PNJ – Attractive valuation from shinning business – Update

• 1Q22 revenue and net profit grew robustly  of VND10,143bn (+46.6% yoy) and NP of VND721bn(+40.5% yoy), fulfilling 44.6% of our FY22F forecast.
• We expect net profit to accelerate 60.5%/24.1% yoy in FY22/23F.
• Reiterate ADD with TP of VND131,100.

1Q22 results: Gold shines amid the global geopolitical crisis
PNJ’s 1Q22 revenue grew 46.6% yoy to VND10,143bn driven by strong performance of both retail and gold bar sales. Retail sales grew robustly 41.5% yoy despite high base 1Q21 thanks to wedding pent-up activities during “new normal”. Gold bar sale surged 78.1% yoy following the sharp volatility in gold price and strong demand. 1Q22 gross margin decreased by 1.1 % pts yoy to 17.4% as a larger contribution of gold bar revenue (31.6%, +3.8 % pts yoy in 1Q22). Consequently, 1Q22 net profit grew 40.5% yoy to VND721bn, fulfilling 44.6% of our FY22F forecast.
Strong cash position thanks to succeed capital raising
With the succeed capital raising of VND1,425bn on Mar 22 and robust 1Q22 business results, net cash position climbed to VND660bn (~2,723VND/share) at end-Mar 22; highest in the last 5 years. Wil ample cash position, PNJ will embark their business expansion in 2022F, including (1) VND355bn for production capacity expansion as the factory are currently run at max level; (2) VND785bn for increase the retail network to 500 stores by 2025 from current 340; and (3) VND285bn for implementing next phase of digital transformation system to optimize operation.
Strong earnings growth in FY22/23F
As a strong recovery in Vietnam’s retail, we expect PNJ’s revenue will increase 23.4%/17.9% yoy to VND24,206bn /VND28,535bn in FY22/23F, on the back of strong growth in retail sales (+24.9%/20.7% yoy) and gold bar sales (+57.7%/10.9% yoy) in FY22/23F. Thus, we expect PNJ’s net profit will increase 60.5%/24.1% yoy to VND1,658bn/VND2,058bn in FY22/23F.
Reiterate ADD with a higher TP of VND131,100
We reiterate ADD with DCF-based target price (TP) of VND131,100 per share. We believe that the strong growth come from PNJ’s core business in FY22/23F will firm PNJ’s valuation at this attractive price and give more upside potential in market’s correction pressure. At 13/05/22 (VND97,500 per share), P/E FY22F of PNJ stays at 13.8x, which is the lowest level since Oct 2020. Potential re-rating catalysts include 1) a faster-than-expected store opening/retail sales, and 2) new projects/collections/concepts which are expected to boost sales. Downside risk to our call is slower-than-expected store expansion/sale, especially PNJ’s jewelry retail sale.

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