RMIT RESEARCH CHALLENGE

2020

TEAM: UNI+
Member:
1. Luong Thi Thu Hien – Banking University HCMC
2. Nguyen Hoang Tam – University of Economics HCMC
3. Tran Trung Duc – International University VNU
4. Le Ngoc Tram – Foreign Trade University
ANALYSIS REPORT
 PHU NHUAN JEWELRY, VIETNAM
FIRE PROVES GOLD
This report is published Valuation Date: 16/06/2020 Recommendation: BUY Industry: Jewelry Retail
for educational purposes
only by students
competing in RMIT Current Price: 58,300 VND Target Price: 69,500 VND Stock Exchange: Ho Chi Minh
Research Challenge 2020 City Stock Exchange
Ticker: PNJ Upside: 19.3%

Table 01: Market profile INVESTMENT SUMMARY

44,040 PHU NHUAN JEWELRY JOINT STOCK COMPANY (HOSE: PNJ) is a
52-week Price Range
- 92,500 Vietnam jewelry market leader with the clear path to become a leading jewelry
Average Daily Volume 974,847
manufacturer and retailer in Asia. According to our analysis through the top-down
Share Outstanding 225,188,176 approach, we issue BUY Recommendation on PNJ with a 12-month target price of
Market Cap ( Bn) 13,398.70 69,500 VND, representing a 19,3% upside from its closing price at the valuation date
Beta 1.16 (30 May 2020). Our valuation is based on 70%/30% blend of a Discounted Cash Flow
to Firm (FCFF) and Relative methods. Our recommendation is founded on following
Source: PNJ
key pillars:
Figure 01: Football field summary
Promising jewelry industry prospects for PNJ to thrive
The jewelry industry is lucrative and fragmented with the high growth rate of 10-15%
80.000 per year in the future. As a market leader with approximately 20% of market share in
Target
this industry, PNJ can easily enlarge its market share as (1) traditional vendors are
wiped out of the industry due to Covid-19 pandemic and (2) PNJ has key success
60.000
factors as strong brand name, largest distribution channel in terms of store numbers
Current and coverage, diverse and quality products. Therefore, we strongly believe that
thriving jewelry industry prospects benefit PNJ well over a long term.
40.000
Vertically integrated value chain ensuring PNJ’s competitive positioning
PNJ has a strong economic moat as vertically integrated value chain to have full
20.000
control from input cost to output quality in jewelry industry. It procures quality inputs
from domestic and abroad sources, has the largest well-equipped factory with
modernized machines from EU to manufacture, has awarded artisan & designer teams
to design & create products, applies technology into every value chain aspect to
Source: Team estimates reduce cost and enhance performance, and owns the largest distribution channel (store
numbers are larger than combination of branded players' store numbers) across
Figure 02: PNJ and VN-Index Performance Vietnam to reach more customers. Thus, PNJ manages to produce high quality
products with cost optimization to maintain its sustainable competitive position.
Strong sale growth and improving margin driven by effective strategies
(1) PNJ has an impressive sale growth of 22% CAGR from 2015 to 2019 fueled by
aggressive store expansion and new initiatives to boost same store sale growth. By
following its past strategies, the Company will open 40-50 stores per year, pushes
cross-selling strategies, develops new store concepts and enlarges customer base by
creating more affordable products. Therefore, we believe that PNJ will continue to
experience strong sale growth of 26% CAGR from 2020 to 2024
(2) PNJ mainly focuses on jewelry retail business and executes technology initiatives
2016 2017 2018 2019 2020 to reduce production cost, streamline operations and enhance labor productivity to
VNINDEX PNJ improve gross profit margin. As a result, the Company increases gross profit margin
Source: Bloomberg from 16.5% in 2016 to 20.4% in 2019, expecting to maintain at this level in the future.

Table 02: KEY RATIOS 2019 2020 2021 2022 2023 2024
Rev. Growth 16.8% -15.1% 29.9% 27.4% 23.8% 23.2%
Net Margin 7.0% 5.7% 7.4% 7.5% 8.0% 8.4%
EBITDA 1,452 1,005 1,684 2,222 2,888 3,736
ROE 28.7% 18.0% 28.1% 31.3% 33.9% 36.0%
ROIC 15.3% 9.9% 15.6% 17.9% 19.7% 20.9%
Leverage 1.81 1.89 1.87 1.83 1.79 1.78
Source: PNJ, Team estimates

01
Figure 03: PNJ’s no. of store BUSINESS DESCRIPTION
346
324 Established in 1988, Phu Nhuan Jewelry Joint Stock Company (PNJ) has become the
269
dominant jewelry manufacturer and retailer with the number of stores risen from
194 in 2015 to 346 in 2019, sustaining its No.1 position in the middle and high-end
219 jewelry market share in Vietnam (approx 20% market share in 2019).
190
165
145 PNJ’s main business lines: Retailing, Wholesaling or Exporting gold and silver
jewelry; Gold bar trading; Gem verification service and Accessories. In which, PNJ
emphasizes that gold jewelry is the key driver of revenue and profit because of its
high growth potential, attractive margin and fashionable design, which accounted for
the largest proportion of revenue - 76.5% proportion in revenue structure in 2019,
contributing to over 80% to profit, (+11,5% yoy).
2013 2014 2015 2016 2017 2018 2019
PNJ has a balanced vertically – integrated sustainable business model that allows
Source: PNJ
PNJ control of input cost and output quality in jewelry industry. As a result, PNJ is
Figure 04: PNJ’s revenue structure in 2019 able to produce diversified products with high margin.

0,6% • Jewelry retail: Currently, PNJ has 3 main jewelry lines: Gold jewelry (PNJ
Gold) – targeted at female customers aged 25-45, Silver Jewelry (PNJ Silver) –
21,4% targeted at young customers aged 15-25, and CAO Fine Jewelry & Jemma –
Gold Jewelry target high income customers.
Silver 1,5% • Wholesale gold jewelry: Besides serving businesses which cannot produce
Gold bar jewelry in large quantities, PNJ also provides jewelry for businesses which wish
Others 76,5% to give partners corporate branded jewelry as gifts in large quantities.
• Gold bar trading: PNJ starts as a gold bar trading company that gold bar
segment contributes a large proportion of its revenue structure. However, due to
minimal profit margin and being under government control since 2012 (Decree
Source: PNJ 24/2012/ND-CP), PNJ decides to focus on boosting jewelry segment with high
profit margin.
Figure 05: PNJ’s gross profit structure in 2019
• Accessories and Services: PNJ also retails high-end jewelry accessories
(Jemma) and watches (PNJ Watch) which are made toward the middle and high-
end segment. It also provides jewelry inspection services (PNJLab) for diamonds,
5,3% 0,4% gemstones and other precious metals.
3,5%
COMPANY STRATEGIES
PNJ Gold
The company’s strategic direction focuses on two pillars: (1) Coping and
PNJ Silver recovering in Covid-19 pandemic; (2) Fast breakthrough to make a great feat
Gold bar with sustainable development goals, as follows:
90,8%
Others Tightening costs and strictly optimizing operations to ensure financial health:
PNJ aims at three main activities, including promoting omni channels: (1) Cost
Source: PNJ reduction: PNJ cut down operational costs by negotiating a rent reduction by 15-20%

Figure 06: PNJ’s Supply Chain in 3-6 months, and 40% of its partners have accepted rent adjustment. Moreover,
PNJ cuts management salaries by 50% and temporarily reduces the staff’s 2 working
days per week. (2) Restructure loans and stop new investment projects in 2020 to
UPSTREAM
optimize cash flow; (3) Structure of the inventory: PNJ prioritizes the production of
• Gold materials from banks and residents
jewelry products with the high gold content that have better liquidity, and it also
stops importing new goods. Thanks to the industry’s nature of being high liquidity
couple with the Company’s moat of possessing a whole integrated supply chain,
PNJ’s inventory value is highly liquid and less exposed to be obsolete and out of
MIDSTREAM date.
• 50 best jewelers
Restructuring key products to meet consumers hoarding needs: PNJ aims to
• Factory with capacity of 4 mil products a year
restructure key products and retail points by boosting gold bar trading from March
2020 as well as expanding customer segments. Specifically, the Company actively
manufactures new jewelry products with high gold content to meet consumers
DOWNSTREAM hoarding needs during the pandemic period. However, it is a temporary strategy at
• Over 300 retail stores nationwide this moment.
• Wholesale
• Omni channels
Conquering the sustainable development goals by (1) Building firmer the No.1
position in Tier 1 market and expanding its position in Tier 2&3 markets by
Source: PNJ, Team Assessment aggressive store expansion;

02
Figure 07: PNJ’s shareholder structure (2019)
(2) Accelerating the evolution of human resources management and enrich retail,
production, financial management capacity; (3) Strongly applying technology as
IoT, Data analytics, AI and ERP-SAP Platform to capture digital era, modernize
9,0% production process as well as promote evolution of marketing and supply chain.
CORPORATE MANAGEMENT

48,9% The team of directors is diverse regarding at least 20 years of experiences. Mrs. Cao
Thi Ngoc Dung, Chairman and Director, has been with the company since 1988 and
42,1% was elected as Chairwoman of PNJ at the end of 2004. Mr. Le Tri Thong – MBA of
Oxford University, the CEO and Vice Chairman, has been through every transition
of not only the international groups as BCG & Prudential but also Vietnamese
enterprises as DongA Bank & Vietnam Smart Card JSC. On the other hand,
the remaining executives have relevant experience with a wide variety of expertise:
Mrs Cao Thi Ngoc Dung Domestic Foreign management consulting, strategy, sales & marketing, finance & accounting,
Source: PNJ
operations & supply chain and gem valuation, committing to deliver a
comprehensive control and provide impartial judgement on both internal
and external activities. Executive Officers have regularly and drastically directed
Table 03: Corporate business solutions upon the spirit of initiative, creativity and innovation to ensure
governance Score Weight Total the Company's stable growth.
assessment SHAREHOLDER STRUCTURE

Audit & risk oversight 9/10 25% 2.25 Among internal shareholders, Ms. Cao Thi Ngoc Dung - PNJ's Chairwoman - is the
largest shareholder of PNJ with an ownership rate of 9.0%. In addition, PNJ’s
Board structure 8/10 35% 2.8 proportion of foreign shareholders has been exported at 49% over the years, and it
does not tend to extend this room. Hence, this ratio is considered quite high and
Shareholder rights &
6/10 25% 1.5 stable compared to other companies.
takeover defenses
CORPORATE GOVERNANCE
Compensation &
3/10 15% 0.45 PNJ has a governance structure with few risks and benefits for shareholders: (1) a
renumeration
separate form of BOD and BOM, (2) great assistance from three BOD’s
Total 6.5/10 100% 7 independent members, (3) high proportion of institutional shareholders, (3) regular
dividend payment history and (4) good shareholder relations management. Thanks
Source: Team estimated
to these factors, PNJ has good reputation and great transparency, while the risk of
being manipulated by management or the conflict of interest between the Company
Figure 08: GDP growth of selected countries
and a number of large shareholders is almost controlled.
7,1%
5,9%
4,3%
5,0% 4,7% MACRO ANALYSIS
2,7% 2,4% 2,9%
Vietnam economic outlook: strong economic growth
0,5% 0,6%
Vietnam has been one of the most rising stars in the global context for the past
years. Vietnam’s GDP growth rate has been resiliently 6-7% pa, greater than
-0,7% roughly 5% pa of ASEAN and 3% pa of the world. In the Covid-19 pandemic,
-1,7%
-3,0% Vietnam has experienced a decline in GDP growth in the first half of 2020, which is
still less severe than other ASEAN countries and the rest of the world. However,
-6,7% Vietnam is poised to show a V-shape recovery in the rest of 2020 and 2021 with an
expected 2021 GDP growth rate of nearly 7%.
Income enhancement and expansion of middle class
2019 2020F
Source: IMF
GDP growth has improved income per capita as well as expanded middle affluent
Figure 09: Vietnam’s GDP per capital (USD) class (MAC). IMF projected that Vietnam’s GDP per capita will rise to USD3,931 in
2024 from USD2,725 in 2019. Income improvement encourages consumer spending
3.932 in both quantitative and qualitative aspects. Apart from income enhancement, MAC
also contributes an important role in MAC made up 25% of Vietnamese population
in 2017 and is expected to reach 45% in 2030. With huge consuming power, MAC
2.725
plays the key driver for luxury goods consumption, especially jewelry.
High consumer confidence and strong consumer spending
Vietnam has consistently displayed strong consumer confidence with the double-
digit retail growth of over 10% pa during 2013-2019. Highly optimistic levels
2019 2020 2021 2022 2023 2024 coupled with an increase in expected income in the future has fueled the
Source: IMF consumption activities of Vietnamese, especially self-actualization demand.

03
Figure 10: Gross income by age group (in VND mn) The retail industry is expected to benefit from the strong purchasing power and
incremental consumer confidence in the coming years thanks to the increase of
65+ average income, enhancement in living conditions, and the expansion of MAC
55-59
population.

45-49
INDUSTRY
35-39
Steady demand in jewelry goods
25-29
According to Reuter’s database, Vietnam’s gold jewelry consumption showed a 10-
15-19 year CAGR of 2% during 2010-2019 period to reach USD4.17 bn in 2019 Gold
Millennials
generation
consumption. Thanks to the preference of Vietnamese, gold plays an important role in
150 50 50 150
Vietnamese daily live as a popular women accessory and indispensable gift for some
2019 2025 special events like wedding. Connected with gold jewelry, silver jewelry presented
Source: Euromonitor even a better performance with 10-year CAGR of 5.15% during 2010-2019 period.
However, this sector was extremely small compared to gold jewelry in term of value
with total 2019’s consumption of USD2.5 mn.
Figure 11: GDP Gold jewelry consumption value
(in USD bn) The jewelry market are promised to perform to bright potential in the next 5 years
thanks to tremendous expected demand from (1) improvement of average income and
5 MAC population (2) high demand for self-actualization (3) vast purchasing power
4,5 4,17 from Millennials.
4
3,5 Vietnam’s jewelry industry: A large and high growth industry with a high level
3 of fragment
2,5 Vietnam’s jewelry is estimated to have a market size of 3.7 billion USD in 2019 with
2 a high growth rate of 10-15% per year in the future. 70% of market share belongs to
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024

12,000 traditional trading players without any well-known brand names and quality
certificates meanwhile the remaining 30% is held by some prestigious companies
Source: Thomson Reuters such as PNJ, SJC, DOJI, Bao Tin Minh Chau, and Precita with a variety of strategies
from wholesale supply to retail orientation.

Figure 12: Vietnam’s jewelry market share Jewelry industry driven by retailing orientation
Despite a large number of players, most of them are small vendors with pure trading
companies without well-known brand name or lack of approach to potential
customers. Just a few branded players like top jewelry companies are likely to
differentiate themselves from peers.
30% Jewelry companies are pursuing the supply chain finalization, distribution channel
development, brand name positioning, and product’s quality enhancement. Some top
brands have prolonged their supply chain to jewelry processing steps instead of only
70%
trading activity.
In distribution channel development, retailing orientation is the main tendency for
jewelry industry with the expansion of brick-and-mortar stores as well as online
Branded comp Small vendors selling system. With these circumstances, the Vietnamese jewelry market is
becoming more vibrant and competitive in the foreseeable future.
Source: Thomson Reuters
Trust and quality concern: key customer behavior characteristics
Jewelry is a highly valuable material with high level of specialization which requires
Figure 13: No. of stores of some prestigious chains
in-depth knowledge to make a full assessment. Customers are unlikely to scrutinize
and verify the actual quality, content and purity of jewelry products. There is no
SBJ 9
doubt that customers tend to select prestigious brand names with popular track-
Precita records in the market instead of focusing only on the products’ price.
Bao Tin Minh Chau 4 An industry with high entry barriers
Doji 74 Jewelry is a conditional industry under the Law of Enterprise 2014, which is managed
by SBV due to the characteristics of designing, manufacturing and trading activities
SJC 42
influencing sharply on the transparency and stability of domestic financial market. In
PNJ 349 which, jewelry manufacturing sector is specifically required permission from SBV
according to the Article No. 5, Decree No. 14/2012. For jewelry trading activities, the
0 100 200 300 400 business conditions are lower than manufacturing activities and not required
Source: Team compelling permission from SBV.

04
Figure 14: The probability of new entrants However, jewelry trading companies have to qualify the requirements of location,
infrastructure and trading facilities necessarily for trading activities.
New
entrants For gold bar product, this is a tightly controlled product from SBV with a variety of
conventional requirements. The qualified companies have to fulfill the following
conditions: (1) minimum charter capital of VND100bn (2) at least 2 years of
Competitor Suppliers experience in gold trading industry (3) tax income of 2 latest consecutive years of
over USD500mn (4) brand system or selling points in at least 3 state-level cities.
With the complex requirement system, the authorities set up high barriers for new
entrants in this industry. It is exposed a great potential for current industry players
Subtitute which decrease the competitiveness of the industry. However, the industry is more
Customers
products
sensitive to the change of regulation.
Source: Team estimated Offline is the key distribution channel in jewelry industry
Due to the characteristics of high value and physical complexity of jewelry products,
Figure 15: Top’s E-commerce platform for customers are prudent to consider before taking buying decisions. In accordance with
jewelry business that, customers prefer touching and checking jewelry products directly to online
purchasing so that offline channel through brick-and-mortar store system is the
dominating distribution channel.
However, jewelry companies are applying Omni-channel selling model which
permits them to utilize the company website, social media, and E-commerce platform
to publicize images and product’s characteristics for customers’ preferences. This
strategy is expected to benefit both customers and companies. In customer
perspective, they may be actively seeking and carefully considering products before
visiting stores. In company perspective, the strategy may decrease expenses through
mitigating the number of staff in each store and improve the efficiency of activities.

Source: Team compelled COMPETITIVE POSITIONING

Figure 16: PNJ’s nationwide distribution ▪ PNJ is a leader and the most reputable brand in Vietnam’s jewelry market. With the
channel long-lived history of 32 years, PNJ possesses an in-depth insight on customers’
preferences and demand.
▪ PNJ possesses a large scale of customer base and a crew of loyal customers which
is an important customer source for growth strategy. PNJ will utilize the current
customer base for new product line to quickly gain market share in the new sector.
360 stores nationwide
Hanoi: 44 ▪ PNJ currently owns the largest distribution store system dominating all competitors
HCM: 131 in the market which serves as a strong foundation for the Company to strengthen
relationship with existing customers, approach to potential customers as well as
benefit from economies of scale.
▪ PNJ is equipped with an integrated supply chain from raw material preparation,
production to selling activities. With the most state-of-the-art production facilities
of Vietnam, PNJ is eligible for producing finished goods to adapt to both
qualitative and quantitative requirements. In 2020, the Company is establishing a
Source: PNJ new manufacturing factory in Long An province specializing in intensive
designing.
▪ The Company is serving a diversified product portfolio produced by a well-trained
1,000 jewelers and jeweler crew of 1,000 jewelers & 50 designers. Product portfolio varies from gold
50 designers bar, gold jewelry, silver jewelry to gemstone, diamond, and other accessories.
PNJ’s product portfolio meets the demand of every niche market and each
customer segment with a large distinction.
360 stores
▪ The Company is managed by a passionate and dedicated BOD team with highly
nationwide
experienced knowledge and customer demand awareness. The Company’s strategy
are flexible and rapidly adjusted to capture the ever-changing market as well as the
preference of customers.
01 operated factory &
01 new developed ▪ PNJ is operating business activities under a professional ERP system which
factory provides an efficient method to control comprehensively Company’s operation
from manufacturing planning, inventory estimation and selling management. The
Company is currently a rare entity using this system in Vietnam’s jewelry industry
to embrace the operation efficiently .
05
Table 04: Valuation summary VALUATION
Valuation With the nature of a company with high debt ratio in its financial structure and
summary Price/Share possessing many fixed assets, we choose two valuation approaches to evaluate PNJ
Weight
(VND)
including FCFF valuation method and Relative valuation method using two
DCF(FCFF) 70% 79,000 multiples of EV/EBITDA and P/E. However, due to a lack in adequate number of
P/E 20% 50,500 domestic and regional listed comparable peers, the price multiples method, in our
EV/EBITDA 10% 41,600 opinion, does not fully represent the intrinsic value of PNJ. Thus, we put more
weight in DCF model to better represent our team’s opinion about the company’s
Close price 58,300
prospect. As a result, DCF Method weights 70%; Price Multiples Method weights
Target price 69,500 30% . Target price/share of PNJ with one year target price is 69,500 VND, upside
%Upside 19.3% 20.5% compared to last closing day (16 June 2020)
Source: Team estimates DCF MODEL: FREE CASH FLOW TO FIRM (FCFF)
Table 05: WACC calculation In applying the FCFF analysis, we use two-stage growth model. This first phase is
Calculating ERP for Vietnam, using based on a specific year to year forecast up to 2024 and the second phase of a
Damodaran's data & approach: constant growth (2025 and onwards). According to our detailed analysis, we arrive
Multiplier 1.23 at the price of VND 79,000 per common share of PNJ

Equity Risk Premium (RM-Rf) of The base case for this model was formulated using guidance from historical
6.0%
US performance, macroeconomics and industry outlook to an assessment of PNJ’s
Sovereign spread 2.9% competitive positioning. The FCFF is most sensitive to the following factors, the
derivations of which are explained below:
CRP (Equity Country Risk
Premium)
3.6% The “D” part: Discount rate
ERP (Equity risk premium) for WACC:
9.6%
Vietnam PNJ uses two main sources of capital: equity and short-term debt. We apply market
Cost of equity value of each capital components to calculate The Company capital structure and
Market value of equity 13,135 then come up with cost of using these sources:
• The cost of pre-tax debt of the company is 7%.
Observed beta 1.10 • For beta, we use stock price data of PNJ and VN Index.
Risk-Free Rate (Rf) (VN) 3.0% • Regarding the risk-free rate, we use the bond yield of 10-year bonds currently
Equity Risk Premium 9.6%
closed at 3%.
• The Equity risk premium, we use Damodaran’s data and approach to calculate.
Cost of equity 13.5% • Then, we apply the CAPM model to calculate the cost of equity of PNJ is 13.5%
Cost of debt After all, we rely on capital structure to calculate WACC with a result of 12,1%.
Market value of debt 2,895 Terminal growth rate:
Cost of debt before tax 7% Viet Nam's economic average growth rate was around 6.5% in the last five years. In
Tax rate 20% addition, we combined this number with the terminal growth rate approximately at
2.2%, which is calculated by using ROE and retention ratio calculation method.
Cost of debt after tax 5.6%
Based on these two factors combined with Vietnam's GDP growth rate remained
WACC 12.1% stable above 6% in the past. Therefore, in order to stay conservative with a good
Source: Team estimates company like PNJ, we used 3% as target PNJ’s perpetual growth rate and make
sensitivity analysis to assess the fluctuations in the outcome.
Figure 17: Revenue projection (2020F – 2024F)
The “CF” part: Cash Flow projection
We estimate the company's FCFF cash flow, based on the assumptions on growth
drivers of company performance:
From 2020 - 2024, we expect sales to grow at 26% CAGR, with a faster growth rate
of 21.2% in 2015 - 2019. The key growth drivers of sales include the following
factors:
- Demand for gold jewelry recovered after pandemic lead sale/store growth
Despite the effect of Covid-19 in the first half of 2020, we expect the demand for
gold jewelry will continue to grow at a rate of 10% CAGR over the next five years,
especially growing strongly in urban areas, in the North, small cities and provinces.
2020E 2021E 2022E 2023E 2024E
We assume that the revenue growth/store in PNJ Gold stores will reach 10-15%,
PNJ Gold Bar PNJ Gold Jewellry which is equivalent to the market growth expectation. Gold jewelry retail revenue is
PNJ Silver Others expected to grow at 28% CAGR, contribute 60% of total revenue. Even sales of
Source: Team estimates gold bar has grown fast this time, we suppose that’s not PNJ long term goals
06
Figure 18: Store expansion 2019 – 2024F - Ambitious expansion plan to conquer tier-2 cities

600 25% We expect PNJ stores will continue to grow at 31 stores in 2020 (per management)
20% and 40-50 new stores each year since then, in line with the strategy to expand
500
15% market share in tier-2 cities to pull growth while tier-1 is on the decline because of
400 10% Covid-19 and strategy to conquer more market share from small vendors. We
5% estimate the total number of stores across PNJ's system will over 500 by the end of
300
0%
2024.
200 -5%
-10% - Build and upgrade factories to optimize operations
100
-15%
0 -20% PNJ is building factory No. 2 in Long An with a capacity of 500,000 products per
2019

2020F

2021F

2022F

2023F

2024F
year in parallel with upgrade factory No.1. We expect the factory will be built from
2021 and on boarding in 2022 and expect PNJ to be able to autonomize the high-end
products sold to the market, reduce import taxes, enhance profit margin and increase
PNJ Gold PNJ Silver
production capacity of the company.
Sale/store growth
Source: Team estimates
Scenario and Sensitivity Analysis
Figure 19: PNJ’s recovery shape in COVID-19 Our growth assumptions may not hold if there is unexpected COVID-19 situation
and onward 2020/21. Simple adjustments of valuation assumptions could significantly affect our
29%CAGR target price and our BUY recommendation. To evaluate the impact of each major
assumption we performed a sensitivity analysis as well as scenario analysis for PNJ
growth plan.
26%CAGR
- Blue Sky Scenario
22%CAGR
We base on scenario that V-Shaped Recovery model will suit Vietnam Economy.
Consumer income and confidence will rise and so does PNJ’s SSSG. PNJ can open
50 stores/year to reach 600 store in next 5 years
20Q1 20Q2 20Q3 20Q4 2022 2024 - Grey Sky Scenario
Grey sky Base Blue sky We afraid that there will be second wave of Covid-19 and PNJ performance will be
affected until 2021
Source: Team estimates
Table 06: Sensitivity of Value price base on 2 variables
Figure 20: Senario analysis
Price per Share (VND)
Perpetuity Growth Rate

78,997 2% 2.5% 3% 3.5% 4%

Blue Sky
78,500 103,411
+34.6% 10.10% 103,411 103,411 103,411 103,411
WACC

89,648
11.10% 89,648 89,648 89,648 89,648
Target price
69,500 78,997
+19,3% 12.10% 78,997 78,997 78,997 78,997

Grey Sky 70,530

Current price 13.10% 70,530 70,530 70,530 70,530
58,300 50,300
-13,8% 63,653
14.10% 63,653 63,653 63,653 63,653
RELATIVES VALUATION Source: Team estimates

We derive at the price of PNJ share by taking the average of both two metri
Source: Team estimates
cs EV/EBITDA and P/E ratio because of:
Table 07: Relative valuation results
• P/E ratio gives a more accurate fair value than other multiples because it shows
P/E EV/EBITDA how earning reflects fundamental value of a company, sales or book value could
not reflect what shall be earned.
PNJ
17.3x 12.5x • EV/EBITDA is also suitable for the jewelry industry which is a capital intensive
Peers business comprised by companies with complex financial leverage, substantial
15.1x 9.3x depreciation, amortization and rent or leasing expenses.
Target We believe that there are no appropriate comparable enterprise in jewelry segment
Price 50.500 41,600 like PNJ in Vietnam, therefore, we seek for appropriate foreign peers based on
Source: Thomson Reuster, PNJ data, Team estimates similar characteristics with PNJ in terms of: Geographic Location, Business Model,
Market Capitalization and Revenue. The one-year target price we obtained by using
the P/E valuation is 50,500VND and EV/EBITDA valuation is 41,600 VND
07
 Table 08: Key financial ratios
FINANCIAL ANALYSIS
KEY FINANCIAL RATIOS 2018 2019 2020F 2021F 2022F 2023F 2024F
Liquidity
Current ratio (x) 2.02 1.82 1.69 1.68 1.70 1.74 1.76
Cash conversion cycle 108 135 137 103 99 97 94
Efficiency
Total assets turnover (x) 2.67 2.26 1.67 2.04 2.28 2.37 2.41
Days of inventory on hand 130 162 185 131 127 125 123
Days of sales outstanding 3 3 3 2 2 2 2
Days of payables outstanding 24 30 51 31 31 31 31
Operating Cycle 133 165 188 134 130 128 126
Solvency
Debt to asset ratio (%) 24.21 30.35 32.99 29.88 27.39 26.12 26.26
Debt to equity ratio (%) 41.61 57.04 62.54 55.33 49.56 46.54 46.91
Profitability
Gross Profit Margin (%) 19.07 20.36 19.71 20.19 19.61 19.90 20.16
Operating Profit Margin (%) 8.26 8.86 7.04 9.08 9.35 9.90 10.43
Net Profit Margin (%) 6.59 7.02 5.73 7.36 7.52 7.95 8.37
ROA (%) 17.57 15.88 9.54 15.02 17.12 18.87 20.19
ROE (%) 28.68 28.69 18.01 28.12 31.31 33.86 36.02
ROIC (%) 17.13 15.32 9.91 15.61 17.87 19.66 20.90
Shareholer Indicator
EPS (VND/sh) 5,748 5,299 3,988 5,251 6,738 10,553 13,340
EPS growth (%) -14.28 -7.80 -24.75 31.67 28.33 56.61 26.41
Source: PNJ Data, Team Estimates Store expansion in retail orientation has driven PNJ’ revenue growth
Figure 21: PNJ’s Sales Mix and yoy Growth Thanks to retailing orientation, PNJ has implemented store expansion plan during
(2018 – 2024F)
the 2015-2019 period. Store expansion boosts both PNJ’s brand presence and
40.000 revenue growth. PNJ’s number of stores has risen from 194 in 2015 to 346 in 2019.
40%
34%
30%
In accordance with store growth, PNJ recorded net aggregate revenue of roughly
35.000 27% VND17tn in 2019, up 16.67% from previous year and showing a CAGR of 21.86%
24% 30%
23%
30.000 during 2015-2019. Under Covid-19 lockdown measures, PNJ has to temporarily
16% close all stores in HCMC and partial stores in provinces. However, most stores were
20%
25.000
reopened as Vietnam’s loosening lockdown measures and PNJ’s activities are
20.000 expected to be recovered quickly from Q3/2020. PNJ targets to open 31 new stores
10%
in 2020. The management’s proposed expansion over 500 stores in 2024 from the
15.000
0%current 346 stores that will boost sales further. The new stores will be concentrated
10.000 in tier-2 and tier-3 regions where consumer disposable income has been less
-15% -10%
impacted than in big cities, per management. PNJ plans to further tailor its store
5.000
format, product assortment and marketing strategies to better capture consumer
- -20%
demand in these regions. Moreover, to cope with the storm of Covid-19, PNJ aims
2018 2019 2020F 2021F 2022F 2023F 2024F

PNJ Gold PNJ Silver Gold bar

to restructure key products by boosting gold bar trading from March 2020 to meet
consumers’ hoarding needs during the pandemic.
Others Sales Growth
Source: PNJ, Team Estimates Gross margin is forecasted to stabilize in the future

Figure 22: PNJ’s financial leverage (2019 – 2024F)

With the retailing orientation and gold jewelry focus strategy, PNJ has improved
gross margin from 15.18% in 2015 to over 20% in 2019 compared to peer’s average
(27.73%). Gold jewelry was the most profitable product with gross margin of 24.1%,
1,89 1,87 opposed to the fragile margin of gold bar product of under 1%.
1,81 1,83
1,79 1,78 Due to the outbreak of Covid-19, PNJ’s gross margin is estimated to drop this year.
As of April 30, 2020, PNJ’s gross margin dropped by 2.6% (yoy) to 19.8% due to
the disruption of retail activities. The decrease in proportion of high margin such as
1,63
gold jewelry in exchange for the increase in gold bar sale proportion may derive an
erosion in 2020’s GM.
During 2020F-2024F, we forecast PNJ’s gross margin to be stable at an average of
2018 2019 2020F 2021F 2022F 2023F 2024F 19.9% thanks to the recovery in gold and silver jewelry sales.
Source: PNJ, Team Estimates
08
Figure 23: PNJ’s gross profit (2018 – 2024F) Stabilize financial leverage
8.000 45%
In 2020, PNJ is expected to stabilize financial leverage ratio due to the
7.000 33% 25% postponement of store expansion plans. However, financial leverage is a burden for
25% 26% the Company in the decelerated income period as of this year. We forecast this
6.000 24%
ratio will be slightly decrease. Moreover, the big concern from debt that reflects the
5.000 non-recurring items is operating leasing. At the end of 2019, just over 8% of total
4.000
PNJ’s debt corresponded to operating leases. This debt comes from leasing of
-18% stores. This financing method allows for reductions in their CAPEX requirements
3.000 to have more flexibility over their plan and mitigate the risks. We also apply
2.000 Altman Z-score model for PNJ’s credit strength test. The result shows that PNJ has
very low probability of insolvent. (appendix 19)
1.000
Production capacity expansion to capitalize on medium and long opportunities
-
2018 2019 2020F 2021F 2022F 2023F 2024F Before 2018, the Company spent a small amount of capital expenditure on
upgrading its manufacturing factory and store expansion. From 2018 until now,
PNJ Gold PNJ Silver
Gold bar Others
CAPEX is primarily focused on store expansion and the Digital Transformation
Gross Profit Growth project. The Company spent more on building and fixing the ERP Platform, so the
Source: PNJ, Team Estimates CAPEX was higher in 2018 and 2019 (336 bil & 224 bil VND) than before (90 bil
Figure 24: PNJ’s leasing cost/Debt (2019 – 2024F) VND of CAPEX on average). According to PNJ’s AGM in 2020, PNJ will
continue to invest in its Digital Transformation strategy while beefing up its high-
8,8% level personnel. Meanwhile, PNJ is building its second factory in Long An
Province. This factory will be capable of producing gold plated jewelry, which PNJ
has not been able to do at its current factory due to environmental concerns related
5,6% to the factory’s proximity to residential areas. The new factory will also
4,4% manufacture product lines that have traditionally been imported. In the first phase,
3,7%
the new factory will boast a capacity of 500,000 items per year and the current
2,7%
2,1% factory capacity of 4 million items per year . From 2020 and onward, we forecast
the CAPEX to increase to retain for the organic growth and capitalize on medium
and long opportunities.
2019 2020F 2021F 2022F 2023F 2024F Better working capital management
Source: PNJ, Team Estimates In 2019, PNJ’s level of working capital is under tight control with an operating
cycle (165 days) twice as high as of its peers' average (appr. 246 days).
Figure 25: PNJ’s CAPEX (2018 – 2024F)
Historically, the increase in receivables was offset by stretching payables, leading
600 to the fact that the subtraction of two number of days receivables/payables
maintains stabilize. The important concern in working capital management is
500 inventory. With the larger scale of inventory, inventory turnover has gradually
400 been slow. In 2019, PNJ’s inventory is 162 days compared to 229 days for the
peers' average. Slow inventory turnover burdened the liquidity of the Company,
300 especially in revenue contraction period as of 2020. However, gold is rarely out-of-
date over time, but PNJ should consider low-circulating jewelry to adopt suitable
200
selling policies to ensure good inventory turnover continuously. Moreover, gold
100 bar is a highly liquidated asset which may be an important source to ensure PNJ’s
short-term liquidity.
0
2018 2019 2020F 2021F 2022F 2023F 2024F DUPONT ANALYSIS
Source: PNJ, Team Estimates PNJ’s ROE witnesses an stable trend (32% in 2016 and 28.69% in 2019), showing
Table 09: Dupont Analysis an improvement in equity efficiency. In which:
ROE growth was attributable to the significant increase in net profit margin from
2016 2017 2018 2019 5.26% in 2016 to 7.02% in 2019. PNJ’s restructuring procedure after “Dong A
event” has driven PNJ’s business operation to recover quickly after the damaged
Equity
2.39 1.52 1.72 1.88 year of 2015.
multiplier
Asset
2.61 2.72 2.67 2.26
Total asset turnover (TAT) has dropped from 2.61 in 2016 to 2.26 in 2019 due to
Turnover the change in business strategy. PNJ has focused on profitable products with high
margin such as gold, silver jewelry, and accessories than high-value products with
Leverage 2.33 1.82 1.63 1.81
minimal profit margin like gold bar.
ROE (%) 32.00 32.58 28.68 28.69 Equity Multiplier (EM) generally decreased during 2016-2019 period thanks to the
effort to restructure borrowings. Store expansion plan stimulated EM to rebound
Source: PNJ, Team Estimates again after 2017.

09
Figure 26: PNJ Risk Matrix
INVESTMENT RISKS
IMPACT
(High) Each investment has certain risks. Based on our analysis, we point out some
concerns for investors to consider, which is classified into: Market Risk (MR),
M1
Operational risk (OR), Valuation risk (VR). However, we also realize that PNJ
has mitigations to hedge these risks.
Market risk (MR)
O2 M2 Uncertainty of Covid-19 pandemic (MR1): In general, Vietnam successfully
M5
PROBABILITY
contained Covid-19 pandemic; however, rest of the world are under ways of
PROBABILITY
(Low) M4 (High) lockdown which probably causes second-wave in Vietnam. If the second-wave
M3 approaches, Vietnam may re-lockdown the economy again. (Low probability –
V2 High influence)

V1 Exchange rate risk (MR2): PNJ has exported products to foreign customers and
O1 collect foreign currencies. PNJ will probably be sensitive to exchange rate
IMPACT fluctuation. (High probability – Low influence)
(Low)
Source: Team analysis Gold price fluctuation (MR3): Gold is a liquid asset and is freely traded in the
global market. The domestic gold market is highly correlated to global price
fluctuation so that PNJ is exposed to gold price changes. (High probability -
Low influence)
Table 10: PNJ risk mitigations
Interest rate risk (MR4): Although PNJ made loans of fixed interest rates,
Risk Mitigations short-term borrowings were the majority source in debt structure which require
PNJ to refinance loans frequently exposing interest rate risk. (High probability –
Develop online selling Medium influence)
MR1 activities and reconsider
store expansion plan Customer behavior change (MR5): In pandemic, people tend to put priority for
staple goods rather than luxury goods, especially in the income erosion period.
Forecast future foreign We concern that aggregate for jewelry products will be temporarily shrunk
exchange and use before the pandemic officially ends. (Medium probability – Medium influence)
MR2 applicable derivatives to Operation risks (OR)
hedge exchange rate
fluctuation Cash generation ability (OR1): PNJ’s net profit increased continuously during
2015-2019 period. However, the Company’s CFO turned negative from 2018 due
Periodically adjust selling to huge investment in working capital in general and inventory in particular. We
MR3 price to maintain a suitable concern that PNJ may suffer illiquid risk from low inventory circulation. (High
profit margin probability – Medium influence)

Increase inventory liquidity Inventory risk (OR2): As a retailer, PNJ has to stock up on their inventory.
MR4
by high proportion of gold With vast inventory, PNJ’s liquidity should manage carefully to avoid the lack of
working capital. Apart from liquidity, gold price is sensitive to international gold
Flexibly update new prices which leads to the vulnerability of PNJ’s performance in high volatility
concepts/product lines to period. (Medium probability – Medium influence)
MR5
capture customer behavior Valuation risks
changes
Volatility of valuation assumptions (VR1): Our evaluation of PNJ is based on
Review expansion plan and assumptions according to current operation circumstances coupled with the
periodically review and set reliable short-term business plan and current valuation factors of PNJ, which can
OR1
up a liquidating plan for be adjusted unprecedentedly. The target price will probably be significantly
low-circulating goods different when new assumptions are updated so that it is exposed to valuation
risks. (Medium probability - Low influence)
Utilize ERP system to
OR2 adjust inventory store-over- Dilution risk (VR2): PNJ has adopted ESOP issuance for employees with the
store Source: Team analysis huge discount price of ESOP’s share and limited trading price in the 3-year
period in recent years. We expect ESOP as a considerable factor diluting PNJ’s
share price in the foreseeable future. (High probability - Low influence)

10
 APPENDIX 1: PNJ’s VERTICAL INTERGRATED SUPPLY CHAINS

Raw material Design Purchase Distribution Customer

-Gold: PNJ mainly -Artisan: 1000+ skilled -Factory: The largest and -Wholesale: 6 + indirectly 3,000 -Gold jewelry:
purchases gold from artisans and goldsmiths well-equipped 12,500 m2 wholesalers across Vietnam. range from 25
banks and from (15 people are awarded jewelry factory in to 45 years old,
-Retail: 348 stores (Feb/2020),
Vietnamese people as “golden-hand” Vietnam which is mainly with income
50/63 provinces nationwide. PNJ
who are believed to artisans by HCMC used to produce gold and from medium to
also partners with other local
hold 500 tons of People's Committee). silver jewelry with the high and above
jewelry stores (12,000 stores in
gold. PNJ purchases production capacity of 4
-Jewelry designer: 50+ Vietnam) due to TT 22/2013/TT- -Silver jewelry:
around 16 tons of million products per year.
creative and young NHNN restricting the amount of range from 15
gold every year on It is 8 times bigger than
designers who help gold in jewelry at jewelry stores. to 25 years old,
average. Since PNJ the combination of DOJI
design refined young
offers a good return and SJC. -Online: PNJ website (811,000
collections and customers who
and exchange policy followers on Facebook + 377,000
beautifully-fashionable -Machine + technology: love fashion.
for customers, they followers on PNJ silver webpage
products. modernized machines and
feel safe and + 30,100 followers on Instagram -CAO Fine
technology import from
trustworthy to sell -Technology: 2D & 3D + 3 millions views on YOUTUBE Jewelry and
Italy and Germany.
gold to PNJ. printing, computer aided channel with 12,200 subscribers) Jemma:
design. customers with
-Silver, diamond -Salesforce: 4000+ well-trained
high income
and other sales people.
and above.
gemstones: PNJ has
established a very -Export: 13 nations - USA, UK,
good relationship Australia, Denmark, Germany,
with 100+ suppliers France, etc.
from China, Hong
Kong, Thailand,
Japan, Italy, etc.

Source: Team analysis

APPENDIX 2: PNJ's AWARDS

· The Most Outstanding Retailer in Asia
· Top 3 Retailer of the Year Award and Top 6 Brand of the Year by JNA
· Honored the Best Company to work for in Asian Award
· 06th time in a row to be honored as National Brand
· Top 50 Vietnamese Organization with Attractive Employer Brand
· Top 50 Vietnamese Organization with the most effective business in Vietnam
· 4th time in a row to be awarded Top 10 out of 100 Sustainable Development Businesses in Vietnam
· Top 100 Vietnam Best Places to Work
· 23 Consecutive years to win the title of Vietnamese High-Quality Goods
· Vietnam 50’s Best-performing Companies
· Vietnam 50’s Best listed Companies
· Top 40 Most Valuable Brands in Vietnam
· Madam Cao Thi Ngoc Dung awarded the First Class Labor Medal
· Madam Cao Thi Ngoc Dung – only female entrepreneur in Top 5 entrepreneurs awarded the Ernst & Young
· Madam Cao Thi Ngoc Dung – one of 10 most successful female entrepreneurs selected by Forbes Magazine
· Madam Cao Thi Ngoc Dung awarded Top 50 Most Influential Women in Vietnam
· Madam Cao Thi Ngoc Dung – Lifetime achievement for the Jewelry Industry in Asia
· Mr. Le Tri Thong – Red star award – Top 10 most Outstanding Young Entrepreneurs

11
APPENDIX 3: PNJ’s PRODUCT PORTFOLIO Source: PNJ Annual report

PNJ Gold Jewelry PNJ Silver & Accessories CAO Fine Jewelry
Since 1988, PNJ Gold Since 2001, PNJ Silver is a Since 2005, CAO Fine won
Jewelry has taken effort to trend leader pursuing the heart of high-class
innovate and produce dynamic pink and purple customers for its distinctive
hundreds of collections, colors. It is proud to be a high-end niche. Its products
which are varied by gold recognizable jewelry brand in are made from 18K gold,
materials and gemstones. Its many shopping centers across diamonds, precious stones
brand is the fascinating mix Vietnam and quenches the and semi-precious gems of
of luxury and uniqueness, thirst for fashion jewelry of vivid colors guaranteed of
fashion and modernity young people illumination and sharp cutting

JEMMA & Accessories PNJ Art - Corporate Gifts Inspection Service

Since 2009, JEMMA Jewelry PNJ Art is one of the PNJ Lab is a leading inspection
is heading for the position of pioneering brands to develop a company for diamonds,
a fashion accessory high- gift line to serve corporate gemstones, precious metals in
class and modern brand. Its customers with diversified and Vietnam. It is among a very
products are designed in preeminent quality models. Its few Vietnamese accrediting
modern style and follow up to products are elaborated in the companies that are successfully
date fashion trends using meaning of values, beautiful built and operated according to
diversity of materials from expression, not only honoring international standards
silver, alloy and stones the true but also pure beauty ISO/IEC 17025

PNJ Watch
Since 2012, PNJ Watch is made toward the middle and high-end
segments, just in line with the Company’s jewelry market conquering
strategy. PNJ Watch has been making steady progress with popular
products namely Longines, Michael Kors, Movado, Tissot, etc.
Against the context of a fragmented market, this business promises a
leading stance in genuine watch distribution throughout Vietnam

12
APPENDIX 4: PNJ’s MARKETING COMPETENCY Source: PNJ Annual report

In 2018, 210 programs have been

effectively implemented with high
efficiency making up for 35% of total
revenue, growing by 14% against
2017.
The design competency has enhanced
against 2017 and exceeded the 2018
plan in which the number of 2D
model designs exceeded 50% of the
plan and 3D models exceeded 1.4%
of the plan set out by units.
Analysis of customer portraits has
been regularly conducted, making
significant contributions to customer
base, hence a boost of loyal
customer base by 48%. The rate of
coming back increased by 27%
compared to 2017.
2018 recorded the first steps into re-
planning the brand strategy,
including brand structure. This is
expected to aid brand development
activities toward a better
Audacious communication campaign “DEP DOI MOT NHA” synchronization, scale and efficiency.

In 2019, PNJ’s marketing activities

made a deep impression on the
community with a short film inspired
by True Love.
The true stories transmitted through
the views and sharing of the insiders
have become the phenomenon of
creating a strong spillover effect on
the mass media and social
networking community.
This is also the second clip that
resonates after the product “DEP
DOI VE MOT NHA – Beautiful
couples coming to one home” for the
wedding season in 2018. Surely there
would be more interesting stories
ahead in the journey to find and
honor the true values of PNJ.
PNJ’s marketing activities in the past
year also left a strong impression
with customer analysis activities that
have been conducted regularly. The
positive results have contributed
Heartfelt campaign “TINH YEU DICH THUC”
significantly to customer base,
contributing to loyal customers.
13
APPENDIX 5: PNJ’s ORGANIZATION CHART

Mrs Cao Thi Ngoc Dung

Chairwoman
• University of Economic HCMC
• Founder of PNJ JSC since 1988
• Working for PNJ as Chairwoman since 2004

Mr. Le Tri Thong

Vice Chairman, CEO
• Masters of Business Administration, Oxford University, UK
• 13 years' experience of director level
• Working for PNJ since 2017

Ms. Dang Thi Lai Ms. Tran Thi Thu Ha

Chief Operating Officer cum Director of Finance & Chief Retail Officer
Operation Division • Bachelor of Business Administration,
• Bachelor of Business Administration, University of University of Economics , HCMC
Economics , HCMC • 21 years’ experience in sales and retail
• 34 years’ experience in finance and accounting • Working for PNJ since 1999
• Working for PNJ since 1990, and served on PNJ
Board of Directors since 2015

Ms. Nguyen Hoang Anh Mr. Dao Trung Kien

Chief Marketing Officer Chief Strategy Officer
• Bachelor of Business Administration • Master of Business Administration in Finance, Hofstra
• 26 years’ experience in sales, marketing and University, USA
advertising • 20 years' experience in strategy and technology
• Working for PNJ since 2013 • Working for PNJ since 2016

Mr. Nguyen Ngọc Tran Mr. Nguyen Hoang Chau

Chief Information Technology Officer Chief Supply Officer
• Masters in Computer Science • Masters of Business Administration
• 20 years' experience in software engineering, • 20 years’ experience in strategy, project management
information technology and consulting and supply chain
• Working for PNJ since 2017 • Working for PNJ since 2013

Source: PNJ data Team analysis

14
16
APPENDIX 6 : PNJ’s GOVERNANCE ASSESSMENT

The Institutional Shareholder Services (ISS) Rating methodology was the selected scoring tool applied to identify and
assess the risks involved in CPA’s Corporate Governance structure

CORPORATE GOVERNANCE ASSESSMENT SCORE WEIGHT CALCULATION

1. AUDIT AND RISK OVERSIGHT 9/10 25% 2.25
a. Non audit fees represent what percentage of total fees
b. No adverse opinion by the auditor in the past year
c. No regulatory initiated enforcement action against the
company
d. No changes in audit firm due to invalid or questionable
reasons
e. 9 directors serve on the board
2. BOARD STRUCTURE 8/10 35% 2.8
a. Women on the Board
b. 33.33% are independent director composition of the
Board
c. 66.67% of the board consists of related members
d. Maintains a formal Nominating, Compensation and
Audit Committee
e. The executives serve on numbers of outside boards
f. The Chairman and CEO do not serve on outside board
3. SHAREHOLDER RIGHTS AND TAKEOVER
6/10 25% 1.5
DEFENSES
a. Has classes of stock with different voting rights,
absolute voting right ceiling and ownership ceilings for
specific parties
b. CIASA have priority rights
c. Ownership factors affect takeover defenses
d. Directors are elected annually
e. Has controlling shareholders and no tag-along rights
for minority shareholders.
f. There are RPTs of significant Board Members
4. COMPENSATION AND RENUMERATION 3/10 15% 0.45
1. Has an equity-based compensation plan
2. What are the pricing conditions for stock options
granted to executives?
3. Non-executive directors participate to performance
related remuneration
4. Disclose details on executives’ remuneration
5. The company does not disclose a performance measure
for stock options plans, restricted share/stock award plans
or other long term plans for execs
TOTAL CORPORATE GOVERNANCE SCORE 6.5/10 100% 7.00

NOTE: Source: Team analysis

10: Insignificant threat to Shareholders
8: Low threat to Shareholders
6: Moderate threat to Shareholders
4: Significant threat to Shareholders
2: High Threat to Shareholders

15
 APPENDIX 7: VIETNAM ECONOMY AFTER COVID19 PANDEMC

- Scenario 1 (50%): V- - Scenario 2 (35%): Swoosh- - Scenario 3 (15%): W-shaped

shaped model shaped model model
+ second wave of Covid19
+ no second wave of Covid19 + no second wave of Covid19
pandemic. The economy will pandemic. The economy will
fully recover in Q3/2020 fully recover in Q4/2020 onward
onward
+ trading partners as US, EU and Source: Team analysis
+ trading partners as US, EU China will open their borders in
and China will open their Q1/2021
borders in Q3/2020

Vietnam's economy is likely to have V-shaped recovery because of the following reasons:
+ There is high probability rate of the epidemic ending in summer. According to WHO, research, most
influenza epidemics end in summer.
+ The Vietnamese government shows strong determination to promote growth with reasonable policies (8 highway
public investment projects; banks sacrifice profits ease interest rates; strong stimulus package to boost supply and
demand in the economy).
+ Strong economic stimulus capacity of the US, West European countries and China will help the world’s economy
recover quickly.

Figure: New cases daily by regions Figure: New cases daily Vietnam
90.000,00 30,000 180
Americas
80.000,00 160
25,000
70.000,00 140

60.000,00 20,000 120

In hospital
New Cases

50.000,00 100
15,000
40.000,00 80
Asia
30.000,00 10,000 60

20.000,00 40
5,000
Europe 20
10.000,00
- - 0
20/01 20/02 20/03 20/04 20/05 07/03 07/04 07/05 07/06
Source: WHO, MOH

Every day the world has more than 120,000 cases of Covid-19 every day, mostly in the Americas. Asia is increasing in new
cases of Covid, mainly India and Singapore and Central Asian countries. The EU has begun to recover and has begun to open
within the bloc. It is expected that the beginning of July will open the door outside the bloc. Russia announced the treatment of
Covid was licensed for use.
Vietnam: There have been nearly 2 months in Vietnam where there have been no cases in the community. The country has only
6 positive cases. The government reopened trade routes with several countries.
16
 APPENDIX 8: THE WORLD AND VIETNAM’S MACRO OUTLOOK

Figure: GDP growth rate by country group during 2016-2021F period

▪ Emerging and Developing
12% Asia economies has showed
a strong economic growth
8% over time with the average
growth rate of over 5%.
▪ Due to the Great Lockdown
4%
from the influence of
Covid-19 pandemic, most
0% developing economies are
expected to be contracted
-4% this year. However, 2021
may be one of the brightest
-8% year with a solid recovery.
Emerging and Emerging and Latin Amercia and Middle East and Sub-Saharan
Developing Asia Developing Europe the Caribbean Central Asia Africa

2016 2017 2018 2019 2020 2021 Source: IMF

Figure: GDP growth rate forecast for the World and key trade partners of Vietnam

12%
▪ 4/5 key trade partners of
Vietnam are poised to
8% record a negative growth in
2020. Meanwhile, China
also faces a rough year with
4% the 2020’s growth rate of
just 1.2%.
▪ List of huge stimulus bills,
0% coupled with rapidly
loosened monetary policies
-4% may be a strong motivation
for most major economies
to bailout the economy and
-8% create a foundation for
2016 2017 2018 2019 2020 2021 coming year recovery.
Source: IMF
World United States Euro Area China Japan South Korea

Figure: GDP growth rate forecast for the selected countries in ASEAN region
▪ With a high level of
12% opening, ASEAN
economies will suffer a
8% head-wind circumstance
due to the slump in global
aggregate demand and lock-
4% down measures in major
economies.
0% ▪ All 11 in 11 ASEAN
economies are expected to
perform poorly this year.
-4% Vietnam is not outside the
region momentum;
-8% however, the successful
2016 2017 2018 2019 2020 2021 contain of the virus permits
Vietnam to quickly recover
Vietnam Indonesia Malaysia Philippines Thailand
the economy compared to
Singapore Myanmar Cambodia Laos Source: IMF
peers.
17
Figure: Vietnam’s GDP growth by industry group (%)

▪ Vietnam has showed a steady

10% economics performance over
time. In 2019, GDP growth
8% rate was at 7.02%, a slight
decrease from 7.1% yoy, but
was the highest growth from
6% global financial crisis.
▪ Industry, construction and
4%
services has driven the
economic growth with strong
2% consecutive years growth in
row.
0% ▪ The growth was boosted by:
2012 2013 2014 2015 2016 2017 2018 2019
(1) Strong exporting power
Agriculture, Forestry and Fishery Industry and Construction
(2) Steady inbound FDI flow
Services Overall Source: GSO
(3) Enhancement of business
environment
Figure: Vietnam’s key macroeconomic indicators (%)
(4) New signed and valid FTA
24 (5) Reformed investment legal
framework
▪ In accordance with economic
18
growth, Vietnam’s macro-
economic indicators has been
improved significantly.
12 Inflation has been stabilized
under target rate of 4%.
▪ According to BCG
6 estimation, middle class
affluent in Vietnam is
forecast to extraordinarily
0 increase during 2017-2030
2013 2014 2015 2016 2017 2018 2019 period, motivating
consumption power,
Avg lending rate Credit growth 5Y Bond Yield Inflation rate changing customer behavior,
Source: GSO, SBV, MOF structuring Vietnam’s
Figure: Vietnam’s consumer class breakdown (in mn people)
position.

120

100 +11%
17
5
80 19
31
+4%
60
29

40
+2%
37
17
20 -4%
23 10
9 -7%
0
2017 2030 Source: BCG

Poor Aspirant Emerging middle class Established middle class Affluent

18
 Figure: Vietnam’s trade indicators (in USD bn)
300 264,19

200

100

100

200

300
2012 2013 2014 2015 2016 2017 2018 2019

Export Import Balance of Trade Source: Vietnam’s Customs

▪ Vietnam has showed a strong exporting power with the outbreak growth in export value over time.
In 2019, Vietnam’s total trade value was at all-time high of over USD510bn. In which, Vietnam
export value was recorded at USD 264.19 bn.
▪ Key export product includes mobile phone & mobile devices, home appliances, agriculture
products, wood & wood furniture, …

Appendix: Vietnam’s inbound FDI flow (in USD bn)

40

35

30

25

20

15

10

0 Source: MPI
2012 2013 2014 2015 2016 2017 2018 2019

Registered FDI Disbursed FDI

▪ In accordance with economy opening strategy, Vietnam is one of the most attractive destination of FDI inflow.
Thanks to the low labor costs, stabile political & social characteristics, Vietnam has attracted billion of dollar
investment pouring from South Korea, Japan, Mainland China.
▪ Vietnam has signed a variety of FTAs in both bilateral and multilateral aspects. In which, top signed FTAs
consist of CPTPP, EVFTA, VJEPA, VKFTA, etc. FTAs are the key factors to attract foreign investment and
make conditions for Vietnamese firms through eliminating duties barriers.

19
APPENDIX 8: VIETNAM’S INDUSTRY OUTLOOK

Appendix: Vietnam’s gold jewelry consumption (in tons)

100
90
80
70
60
50
40
30
20
10
0
2010 2011 2012 2013 2014 2015 2016 2017 2018

Gold bar Jewelry

Appendix: Gold consumption per capita in selected countries in Asia in 2018 (gram/people)

0,6

0,5

0,4

0,3

0,2

0,1

0
Vietnam China Thailand India Malaysia Indonesia

Source: Thomson Reuter

Vietnam’s gold jewelry consumption is expected to increase in the future thanks to (1) strong economic
outlooks improve living standards and purchasing power, (2) accelerating consumer confidence and retail
industry growth support consumer spending, (3) rising disposable income and MAC fuel vibrant jewelry
consumption, and (4) a recent government decision in 588 QD-Ttg and free trade agreements (TPP and
EVFTA) benefit jewelry consumption and export. In addition, the jewelry industry is on the rise because of
vast purchasing power from Millennials and high demand for self-expression and self-actualization.
The gold consumption rate per capita in Vietnam is quite low compared to other countries as China, India
and Malaysia. Therefore, it offers room for Vietnam to increase gold consumption rate per capita in the
future.

20
APPENDIX 9: COMPETITOR'S ASSESSMENT
Bảo Tín Unbranded
CRITERIA PNJ SJC DOJI Precita
Minh Châu players

BRAND High High High Medium Medium Low

CORE PRODUCT Gold jewelry Gold bar Gold jewelry Gold jewelry Gold jewelry Gold jewelry

PRICE Mass Mass Mass Mass Mass Mass

High Medium Medium High Low

DESIGN Traditional
fashionable fashionable fashionable fashionable fashionable

SERVICE High Medium Medium Medium High Medium

Southern Southern Northern Southern

LOCATION Nationwide Nationwide
Vietnam Vietnam Vietnam Vietnam

NO. OF STORES (2018) 324 48 53 80 19 12,000

TRUST & RELATIONSHIP High High High High High High

SCALABILITY High High High High Medium Low

Source: Team analysis

APPENDIX 10: SWOT ANALYSIS

STRENGTH OPPOTUNITY

- Market leader in the fragmented and large jewelry industry with - Winning market share from unbranded players and
a market share of approximately 20% market share in other regions rather than Southern
- Vertically integrated value chain and economies of scale Vietnam
- Strong sales (double digits growth year over year), improving - New underserved markets to operate (personal
and high margin (approximately 20%) accessories, glasses)
- The skilled and experienced management team (over 20 years - Industry consolidation: alliances or mergers
of experience) - Ecommerce platform
- Large numbers of skillful artisans and creative designers - Technology advancement to reduce cost, improve
- Good customer services and exchange policy productivity and sale
- Huge distribution channels (largest numbers of retail stores) - Strong economic growth and recovery
- 32 years old and well-known brand - Support from government policy
- High quality and diversified products ranging from diamond, - Favorable demographic
gold, silver and gemstones jewelry to other accessories (watches) - Global expansion to other countries
and corporate gifts
- Quick strategies adapting to current situations

WEAKNESS THREAT

- Dependent on the economic cycle - New industry players that affect competitiveness
- Still weak presence in Northern Vietnam and cannot compete in - New unfavorable government regulation
gold bars segment -Vietnamese economic recession or jewelry
- Low product differentiation turndown
- Increasing operating expense
- Technology issues
- Potential management turnover

Source: Team analysis

21
APPENDIX 11: PNJ's PORTER’S FIVE FORCES ACCESSMENT
New entrants
4
3
2
Competitor Suppliers
1
0

Subtitute products Customers

Source: Team analysis

Rivalry among existing competitors: MEDIUM TO HIGH

PNJ is operating under a fragmented and double-digit growing jewelry industry with approximately 12,000 unbranded players
across Vietnam. As a market leader in Southern Vietnam, PNJ is well positioned with its competitive advantages as an
integrated value chain, huge distribution network, brand name, and diversified products to serve different types of customers;
thus, it is very challenging for other players to win market share from PNJ in this region. However, PNJ has to compete with
other unbranded players because of the nature of the jewelry industry as high brand loyalty and low switching cost - customers
are unlikely to switch from one player to another when they have already established trust and relationship with them. Besides
that, PNJ also competes with the market leader in Northern Vietnam - Bao Tin Minh Chau (BTMC)- which not only possesses
the majority of market share but also customers' hearts. Since people living in Northern Vietnam are considered as traditional
and conservative, it is difficult for PNJ to usurp market share from BTMC and other unbranded players. Moreover, PNJ faces
stiff competition with SJC in the gold bar segment because SJC is the only state-owned company that is allowed to import gold
materials and manufacture gold bars to the market. PNJ also has to deal with potential threat Precita because it is backed by a
leading private equity firm, Mekong Capital, who has a long track record of well-known successful investments in Vietnam.
Therefore, we evaluate this rivalry among existing competitors is medium to high
Threat of new entrants: LOW
The jewelry industry in Vietnam is considered as high barriers to entry because of the following reasons. First, it needs to meet
certain requirements by law in order to obtain the license. Second, it requires capital investment to build a large distribution
network, production base, and financial resource to build brand image and invest in the IT system. Finally, it also needs to
have an experienced management team that works in the industry long enough to have industry insights, understand the market
cycle and customers' behaviors so that they can build strategies to cope with different situations and products suitable for
customers’ needs. In addition, when the government issued Circular Number 24/2012/ND-CP to enhance the stability of the
gold market and transparency of the jewelry industry, the competition becomes more challenging. As a result, we evaluate the
threat of new entrants is low.
Threat of substitute products: LOW
There is a wide diversity of product materials in the jewelry industry, including diamond, gold, silver, and other gemstones
jewelry. Since PNJ's products are diverse (gold and silver jewelry, diamond and other gemstones jewelry, watches, and
designed gifts) and its target customer is a middle-income class with 20-40 years of age, we believe that PNJ faces low risks
from substitutes. Since Vietnam's middle affluent class is expected to grow at 5.5% CAGR 2017-2030, it will definitely benefit
PNJ in terms of higher valued jewelry. Thus, we evaluate the threat of substitute products is low.
Bargaining power of suppliers: LOW TO MEDIUM
Vietnamese citizens are believed to own 500 tons of gold so there is an ample source of gold in the country. As a well-known
and dominant jewelry retailer, PNJ is in a better position when it comes to supplier bargaining power because it has a great
purchase and exchange policy with customers.
For silver, diamond, and other precious gemstones, PNJ has a well-established relationship with quality suppliers from
Germany, Belgium, Thailand, Hong Kong, etc.
As a result, we evaluate the bargaining power of suppliers is low to medium.
Bargaining power of buyers: MEDIUM
Because of the fragmented jewelry industry with approximately 12,000 unbranded players, the customers will have lots of
choices in terms of products, pricing, and distribution channels. For products, different players offer different products so that
customers have many options to select. For pricing, customers are price-sensitive as they choose products that fit their pockets
and they easily can check/compare the price online. For distribution channels, customers can easily find jewelry vendors on
the street and drop by to take a look.
As trust and quality concerns play an important role in customers’ purchasing decisions, they are more likely to stick with
players that they have built the relationship with. Therefore, it is difficult for PNJ to lure customers if it cannot lower its price
as traditional vendors.
Thus, we evaluate the bargaining power of buyers is Medium

22
APPENDIX 12: REVENUE PROJECTION BASE CASE

Revenue 2020E 2021E 2022E 2023E 2024E

Total 14,477,891 18,814,984 23,979,973 29,695,513 36,607,206
PNJ Gold Bar 4,361,170 5,669,521 6,803,426 8,164,111 9,796,933
PNJ Gold Jewellry 9,817,170 12,846,491 16,847,267 21,169,286 26,412,593
PNJ Silver 209,976 201,032 222,139 244,854 269,286
Others 89,575 97,939 107,140 117,261 128,395

Source: PNJ, Team Estimates

To forecast revenue for PNJ from 2020 to 2025 in the base case, we base on the following assumptions:
- Nike-Shape recovery: Vietnam won Covid-19 when 2 consecutive months there was no new case of infection in the
community. Vietnam's key partners have also returned to normal when they start to open their borders and trade. The
economy will recover
- Jewelry purchasing power will increase again due to people's income recovery
- PNJ can reach the plan of opening 31 stores by 2020 and the following years with an average speed of 50 new stores / year
and reach over 500 stores in 2024.
- The proportion of gold bar in the revenue structure of PNJ will decrease because the gold bar is not PNJ's key strategy in the
coming years, making way for the development of jewelry with support from the new factory under construction at the end
2020/ beginning 2021.

APPENDIX 13: SCENARIO ANALYSIS – GREY/BLUE SKY REVENUE

PROJECTION
- Blue Sky Scenario
We base on scenario that V-Shaped Recovery model will suit Vietnam Economy. Consumer income and confidence will
rise and so does PNJ’s SSSG. PNJ can open 50 stores/year to reach 600 store in next 5 years

Revenue 2020E 2021E 2022E 2023E 2024E

Total 16,941,585 22,136,052 28,641,828 37,094,728 47,964,902
PNJ Gold Bar 5,151,800 6,697,340 8,036,808 9,644,170 11,573,004
PNJ Gold Jewellry 11,446,603 15,100,820 20,211,495 26,998,582 35,879,146
PNJ Silver 253,607 239,952 286,384 334,715 384,358
Others 89,575 97,939 107,140 117,261 128,395
- Grey Sky Scenario
We afraid that there will be second wave of Covid-19 and PNJ performance will be affected until 2021.

Revenue 2020E 2021E 2022E 2023E 2024E

Total 11,931,834 14,828,962 18,173,298 22,197,294 26,946,755
PNJ Gold Bar 3,808,180 4,950,634 5,940,761 7,128,914 8,554,696
PNJ Gold Jewellry 7,869,193 9,608,310 11,944,714 14,758,017 18,053,798
PNJ Silver 164,887 172,078 180,682 193,102 209,867
Others 89,575 97,939 107,140 117,261 128,395

Source: PNJ, Team Estimates

23
 APPENDIX 14: DCF VALUATION SCHEDULE
Unit: Bill VND 2018 2019 2020F 2021F 2022F 2023F 2024F 2025F 2026F 2027F 2028F 2029F

EBIT 1,144 1,391 938 1,591 2,109 2,764 3,601 3,909 4,385 4,880 5,362 5,813

Tax Paid 246 313 207 346 451 590 766 625 702 781 858 930

NOPAT 899 1,079 731 1,244 1,659 2,174 2,835 3,284 3,684 4,100 4,504 4,883

Depreciation &
Amortization Expense 42 61 67 94 113 124 135 101 106 111 117 123

Change in Net
Working Capital 1,285 1,912 (2,111) 1,020 1,111 1,155 1,501 1,652 1,817 1,998 2,198 2,418
Capital
Expenditure 336 224 129 269 322 192 192 202 212 222 233 245
Free Cash Flow to
Firm (FCFF) (680) (996) 2,780 50 337 950 1,276 1,531 1,761 1,990 2,189 2,342
WACC 12.1%

Discount Period - 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0

Discount Factor 1.00 0.89 0.80 0.71 0.63 0.56 0.50 0.45 0.40 0.36
Present Value of
FCFF 2,780 44 268 675 808 865 887 894 878 838

Implied Equity Value and Share Price

Enterprise Value (VND bill)
(VND bill, except per share)

Cumulative Present Value of FCFF 8,938

Enterprise Value
18,417
Terminal Value (by growth rate) Less: Total Debt
2,619
Growth rate 3.0%
Plus: Cash and Cash Equivalents
Terminal Value 26,505 1,999
Discount Factor 0.4 Implied Equity Value
17,797
Present value of Terminal Value 9,479 Basic share outstanding 225,293,585
% of Enterprise Value 51.47%

Price per Share

Enterprise Value 18,417 78,997

Source: PNJ, Team Estimates

APPENDIX 15: SENSITIVITY ANALYSIS

Enterprise Value (VND bill)
Perpetuity Growth Rate
18,417 2% 3% 3% 4% 4%
10.94% 21,266 21,266 21,266 21,266 21,266
WACC

11.94% 18,770 18,770 18,770 18,770 18,770

12.94% 16,793 16,793 16,793 16,793 16,793
13.94% 15,192 15,192 15,192 15,192 15,192
14.94% 13,872 13,872 13,872 13,872 13,872

Price per Share (VND)

Perpetuity Growth Rate
78,997 2% 3% 3% 4% 4%
10.10% 103,411 103,411 103,411 103,411 103,411
WACC

11.10% 89,648 89,648 89,648 89,648 89,648

12.10% 78,997 78,997 78,997 78,997 78,997
13.10% 70,530 70,530 70,530 70,530 70,530
14.10% 63,653 63,653 63,653 63,653 63,653
Source: Team Estimates

24
 APPENDIX 16: PNJ’S PEER BENMARKS ANALYSIS

Gross
Days in Days in Days in Operating
Margin Current Quick Cash
receivables inventories payables cycle
(%)

2018 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 2019 2018 2019

Phu Nhuan Jewelry JSC 19.07 20.36 3 3.04 108.47 135.22 24.06 29.54 111.47 138.26 2.02 1.82 0.14 0.06 0.08 0.02

Chow Tai Fook Jewelry Group Ltd27.47 28.08 28.08 30.75 278.32 287.03 3.8 3.99 306.4 317.78 2.38 1.96 0.67 0.51 0.38 0.28

Chow Tai Seng Jewelry Co. Ltd 33.69 35.62 17.94 16.78 267.31 272.56 69.36 50.49 285.25 289.34 2.33 3.61 0.97 1.36 0.82 1.12

Luk Fook Holdings Internation Ltd25.66 25.43 13.28 15.61 252.7 267.91 12.86 10.41 265.98 283.52 5.37 3.34 1.42 0.83 1.04 0.56

Chow Sang Sang Holdings

24.59 28.9 38.53 36.44 192.8 237.74 3.46 3.8 231.33 274.18 3.97 2.97 1.41 0.82 0.45 0.25
International

Lao Feng Xiang Co Ltd 8.75 8.48 5.64 3.51 72.08 81.35 5.71 4.62 77.72 84.86 2.09 2.13 0.82 0.65 0.7 0.59

Source: PNJ, Reuster, Team Estimates

APPENDIX 17: RELATIVES VALUATION

Name Unit Country Rev EBITDA Mrk Cap P/B P/E EV/EBITDA
Phu Nhuan Jewelry JSC (PNJ.HM) VND Vietnam 17,144 1,452 13,135 4.07x 17.26x 12.52x
Lao Feng Xiang Co Ltd (600612.SS) CNY China 7,174 421 2,842 4.27x 19.57x 8.37x
Chow Sang Sang Holdings International Ltd (0116.HK) HKD Hongkong 2,263 286 1,171 0.92x 10.34x 7.04x
Luk Fook Holdings International Ltd (0590.HK) HKD Hongkong 2,023 253 1,978 1.47x 10.66x 7.62x
Chow Tai Seng Jewellery Co Ltd (002867.SZ) CNY China 783 189 1,999 2.95x 14.04x 9.71x
Chow Tai Fook Jewellery Group Ltd (1929.HK) CNY China 8,500 1,008 10,115 1.99x 16.86x 12.34x

Median 4,719 353 2,421 2.47x 15.45x 9.04x

Mean 6,315 602 5,207 2.61x 14.79x 9.60x
Min 783 189 1,171 0.92x 10.34x 7.04x
Max 17,144 1,452 13,135 4.27x 19.57x 12.52x
Mid 15.1 9.3
PNJ EPS diluted 3,339
PNJ EBITDA 1,005

Share prices:
P/E 50,488
EV/EBITDA 41,589

Source: PNJ, Reuster, Team Estimates

25
APPENDIX 18: PNJ’S ALTMAN Z-SCORE

The Altman Z-Score Analysis indicates a company's financial health and, consequently, the probability of filing for
bankruptcy. With the specified formula, the indicator shows a score, in which below of 1.80 indicates a firm has a high
probability of bankruptcy and a score of approximately 3.00, indicates a firm is far from a high bankruptcy prob- ability

Z-Score = 1.2A + 1.4B + 3.3C + 0.6D + 1.0E

Where:
A = working capital / total assets
B = retained earnings / total assets
C = earnings before interest and tax / total assets
D = market value of equity / total liabilities
E = sales / total assets

INPUT VARIABLES 2019 2020F

Current Assets 7,332 6,953
Total assets 8,602 8,778
Current liabilities 4,018 4,104
Total liabilities 4,026 4,148
Market value of equity 13,135 16,173
Retained earnings 1,015 705
Revenue 17,144 14,559
Earnings before interest and tax (EBIT) 1,391 938
Working capital 3,314 2,849

Altman Z score
Z score 5.112 4.853

Source: Team Estimates

RESULT: Considering the financial information for 2019, 2020F, PNJ has LOW probabilities of filing for bankruptcy.
PNJ’S Z-score is in safe-zone, according to Altman research.

Figure: Altman Z-score for Asian Companies with market cap > 1bnUSD

Source: Altman

26
 APPENDIX 19: PNJ’S BALANCE SHEET
Year end Dec 31 (VND bn) 2015 2016 2017 2018 2019 2020F 2021F 2022F 2023F 2024F
ASSETS
A. CURRENT ASSETS 2,265 3,102 3,896 5,405 7,332 6,953 7,426 8,608 10,374 12,889
I. Cash and cash equivalents 38 155 175 207 95 1,999 1,173 882 1,102 1,641
1. Cash 38 71 111 207 95 1,999 1,173 882 1,102 1,641
III. Current accounts receivable 47 62 84 155 128 109 142 181 224 277
1. Trade receivables 29 34 40 58 48 41 53 68 84 104
2. Advances to suppliers 9 19 34 58 75 64 83 106 131 161
6. Other short-term receivables 8 9 11 39 5 5 6 7 9 11
IV. Inventories 2,135 2,839 3,402 4,968 7,030 4,778 6,021 7,434 8,909 10,799
1. Inventories 2,135 2,839 3,402 4,968 7,030 4,778 6,021 7,434 8,909 10,799
V. Other current assets 45 46 74 75 78 66 90 112 139 172
1.Short-term prepaid expenses 44 45 69 66 72 61 83 102 127 158
2. Value-added tax deductible - 0 0 1 6 5 7 9 11 14
B. NON-CURRENT ASSETS 711 485 596 1,033 1,270 1,825 2,244 2,774 3,268 3,842
I. Long term receivables 21 26 43 57 71 99 139 194 272 353
II. Fixed assets 486 416 487 719 924 986 1,161 1,370 1,439 1,496
Tangible fixed assets 194 207 206 226 264 291 406 544 623 703
- Cost 326 371 397 454 535 592 710 852 936 1,021
- Accumulated depreciation (133) (163) (191) (228) (271) (301) (304) (308) (313) (318)
Intangible fixed assets 292 209 281 493 660 695 755 827 815 793
- Cost 296 213 287 500 680 752 902 1,083 1,190 1,297
- Accumulated depreciation (3) (5) (5) (7) (20) (57) (147) (256) (375) (504)
IV. Long-term assets in progress 6 8 10 71 28 28 31 34 38 42
1. Construction in progress 6 8 10 71 28 28 31 34 38 42
V. Other long-term assets 30 36 56 185 247 712 914 1,175 1,520 1,951
TOTAL ASSETS 2,975 3,587 4,492 6,438 8,602 8,778 9,670 11,382 13,642 16,731
LIABILITIES AND EQUITY
C. LIABILITIES 1,661 2,088 1,543 2,693 4,026 4,148 4,448 5,091 5,985 7,367
I. Current liabilities 1,581 2,022 1,489 2,677 4,018 4,104 4,410 5,059 5,957 7,337
Short-term trade payable 191 326 279 343 691 588 765 974 1,207 1,488
Short-term advance from customers 20 56 38 83 95 81 106 135 167 206
3. Statutory obligations 110 87 117 154 193 165 200 261 325 403
4. Payables to employees 18 28 99 228 222 191 247 317 391 480
5. Accured expense 5 6 5 11 46 39 39 60 72 85
9. Other payable 29 28 52 238 69 52 74 105 142 192
Short-term loans 1,189 1,449 846 1,558 2,611 2,896 2,890 3,117 3,563 4,393
12. Bonus and welfare fund 18 42 52 63 91 91 91 91 91 91
II. None current liabilities 79 66 54 16 8 45 38 32 27 30
D. OWNER'S EQUITY 1,315 1,500 2,950 3,745 4,577 4,630 5,223 6,290 7,657 9,364
I. Capital 1,315 1,500 2,950 3,745 4,577 4,630 5,223 6,290 7,657 9,364
Shareholder's capital 983 983 1,081 1,670 2,253 2,276 2,504 3,129 3,912 4,890
Shares with voting rights 983 983 1,081 1,670 2,253 2,276 2,504 3,129 3,912 4,890
Share premium - - 877 925 968 991 1,016 1,041 1,066 1,091
Treasury shares (0) (0) (0) (0) (2) (0) (0) (0) (0) (0)
Undistributed earnings 113 374 772 885 1,045 1,045 1,385 1,802 2,361 3,066
TOTAL LIABILITIES AND EQUITY 2,976 3,588 4,492 6,438 8,603 8,778 9,670 11,382 13,642 16,731

Source: PNJ, Team Estimates

27
 APPENDIX 20: PNJ’S INCOME STATEMENT
Year end Dec 31 (VND bn) 2,015 2,016 2,017 2,018 2,019 2020F 2021F 2022F 2023F 2024F
Revenue 7,739 8,615 11,049 14,679 17,144 14,559 18,906 24,079 29,800 36,711
Deductions (33) (51) (72) (108) (144) (81) (91) (99) (105) (104)
Net revenues 7,706 8,565 10,977 14,571 17,001 14,478 18,815 23,980 29,696 36,607
Cost of goods sold (6,538) (7,153) (9,065) (11,792) (13,540) (11,625) (15,016) (19,278) (23,787) (29,228)
Gross profit 1,168 1,411 1,912 2,779 3,461 2,853 3,799 4,702 5,909 7,379
Financial incomes 1 5 9 7 17 14 19 24 29 36
Financial expenses (431) (182) (56) (66) (134) (114) (175) (167) (217) (268)
- Interest expenses (81) (73) (55) (61) (115) (98) (141) (144) (187) (231)
Gain/loss in associate companies - - - - - - - - - -
Selling expenses (424) (554) (775) (1,170) (1,362) (1,160) (1,317) (1,679) (2,079) (2,563)
General & Administratives expenses (118) (133) (188) (346) (476) (476) (476) (495) (515) (535)
Operating profit 197 548 901 1,204 1,506 1,020 1,708 2,241 2,940 3,819
Other income 2 47 7 5 5 13 15 9 9 10
Other expenses (12) (4) (1) (3) (4) (5) (3) (3) (4) (4)
Other profit (11) 43 6 2 0 8 12 6 6 6
Accounting profit before tax 187 591 907 1,206 1,507 1,036 1,732 2,253 2,952 3,832
Current coporate income tax expense (114) (140) (182) (249) (316)
(207) (346) (451) (590) (766)
Deferred corp.income tax expense 2 (0) (0) 4 3
Net profit after tax 76 450 725 960 1,194 829 1,385 1,802 2,361 3,066
EBIT 106 517 852 1,144 1,391 938 1,591 2,109 2,764 3,601
Depreciation 30 34 39 42 61 67 94 113 124 135
EBITDA 137 552 892 1,187 1,452 1,005 1,684 2,222 2,888 3,736
Source: PNJ, Team Estimates

APPENDIX 21: PNJ’S CASHFLOW STATEMENT

Year end Dec 31 (VND bn) 2015 2016 2017 2018 2019 2020F 2021F 2022F 2023F 2024F
I. Cash flows from operating activities
1. Profit before tax 187 591 907 1,206 1,507 1,036 1,732 2,253 2,952 3,832
2. Adjustments for
- Depreciation & amortisation 30 34 39 42 61 67 94 113 124 135
- Provisions 293 82 1 - (3) (4.10) (4.92) (5.90) (7.08) (8.50)
- Unrealised foreign exchange gains 0 3 (1) (0) (1) - - - - -
- Profits from investing activities 38 (21) (15) (7) (1) 100 157 143 188 231
- Interest expenses 81 73 55 61 115 98 141 144 187 231
3. Operating profit before changes in WC 630 763 987 1,301 1,677 1,297 2,119 2,646 3,443 4,421
- Increase in receivables 32 (26) (42) (86) 13 19 (33) (39) (43) (52)
- Increase in inventories (463) (703) (563) (1,566) (2,062) 2,253 (1,243) (1,413) (1,475) (1,890)
- Increase (decrease) in payables 76 170 17 412 199 (172) 278 361 388 472
- Increase in prepaid expenses (31) (7) (45) (45) (62) 11 (22) (20) (25) (31)
- Interest paid (81) (71) (56) (60) (114) (98) (141) (144) (187) (231)
- Corporate income tax paid (68) (160) (154) (232) (292) (187) (312) (406) (531) (690)
- Other cash outflows - 8 - - - - - - - -

NET OPERATING CASH FLOWS 74 (27) 109 (302) (661) 3,123 646 986 1,569 1,999
II. Cash flows from investing activities
1. Purchases and construction of fixed assets (70) (87) (115) (336) (224) (129) (269) (322) (192) (192)
2. Proceeds from disposals of fixed assets 0 165 8 1 2 - - - - -
3. Loan to other entities - - (160) - - - - - - -
4. Collections from borrowers - - - - - - - - - -
5. Interest receive 0 4 3 6 0 3 3 3 3 3
NET INVESTING CASH FLOWS (44) 146 (264) (169) (222) (126) (266) (319) (189) (189)

III. Cash flows from financing activities

1. Capital contribution and issuance of shares - - 975 97 69 23 228 626 782 978
2. Capital contribution from minority interests - - - - (2) 0 0 0 0
3. Payment for acquiring treasury shares - - - - -
4. Drawdown of borrowings 4,746 3,251 3,092 4,321 5,436 5,720 5,714 5,942 6,388 7,218
5. Repayment of borrowings (4,753) (3,007) (3,707) (3,647) (4,387) (4,672) (4,666) (4,894) (5,340) (6,169)
6. Dividends paid to equity holders of the parent (23) (246) (185) (268) (344) (166) (277) (360) (472) (613)
NET FINANCING CASH FLOWS (30) (1) 174 503 771 905 999 1,314 1,358 1,413
Source: PNJ, Team Estimates
28