PNJ – Shining again – Update

• PNJ posted VND9,033bn (+64.1% yoy) and VND598bn (+93.5% yoy) in 4M21 revenue and NP, above our FY21F forecast of 47.3%.
• New Covid outbreak hit PNJ’s performance in the short term, but PNJ is still shining, thanks to the better-than-expected growth of the jewelry retail segment.
• Upgrade to ADD with a higher TP of VND119,200.

New Covid-19 outbreak can hit PNJ’s performance in the short term

The 4th Covid-19 epidemic, which began at the end of April 21, is causing widespread anxiety throughout the country, particularly in Ho Chi Minh City, and has resulted in a 15-day social distancing throughout the city beginning on May 31. As of June 21, 72/340 PNJ stores have closed countrywide, with 69 of them in Ho Chi Minh City, accounting for 20.3% of the total number of PNJ stores. We estimate that PNJ’s revenue in June may decrease by 30-40% yoy due to the impact of this social distancing.

More jewelry retailers shining PNJ’s performance

Despite the social distancing in Ho Chi Minh city, we are still optimistic about PNJ ‘s new branding strategies: 1) new premium stores NEXT, 2) new concept STYLE, 3) new effective promotion, and 4) the latest cooperation with Pandora with the shop-in-shop model. These initiatives have boosted PNJ’s jewelery retail segment, as demonstrated by a better-than-expected result in 4M21 with revenue and net profit (NP) reached VND9,033bn (+64.1% yoy) and VND598bn (+93.5% yoy), completed 47.3% of our FY21F full-year forecast.

Change our forecast with a higher jewelry retail sale expectation

We increased our forecast in revenue of retail channel by 7.6%/8.6% vs. the previous forecast due to the increase of growth in revenue of gold jewelry sale per store to 13%/8% in FY21F/22F (from 5%/7% in the previous forecast). We also increase the revenue from the wholesale channel by 4.6%/4.6% in FY21F/22F vs. the previous forecast as the recovery of small size jewelry stores in FY21F/22F. As a result, we increased our FY21F/22F NP by 16.8%/18.5% vs. the previous forecast.

Upgrade to ADD with a higher TP of VND119,200

We raise our DCF-based target price (TP) by 19.8% to VND119,200 per share following 17.8%19.8% upward revision in FY21F/FY22F EPS vs. the previous report. 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 which are expected to boost sales. Downside risk to our call is the next wave of COVID-19 outbreak in Vietnam.

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