- We cut our target price (TP) for PNJ by 15% but maintain our BUY rating. Our lower TP is mainly due to (1) raising our WACC assumption as a result of our higher equity risk premium (ERP) and (2) a 13% downward revision to our aggregate 2023F-2025F NPAT. These factors are partially offset by rolling our TP horizon forward to end-2023.

- In this Update Report, we factor in the reverse wealth effect in the Vietnamese middle-affluent class stemming from recent woes in the financial market that we believe will undermine growth prospects of branded jewelry spending in 2023-2024. As such, we cut our aggregate 2023F-2025F retail revenue forecast by 5%, which is driven by (1) our downward revision of PNJ’s SSSG in 2023/2024 by 200/300 bps to 2%/6%, respectively, and (2) cutting our forecast number of new gold stores in 2023/2024 to 15/25 vs our previous assumption of 35 new gold stores p.a.

- We forecast a retail revenue CAGR of 10% (vs 11% previously) in 2022-2025F vs 84% YoY growth in 2022. Our expected improvements in the product mix further drive our EPS CAGR forecast of 14% (vs 18% previously) in 2022-2025F.

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