What challenges for PNJ?

This perspective urges PNJ to continue looking for solutions and investing in transformation to ensure long-term growth.

Months of Success

According to the PNJ report, during the first seven months of 2024, the company's performance across all channels was led by 24K gold sales, which increased by 66.8% year on year, owing to an active market in the early months of the year. Retail jewelry sales were robust in the first seven months of 2024, up 14.6%, owing to the successful debut of many new collections that appealed to market trends and were well accepted by consumers. Notably, successful marketing efforts and sales programs assisted PNJ in attracting client groups and overcoming the hard consumer environment of "tightened belts."

With an average gross profit margin in the first 7 months of 2024 of 16.4%, down from 18.7% in the same period of 2023 due to changes in the revenue structure of different business segments, PNJ reported a net revenue of VND 24,621 billion, up 30.8%, and net profit after tax of VND 1,218 billion, a 4% increase compared to the same period last year. As of July 30, after opening 17 new stores and closing 8, PNJ had a total of 408 stores, including wholesale centers, continuing its strategy as the number one jewelry retailer in Vietnam and expanding globally.

In terms of business performance, compared to the 2024 target for attaining VND 37,148 billion in net revenue and VND 2,089 billion in net profit after tax, PNJ has 5 months to "sprint" toward its goal, taking advantage of the forthcoming peak consumer season during the festival and wedding seasons. Although earnings have only reached around 60% of the objective, the likelihood of meeting the target remains viable. PNJ shares are likewise highly valued by investors, peaking at VND 108,900/share in the last week of August, a 27% rise from the start of the year, and only marginally dipping below VND 100,000/share in early September sessions.

Is There Still Breakthrough Potential?

Regarding stock outlook and growth breakthrough potential, PNJ appears not to be highly rated.

The September stock market report from SSI Securities Corporation recently excluded PNJ from its recommended holding list, despite PNJ, as evidenced by its business results, being a “retail star” – a sector that SSI recommends investors accumulate in their portfolio.

Similarly, according to VDSC's valuation of PNJ, using the discounted cash flow approach, the long-term fair value of PNJ shares is VND 92,100/share, with a projected 2024 P/E ratio of 14.9 times (less than the current market price). Combined with a cash dividend of VND 2,000 per share, the total predicted return is -7%, implying that the present PNJ share price properly reflects the company's long-term prospects.

While PNJ is predicted to increase its retail jewelry market share from 21% in 2023 to 27% by 2028, VDSC also predicts that the gold bar sector will fall considerably beginning in the second half of 2024 owing to stronger market rules. It's worth noting that this area contributed significantly to PNJ's revenue in the early months of 2024, with the fastest growth rate among channels.

Additionally, although PNJ is considered capable of securing a stable supply of raw gold materials, the risk of shortages due to external factors may still occur. However, one expert believes that if a shortage occurs in the short term, PNJ’s ability to manage supply remains secure, as the company has led the market in accumulating gold stock during recent price increases.

The more concerning risk is that the demand for gold jewelry (which contributes over 52% of PNJ's revenue) may be lower than expected due to economic impacts and changing consumer habits. VDSC’s data shows that while the average monthly income of Vietnamese people has been rising (up 7% annually, reaching nearly VND 5 million/month), spending on jewelry has trended in the opposite direction. This has led to the monthly spending on jewelry decreasing from 3.2% in 2016 to 1.6% in 2023. With projected industry growth of only 4.9% during the 2023-2030 period, jewelry spending as a percentage of disposable income is expected to decline further, reaching just 1.2% by 2030. This trend will undoubtedly push PNJ to continue seeking solutions and investing in transformation to maintain long-term growth.