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Company Quarterly Earnings Update – PNJ VN – Q4 2023
Summary of the 2023 results and outlook of Phu Nhuan Jewelry (PNJ VN)
- Net revenue saw a 2.2% y/y decline, totaling VND33,137bn. Jewelry retail, comprising 58.2% of total revenue, dropped 7.0% y/y to VND19,286bn despite adding 35 new stores and a 2.3% y/y increase in local gold prices. This decline was attributed to weakened demand resulting from slowed business activities, diminished consumer confidence, and a high base from 2022 post-Covid restrictions. On a quarterly basis, we notice an improvement with Q4’s retail sales staying flat y/y while Q2 and Q3 recorded considerable declines. Conversely, gold bar trading surged 21.8% y/y to VND10,438bn, representing 31.5% of total sales, fueled by PNJ’s extensive store network and heightened savings demand.
- Net profit expanded by 8.9% to VND1,971bn. The gross margin increased by 0.8 percentage points to 18.3%, driven by the jewelry retail business (94.1% of total gross profit) with PNJ’s refined product mix and higher demand for well-designed pieces with higher margins. The net margin improved by 0.6 percentage points to 5.9%, slightly less than the gross margin addition, primarily due to higher selling expenses as a result of store network expansion.
- The financial structure remained solid. Leverage was low with D/E and D/A ratios at 0.24x and 0.17x respectively. Cash and short-term investments made up 11.8% of total assets while the majority – 75.8% – were inventories.
- We foresee a gradual recovery in jewelry demand through 2024, gaining momentum in 2025 thanks to improved economic activities. Export growth is expected to continue rising as destocking in key markets like the US and EU winds down and the FED likely halts rate hikes, lowering interest rates in 2024. FDI registration in 2023 surged by 32.1% y/y, promising high disbursement in 2024. In addition, the government is implementing both an expansive monetary policy (maintaining low interest rate) and fiscal policy (boosting infrastructure investments). For PNJ, we project net profit to be supported by the recovery in demand, continued store expansion, optimized product mix, and consumer preferences shifting towards higher-profitability, well-designed pieces.
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Photo image credit: pnj.com.vn
