PNJ – The stars are aligned – Update

• 2Q22 revenue and NP reached VND8,068bn (+81.1% yoy) and VND367bn (+63.8% yoy), respectively.
• We expect earnings to surge 79.7%/19.4% yoy in FY22/23F as PNJ gains more market share and a strong economic recovery momentum.
• Reiterate ADD with higher TP of VND140,700.

2Q22 results: Stronger than expected
2Q22 revenue grew 81.1% yoy to VND8,068bn as PNJ gains more market share and strong economic recovery momentum. 2Q22 gross margin decreased by 0.8 % pts yoy to 17.96%, but higher than that of 1Q22 (17.36%) as retail revenue posted a stronger growth rate, at 90.7% yoy, than gold bar revenue at 74.5% yoy. Thus, 2Q22 NP grew 63.8% yoy to VND367bn, stronger than that of 1Q22 (41.2% yoy). Consequently, 1H22 revenue and NP reached VND18,210bn (+56.5% yoy) and VND1,088bn(+48.0% yoy), far above our expectation.

We believe PNJ is able to maintain strong NP growth in 2H22F – FY23F
Strong 1H22 performance has eased concerns over the slowdown of luxury goods demand due to increasing inflation. We believe PNJ is able to maintain the momentum thanks to (1) its dominant position with more than 50% market share in retail jewelry space, (2) Vietnam ‘s moderate inflation together with increasing consumer confidence will bode well for both gold and jewelry sales.

Change in FY22-23F earnings forecasts
We increase our forecasts for PNJ’s revenue by 20.4%/19.9% vs previous report to VND29,152bn /VND34,221bn in FY22/23F, on the back of stronger retail sales (+23.1%/23.1% vs previous report as increasing revenue per store in the same amount) and gold bar sales (+18.7%/18.7% vs previous report) in FY22/23F. We also increase SG&A expenses by 28.6%/29.9% to reflect increasing in promotional activities to boost sales in FY22/23F. Thus, we increase our forecast for PNJ’s NP by 11.9%/7.7% to VND1,856bn/VND2,216bn in FY22/23F. We expect PNJ’s revenue/NP to increase by 52.5/68.1% yoy in 2H22F and 17.4/19.4% yoy in FY23F.

Reiterate ADD with a higher TP of VND140,700
We increased our DCF-based target price (TP) by 7.3% to VND140,700 per share following FY22-23F EPS upgrade. Currently, PNJ is being traded at P/E FY22F 14.2x, lower than the 3-year average P/E of 17.6x and equivalent to the P/E region in 3Q21, when PNJ was heavily impacted by social distancing. 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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