- We cut our target price (TP) for PNJ by 7% and maintain our OUTPERFORM rating. Our lower TP is due to a 9% cut in PNJ’s aggregate 2023-2025F NPAT (respective 13%/4%/9% cuts for 2023/24/25F), which is mainly due to our 11% lower aggregate revenue forecast for the same period. In this Update Report, we roll our TP horizon forward to mid-2024 from YE2023.
- We maintain our view that a reverse wealth effect will undermine the growth prospects of branded jewelry spending in 2023. Nonetheless, our more conservative forecast for PNJ’s earnings in 2023 is mainly due to weaker-than-expected growth in some categories in Vietnam’s luxury market in Q1 2023.
- We forecast a retail revenue CAGR of 7% in 2022-2025F vs 80% YoY growth in 2022. Our expected improvement in PNJ’s product mix and operating efficiency further drive our EPS CAGR forecast of 13% in 2022-2025F.
- Our TP puts PNJ’s 2023F/2024F P/E at 17x/14x, respectively, which are 5% higher/17% discount vs its five-year median TTM P/E of 16x and represent ~32%/44% discounts vs our average 5Y peer median TTM PER of 25x.
- Downside/upside risks to our view: Weaker/stronger-than-expected demand for luxury products and store expansion; weaker/stronger-than-expected improvement in retail profitability.