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PNJ - Despite strong growth, potential has already been priced in

Using the discounted cash flow method, we issue the long-term fair value of PNJ stock at VND 92,100, with 2024F P/E of 14.9x. Combined with a cash dividend of VND 2,000/share, the total expected return is -7.0%, indicating that the current stock price has fully reflected the company's long-term prospects. However, the market may be trading the stock with higher expectations and a greater tolerance for risk. Investors can consider PNJ stock for 2025 with forward P/E at 13.4x.
• We expect PNJ, with its sustainable competitive advantages, to continue increasing its market share in the retail jewelry market, from 21% in 2023 to 27% in 2028. These competitive advantages include a well-established retail capability built over years, advanced technology systems, effective brand building, and a strong corporate culture. With a management team consisting of experienced industry veterans, we believe these competitive strengths will continue to be developed sustainably.
• The gold bar business segment is expected to shrink significantly from the second half of 2024 due to tighter regulatory controls. In our base case scenario, we project that this segment will contribute minimally to revenue. The overall net profit margin is expected to increase sharply from 5.9% in 2023 to 10.2% in 2028, although absolute profit will not see major impact. We believe PNJ will still have sufficient gold supply to produce jewelry, thanks to: 1) consumer demand for updating jewelry; and 2) the company’s strong financial capacity, enabling it to procure high-cost raw materials.
• Free float is high, but foreign room has reached its limit. The low dividend yield makes the stock less attractive for investors seeking dividend income.
Risk
• Shortage of gold supply due to external factors.
• Lower-than-expected jewelry demand due to economic conditions and changing consumer habits