PNJ_BUY_TP 143,700 VND_Upside 47.8%_2019 outlook - Positive_BSC company update

Valuation
We recommend strongly buying PNJ shares and raising the target price to VND 143,100/share (+ 47.8% compared to the closing price on February 15, 2019) from VND 130,700/share compared to the latest report due to the adjustment of the valuation ratio by a method of FCFF to 70% and PE of 30%.

Catalyst
- Old store revenue growth (SSSG) of gold jewelry segment is expected to maintain a stable level, equivalent to 20% in 2018.
- Gross profit margin continued to improve thanks to (1) the contribution of jewelry gold segment continued to increase, (2) Focus on high-value products (Diamonds and colored stones).
Investment Risk
(1) Risks from policies due to the gold jewelry industry are subject to strict management from the State Bank
(2) Risks from expanding the store too fast but not controlling the costs leading to the operation have not been highly effective
(3) The threat from the new competitor is Precita

Update business results
(1) Business results in 2018 surpassed expectations, completing 106% and 109% of revenue and profit after tax plans respectively. Specifically, net income and profit after tax of 2018 reached VND 14,573 billion (+ 33% yoy) and VND 960 billion (+ 32% yoy).

(2) Same-store revenue growth (Same Store Sales Growth) jewelry gold segment in 2018 continues to maintain a high level of 20% compared to 21% in 2017.

(3) The progress of opening new stores exceeds the set plan, bringing the total number of stores to 324 stores.

(4) PNJ plans to increase revenue and profit after tax in 2019 by 24% and 23% respectively compared to the results of 2018. Specifically, revenue and profit after tax are estimated at VND 18,100 billion and VND 1,184 billion respectively.

(5) BSC forecasts 2019 business results with revenue and profit after tax of VND 18,482 billion (+ 25.9% yoy) and VND 1,291 billion (+ 34.7% yoy), FW EPS 2019 = 6,792 VND/share, PE FW 2019 = 14.3 times