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Company Quarterly Earnings Update – PNJ VN – Q1 2023
Summary of the Q1/2023 results and outlook of Phu Nhuan Jewelry (PNJ VN)
- Net revenue reached VND9,796bn, -3.4% y/y, showing deceleration from all business segments. Jewelry retail’s revenue declined slightly by 0.6% y/y to reach VND5,660bn (58.0% total revenue). Gold bar trading contributed 31.7% to total sales or VND3,095bn, -3.1% y/y. In comparison, Vietnam’s jewelry demand declined by 18.0% y/y due to firstly the high base of Q1/2022 when consumption surged post Covid-lockdown, and secondly weak economic activities (Q1’s GDP growth of 3.32% was the second lowest Q1’s in 13 years). PNJ’s slower decline vs. the market’s was thanks to its gaining market share from small unbranded stores. Besides, investing in gold bars was also discouraged by the high gap between local and international gold prices.
- In contrast, net profit grew 3.8% y/y to VND749bn. The net margin rose 0.5 percentage points to 7.6% mainly thanks to a higher revenue contribution from jewelry retail and the improved gross margin of jewelry retail thanks to an optimal product mix.
- PNJ maintained its solid financial structure. Leverage remained low, with D/E and D/A ratios of 0.18x and 0.13x.
- Business direction. The 2023 Annual General Meeting of PNJ approved the following for 2023: 20-25 new stores, net revenue and net profit at VND35,578bn and VND1,937bn, +5.0% y/y and 7.0% y/y respectively. PNJ will expand its business to include other lifestyle products, but jewelry will remain the core business.
- We maintain our outlook that PNJ will continue acquiring more market share with more stores opening in tier-2 and tier-3 cities while existing stores will reach saturation point. In the short-term, we expect PNJ’s 2023 revenue to decelerate slightly due to 2022’s high base and weak demand before an expected gradual recovery in late 2023 and into 2024. We have seen some positive macroeconomic signals from lower local interest rates, new issued and draft regulations supporting the real estate and retail sectors and an upcoming halt in interest rate hikes of global central banks. In our projections, we have made an upward revision to the gross margin of 19.0% (from 18.1% previously) as consumer taste has become more sophisticated, making well-designed pieces, which carry high margin for the maker, more sellable. Hence, we project net profit for 2023 and 2024 to be VND1,851bn and VND2,048bn, +2.3% y/y and +10.6% y/y respectively. For 2023-2027, net profit will likely expand moderately by 5.3% p.a., higher than the revenue growth rate of 3.5% p.a. thanks to a higher contribution of the retail business and technology application.
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Photo image credit: pnj.com.vn
