Company Quarterly Earnings Update – PNJ VN – 2020 9M

Summary of the 2020 9M results of Phu Nhuan Jewelry (PNJ VN)

9M/2020 results highlights:
  • PNJ’s net revenue reached VND11,668bn in 9M/2020, nearly flat compared to same period last year. Jewelry retail sales, which contributed 58% to total sales and 84% to gross profit, reported a slight growth of 4.4% y/y in sales mainly thanks to more operating stores while same store sales growth (SSSG) was still negative at single digit. Gross margin declined to 19.3% in 9M/2020 from 23.4% in same period last year mainly due to high gold price and weak customers’ demand. Net profit declined by 20.3% y/y to VND642bn in 9M/2020.
  • In 9M/2020, PNJ has opened 23 new gold jewelry stores but closed other 17 stores, thus the company has a total of 296 gold jewelry stores by the end of the third quarter. PNJ targeted new store openings in tier 2 and 3 cities as the current coverage in Ho Chi Minh City (HCMC) and Hanoi is large enough.
  • By the end of September 2020, PNJ’s cash and cash equivalent was VND232bn, accounting for merely 2.9% of total assets. Inventory was at VND6,325bn, mostly finished products and precious materials, which are considered highly liquid assets. The debt amount was VND2,260bn, giving low financial leverage with D/E of 0.3x and D/A of 0.5x.
Outlook
  • The 9M/2020’s results were on track with our expectations in our previous report. The positive developments in Q4/2020 will be (i) the gradual decrease of gold price, which is down somewhat quarter-to-date to around $1,800/oz; Such decline will provide PNJ with more buffer zone to promote sales; (ii) Vietnamese should gradually resume their spending cut-backs on discretionary demand. However, the current gold price is still high and customer’s spending behavior will not promptly resume to pre-Covid-19 level, thus we maintain our view that PNJ’s SSSG and store opening will increase with modest rates in the long-run. We expect PNJ’s net profit to decline by 14.4% y/y to VND1,022bn in 2020, and recover by 23.3% y/y to VND1,260bn in 2021.

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