Earnings Report /
Vietnam

Phu Nhuan Jewelry: Q4 20 – Thriving retail sales

  • 2020 unaudited net profit was 5% higher than our full-year estimates, totaling VND1.1tn (EPS: VND4,700)

  • PNJ ended the year on a relatively positive note compared to what was expected since the Covid-19 outbreak

  • We reiterate our Buy recommendation on PNJ, with a 1Y target price of VND94,000

Tung Do
Tung Do

Logistics, Aviation

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Rong Viet
28 January 2021
Published byRong Viet

We attended the PNJ Q4 20 AM on 25 January. We present our key takeaways below:

  • 2020 unaudited net profit was 5% higher than our full-year estimates, totaling VND1.1tn (EPS: VND4,700), mostly due to better-than-expected Q4 20 profit.

  • Upbeat jewellery retail channel sales in Q4 20 (+22.8% yoy) was the main culprit behind the slight surprise in earnings.

  • Though Q4 20 GPM jumped nearly 1ppt yoy and 1.4 ppts qoq to 20.2% as channel sales mix changed, quarterly net margin remained nearly unchanged at 7.3% due to large employee incentives expenses.

  • Despite recent positive results in retail sales, managers are still worried about uncertainty in jewellery demand in the short term, pending a clear guidance for 2021.

  • New growth motivation: Replicating Shop-in-Shop model that sells affordable jewellery under the brand "Style by PNJ"; Cooperating with financial companies to offer installment purchase and pawn services.

PNJ ended the year on a relatively positive note compared to what was expected since the Covid-19 outbreak. Revenue reached VND17,511bn (+3% yoy), with NPAT of VND1,069bn (-10% yoy), completing 121% and 128% of the 2020 business plan, respectively. Full-year gross profit margin slightly declined by 0.8ppts yoy to 19.6% due to increased revenue contribution from gold bar and high gold content jewellery, which yield lower profit margin than gemstone ones. Also, the net profit margin went down by 0.9ppts yoy to 6.1%. 

For 2021, we forecast that revenue and NPAT will reach VND19,276bn (+10% yoy) and VND1,278bn (+20% yoy), respectively, equivalent to 2021 EPS of VND5,615. PNJ is trading at 13.8x 2021F P/E. We hold a positive view on PNJ’s long-term prospect, which is premised on its market leadership and potential purchasing power from the fast-growing affluent middle income group, while short-term catalyst comes from the rebound in net profit from the low base in 2020 on the back of recovering discretionary spending.

We reiterate our Buy recommendation on PNJ, with a 1Y target price of VND94,000, implying a total expected return of 23% with an expected cash dividend of VND1,800.