer social distancing period caused by prolonged Covid-19 waves.

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