PNJ – A strong bounce back since Oct – Update

• In 9M21, PNJ posted revenue of VND12, 514bn (+7.3% yoy) and NP of VND576bn (-10.3% yoy), fulfilling only 39% of our FY21F forecast.
• PNJ reported Oct 21 preliminary revenue posted a strong growth of 12-15% yoy, firming a strong recovery after social distancing period.
• Reiterate ADD with a higher TP of VND128,200.

3Q21 recap: The weakest quarter since its listing
3Q21 revenue dived 77.6% yoy to VND877bn as 80% of its stores must close for about 10 weeks to mid-Sep due to stricter nationwide lockdown. Thus, PNJ recorded net loss of VND160bn compared to net profit of VND202bn in 3Q20. For 9M21, PNJ posted a revenue of VND12,514bn (+7.3% yoy) and NP of VND576bn (-10.3% yoy), fulfilling 39% of our FY21F forecast.
We see the shine again since Oct 21
PNJ reported Oct 21 preliminary revenue posted a strong growth of 12-15% yoy, firming a strong recovery after social distancing period thanks to PNJ’s strategy to boost retail sale, include: 1) release an attractive concept – Style by PNJ, 2) effective advertising campaign, and 3) co-operate with Pandora to become “Multi Branded Stores”. As the gold price rally of nearly 8% qtd, we believe this rise will not have a significant impact to PNJ business due to: 1) the current rise is still lower than 2020, 2) PNJ’s main growth engine is retail jewelry with has low correlation to gold price, 3) gold bar sales have a very thin gross profit margin and 4) PNJ has a good inventory management to control production cost.
Change in our FY21-23E earnings forecasts
We lower the revenue of jewelry sale per store by 4.2%/6.8% in FY22/23F to reflect the lower than expected jewelry sale in 2021. However we increase the number of new PNJ gold stores in FY22/23F from 15/20 stores to 35/20 stores according to PNJ new expansion strategy. Thus, revenue of retail channel in FY21/22F changed -0.7%/7.0% vs. previous report. We changed FY21/22F revenue by -3.5%/3.4% and NP by -5.6%/1.7% vs. the previous forecast. All in all, we expect PNJ‘s NP to bounce back 60.7% yoy / 22.6% yoy in FY22/23F.
Reiterate ADD with a higher TP of VND128,200
We raise our 1-year DCF-based target price (TP) by 7.6% to VND128,200 per share following a rollover in valuation to FY22F and changes in net profit forecast by -5.6% in FY22F and 0.5%-4.6% in FY23-31F vs. previous forecast. Potential re-rating catalysts include 1) a faster-than-expected store opening, 2) a better-than-expected recovery after the pandemic, and 3) new projects are expected to boost sales. Downside risk to our call is a wide range social distancing lead to another wide range store closure
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