UEH – COLLEGE OF BUSINESS
FINANCE DEPARTMENT
TERM PROJECTS
SUBJECT: FINANCIAL INVESTMENTS
• Class: 22C1FIN50504703
• Instructor: Ass. Prof. Trần Thị Hải Lý
• Group leader: Phạm Công Hoàng
• Group members: 5
• Plagiarism check: 4%
Student’s Name
MSSV
Participation
1. Đoàn Thị Kim Anh
31201022021
70%
2. Phạm Công Hoàng
31201020324
100%
3. Trần Minh Tuyết Mai
31201022425
100%
4. Nguyễn Bích Ngọc
31201020646
70%
5. Nguyễn Thu Trang
31201022820
70%
EQUITY RESEACH REPORT
COMPANY: Phu Nhuan Jewelry Joint Stock Company (HOSE: PNJ)
Written by Sustainable Growth Domestic Fund:
• Đoàn Thị Kim Anh
• Phạm Công Hoàng
• Trần Minh Tuyết Mai
• Nguyễn Bích Ngọc
• Nguyễn Thu Trang
This report is published for educational purposes only on 29/11/2022
Date: 29/11/2022
Ticket: PNJ
Closed price: 112,800 on 22/07/2022
RECOMMENDATION: BUY
PNJ: MIRACLES FROM PRESSURE
Stock Information
REPORT SUMMARY
Target price
132,071
Closing price
112,800
Change in price
17.1%
250 tradingday highest price
129,500
250 trading-day
lowest price
We give a BUY recommendation for Phu Nhuan Jewelry Joint Stock Company
with a target price of 132,071 – 17.1% upside from the current price of 112,800
(Nov 29, 2022). Our recommendation comes from the following THREE points:
(1) The growth potential of the branded retail jewelry segment is still very
large, (2) A unique vertical integration value chain creates a sustainable
competitive advantage, (3) PNJ pioneered in exploring the jewelry style for
Gen Z.
88,960
250 tradingday average price
820.047
Market
capitalization
(Billion VND)
108,730
Source: PNJ, team synthesizes
PNJ price and VN-INDEX
Source: PNJ, Investing, team synthesizes
Consumer confidence index
Source: PNJ, team synthesizes
Summary table of valuation results
Method
Result (VND)
Weight
FCFE
131,018
33.33%
FCFF
143,972
33.33%
P/E Forward
121,224
33.33%
Result
RECOMMENDATION: BUY (17.1% UPSIDE)
TARGET PRICE 132,071
132,071 VND
Source: Team analysis
The optimistic macro context favors the retail industry, especially the branded
jewelry retail sector​
During the forecast period 2022-2027, we believe that Vietnam will maintain the
fastest GDP growth momentum in Southeast Asia with an average annual growth of
6.5%-7%. In addition, it is estimated that the Vietnamese economy will approach that
of Thailand by 2027, reaching the milestone of 690 billion USD (Statista, 2022). With
the above growth, Vietnam is a bright spot in the retail industry, especially in the field
of branded jewelry retail thanks to the growth of the economy and the increase of the
middle and upper class. Therefore, enterprises in the jewelry industry in Vietnam who
achieve high reliability, guaranteed jewelry quality, and large scale will lead this
market.
Vertically integrated value chain creates sustainable competitive advantage
PNJ strictly controls its value chain from input, operation to distribution and sales.
The competitive advantage of PNJ's value chain also comes from two valuable
resources: (1) The factory with the largest capacity with modern technology
imported from Germany helps PNJ achieve production capacity far ahead of its
competitors; (2) The team of artisans is the most advanced when there are more
than 50 designers, accounting for more than 75% of Vietnamese artisans.
Style By PNJ and Gen Z - Unlimited growth potential​
Gen Z and Millennials will be the dominant force leading the jewelry market in the
next few years. Therefore, we believe that PNJ will fully exploit the potential of this
customer through the exclusive Style By PNJ product segment, thereby consolidating
its leading position in the future.
Valuation using the DCF method, and P/E forward
We value PNJ stock by discounting cash flow: FCFF, FCFE, and P/E forward with
three qual weights. We use DCF because (1) PNJ currently maintain sustainable
growth, and (2) we want to examine carefully internal cash flow to shareholders,
and debtholders of the business. We don't construct peer groups in both foreign
and nation for 3 reasons: (1) PNJ is the leading listed company in VN's jewelry
industry, (2) jewerly industry is a specific sector, involving in many different risks
related to government, and social; (3) we are a domestic fund. We also don't use
P/E in Vietstock due to (1) the uncertainty calculation, and (2) biased from only 4
latest quarter historical data. Therefore, we conduct P/E forward
from cummulative present value of FCFF.
Digital transformation helps PNJ effectively control risks
After understanding the business as well as getting valuation results, we conduct an
analysis of potential risks that may threaten PNJ's operations and our valuation
results, from market risk, industry risk to operational risk. Then, we point out some of
the main handling directions that PNJ is and will be aiming for, thereby helping
businesses mitigate these threats.
3
PNJ
Figure 1: Revenue structure by channel
BUSINESS OVERVIEW
Established in 1988, Phú Nhuận Jewelry Joint Stock Company (HSX: PNJ) is
currently the leading jewelry manufacturer and retailer in Vietnam's jewelry market.
Business activities are in all three areas: (1) retailing in gold, silver, and jewelry; (2)
retailing accessories, and watches; and (3) providing precious metal testing services
(Figure 1). More than 98% of PNJ's revenue comes from the gold, silver, and
jewelry businesses. To reposition the business strategy as a "Professional Retailer"
from 2021, PNJ will continue to expand its scale from stores to jewelry-related
industries in the long term.
Retail
Gold
Bars
Wholesale
B2B & Export
Source: Company report, team analysis
Figure 2: PNJ's retail and specialty retail
sales growth
Specialized
retail revenue growth
.
.
Gold
and jewelry retail sales
growth
Source: WiChart, team synthesizes
Figure 3: Growth in the number of PNJ's
stores over the years
BUSINESS OVERVIEW
Jewelry Retail | The core business:
Revenue from the gold, silver and jewelry businesses comes from four main
channels: retail, wholesale, gold bars, B2B, and export. Retail is a key segment in
PNJ's gold, silver, and jewelry businesses, with 59.41% of consolidated revenue
(especially gold jewelry retail, which has continuously contributed more than 50% of
total revenue over the years). In 2021, the retail segment recorded a revenue
growth of 10.5% although the retail industry grew by a negative 7.7% (Figure 2). In
the past year, due to the impact of social distancing, shops had to close during the
stressful epidemic period. This is due to the quick efforts of management in moving
business activities online, and fully utilizing the performance of Omni-channel
models.
Distribution System | Leading the jewelry retail market in Vietnam:
From 2017 to 2021, PNJ’s stores increased from 269 to 342 stores (Figure 3). The
number of PNJ's stores is much higher than that of its nearest competitors such as
Bao Tin Minh Chau (BTMC), DOJI, and SJC. Specifically, more than 80% of the
stores are concentrated in the South, where the income per capita is the highest,
suitable for the mid-range and high-end customer segments that PNJ targets.
Distinct value chain | Origin of competitive advantage:
PNJ owns a stable and abundant source of input materials, which is one of two
enterprises entitled to 0% import tax on raw gold (PNJ and VJC - Agribank), has the
largest manufacturing plant and the best team of artisans, a strong distribution
system with an overwhelming number of stores (Figure 4) and, taking full advantage
of PNJ's scale advantage, applies the ERP-SAP system to the effective use of
Total
of stores
stores
Totalnumber
number of
resources for business management, production process management, and
Growt in number of stores
Growth
inventory. All these factors help PNJ control product quality well, optimize costs, and
Source: Company report, team analysis enhance its competitive advantage in the Vietnamese jewelry market.
Figure 4: Comparison of the
number of stores of jewelry brands
Figure 5: Business structure of PNJ
Trading in gold, silver and jewelry
Accessories trading
Retail
Wholesale
Gold
bars
B2B
Export
Accreditation
Source: Team synthesizes
PNJ
Figure 6: Number of PNJ Gold and PNJ
Silver stores
319
299
288
54
33
2019
14
2020
2021
PNJ GOLD
PNJ Silver
Source: Company report, team analysis
Figure 7: Brand Value PNJ
100.97
93.1
Million USD
78.6
58.1
61
48
2016
2017 2018 2019 2020 2021
Source: Forbes, team analysis
Figure 8: Segmentation of jewelry
brands
High-class
Segmentatio
n
CORPORATE STRATEGY
Boost capacity | Towards the middle, and high-end customer file​
Grasping the trend of disposable income growth among Vietnamese people, PNJ
plans to mobilize VND 1,425 billion through private placement to increase capacity for
the Long Hậu factory and develop product lines towards the mid-high-end segment.
Therefore, PNJ Gold stores will continue to open, and PNJ Silver will switch to the
shop-in-shop model in PNJ Gold. (Figure 6)​
Product diversification | Tapping Gen Z and Millennials
Gen Z and Millennials will be the dominant force driving the jewelry market in the
coming years. Therefore, PNJ has spent heavily on research and development,
marketing for the Style by PNJ product line targeting the innovative beauty trend of
young people. This is a business segment that only PNJ has in the jewelry market.
Thereby, the PNJ brand will be closer to customers of all ages.
Upgrading the quality of products and services | Focus on customer experience​
In 2020, PNJ has reaffirmed its business strategy from “Manufacturer and Selling” to
“Professional Retailer”. This means that in the future, PNJ will focus on customers'
shopping experience more by improving the quality of products and services,
upgrading and maximizing efficiency from the Omni-channel model. Focusing on retail
has helped PNJ's brand increase in recent years, and will continue to grow. (Figure 7)
MARKET POSITIONING
PNJ now owns a variety of brands spread across different customer files and product
quality, in contrast to a business model that focuses on a specific market segment like
competitors in the same industry (BTMC, Doji, SJC) (Figure 8). This diversity helps
the company limit the direct threat of competitors in each segment, maintaining its
leading position in the jewelry retail industry.
ENVIRONMENTAL, SOCIAL, AND GOVERNANCE (ESG
FRAMEWORK)
G FACTORS - CORPORATE GOVERNANCE
PNJ is one of the enterprises with the best corporate governance system in Vietnam.
Low Level
Intermediate
Shareholder structure | When the big guys come in
Total ownership of 47% of strategic shareholders and investment funds investment
(Figure 9) ensures stability in PNJ's management decisions. The participation of
strategic shareholders and investment funds has a positive impact on enhancing the
effectiveness of corporate governance supervision through access to corporate
information and valuation by expertise.
Low
Intermediate
Qualit
y
High-class
Source: synthesis and team analysis
Figure 9: Shareholder structure
21.49%
53.03%
Gender Diversity in the Board of Directors | Break the conventional rules to
stay ahead of the trend
Under the leadership of Chairman Cao Thị Ngọc Dung, who has been with PNJ for
more than 30 years, Mrs. Dung has brought PNJ to occupy the highest market share
in Vietnam's jewelry industry. She and her colleagues built PNJ from a company with
14 million dong and 20 employees to become a leader in jewelry and retail.
Currently, 5/9 members of the Board of Directors are women – far ahead of other
countries in the region (Figure 10). Gender diversity in the Board of Directors leads to
more effective corporate governance (The Economist, IFC, 2019), leading to
improved performance and broadened strategic vision.
25.48%
Cổ
đông chiến
lược
Strategic
shareholder
Strategic
shareholder
Quỹ
đầu tư funds
Investment
Investment
funds
Common
shareholders
Cổ
đông thường
Common
shareholders
Source: Company report
Executive Board Member | Leading to Success
With 7 members of the Executive Board with an average of more than 15 years
of experience in a variety of specialized fields, they have led 342 PNJ store chains
to overcome the Covid-19 pandemic and achieve sustainable development as
shown by the 7.68% CAGR of revenue in the period of 2018-2021. Along with an
excellent educational background and rich working experience, each one on the
Board of Management is the driving force behind PNJ's goal achievement
and performance improvement (Appendix D4).
PNJ
Figure 10: Gender Diversity in the BOD
F
Male
Nam
Female
F
Nữ
PNJ
56%
VN30
HOSE
44%
22%
78%
14%
APAC
86%
29%
Framework for assessing corporate governance according to the principles
of corporate governance of CFA Institute | Meet the standards
To analyze the corporate governance quality of PNJ, the analysis team applies four
corporate governance principles published by CFA Institute. The group analyzed
the 4 main pillars of PNJ's corporate governance and concluded that the
outstanding governance efficiency (3.9/4) was with the goal of the Board of
Directors and the Board of Management to make PNJ continue to become the
queen in the jewelry industry (Appendix D1).
71%
E FACTORS - ENVIRONMENTAL
0%
50%
100%
Source: Grant Thornton, PNJ, synthesis team
Figure 11: Revenue PNJ (Billion VND)
25.000
25%
20.000
20%
15.000
15%
10.000
10%
5.000
5%
In the period 2017-2022, besides efforts to develop production and business, PNJ
always focuses on environmental protection with a long-term strategy: (1) Use
economically, efficiently, and optimize reuse of materials, energy and water;
(2) Improve the process of treating waste sources, wastewater and
emissions, (3) Say no to single-use materials. Along with that, the waste
treatment system meets the B standard - the national technical regulation on
industrial emissions for dust and inorganic substances. Based on the MSCI ESG
Framework, PNJ's environmental criteria is rated at 2.7/4. (Appendix D1).
S FACTORS - SOCIAL
For workers, PNJ has made efforts to automate the processing stages to protect
the workers' health, which contributes to ensuring that products delivered to
Doanh thu
Y-o-y
Revenue
consumers do not contain harmful chemicals.
For personnel, PNJ focuses on building "PNJ common roof culture", developing
Source: PNJ, synthesis team
Human resources that go hand in hand with gender equality, maintaining the ratio
Figure 12: Management Review PNJ
of the structure of management staff value at 9.42%, and compliance with
corporate governance standards. Every year, PNJ has a program to recruit interns
Ban
điều
Executive
hành
Board
to attract talent. In addition, the Management also carefully pays attention to
4
training courses and investments for employees, implementing social projects to
3
2
help support and improve the living standards of the local community. Based on
1
Share
Compen
Quyền
Ban
Compe - the MSCI ESG Framework, the social criterion is assessed at 2.6/4.
0.000
0%
2018
lợi cổ
holders'
đông
interests
2019
2020
2021
0
lương
nsation
thưởng
sation
Board
Board
MACRO, AND INDUSTRY OVERVIEW
MACRO ANALYSIS
Ban kiểm
Audit
toán
Vietnam's economy on the rise - Boosting purchasing power and
consumption
Source: PNJ, team analysis
Vietnam's GDP is forecasted to grow at 6.3% by 2025, in line with the
Government's 5-year GDP growth roadmap for the period 2020-2025 and
Figure 13: PNJ's ESG Review
maintaining the highest growth rate in the area (Figure 14). Along with that,
Quản trị
Administration
4
Vietnam's GDP per capita is forecasted to grow at an average annual rate of 10%
3
from 2022 to 2026, returning and growing positively compared to the period of the
2
Covid-19 epidemic. Thereby, Vietnam is assessed as a country with a potential
1
economy with improved living standards and domestic income in the coming
0
period. Therefore, we believe that the demand for goods in Vietnam has a lot of
growth potential, thereby leading to the development of middle, and high-end
Social
Environment
Xã hội
Môi
trường goods in the coming years.
Committee
Source: PNJ, team analysis
Figure 14: GDP growth
30%
20%
10%
0%
-10%
Việt
Nam
Vietnam
Châu
Á
Asia
Thái
Lan
Thailand
Source: IMF, Statista, synthesis team
Quản tri
Outlook for Vietnam's retail industry - Improving the growth rate
The retail industry in Vietnam is recognized as a bright spot. Vietnam's retail
sales recorded an average growth of 5.44% throughout 2017 - 2020 and slowed
down in 2021 due to the Covid-19 pandemic.
Retail sales in Vietnam will recover in 2022 and grow at a CAGR of
8.02% (Figure 15) until 2026 comes from 3 reasons: (1) Vietnam has controlled
the Covid-19 pandemic, (2) retailers optimize customer experience postpandemic, and (3) the development of e-commerce system. Therefore,
Vietnam's retail industry is expected to improve its growth, opening up new
opportunities and potentials for the jewelry retail companies to develop.
PNJ
Figure 15: Retail revenue
(Trillion VND)
3855
3,45%
2922
2050
2217
2017
2019
2429
2021
2023F 2026F
Source: Euromonitor, 2022
Figure 16: Vietnam - Disposable
Income (USD)
8000
10%
6000
8%
4000
5%
2000
3%
0
0%
Disposable
income
per mỗi hộ gia
Thu
nhập khả
dụng trên
Disposable income per
household
đình
%household
Tăng
trưởng
hằng năm
annual
growth
Inflation
Lạm
phát
Source: Fitch Solution, team analysis
Figure 17: Asia jewelry revenue
(million USD)
300
250
200
150
100
50
0
Source: PNJ, team analysis
0%
-50%
-100%
2017
2018
Vietnam
Việt
Nam
2019
2020
INDUSTRY ANALYSIS:​
Promising industry for famous brands
Jewelry industry in Asia recovery growth after the pandemic- Vietnam still has
room for future growth.
Jewelry industry revenue in Asia (accounting for 2⁄3 of the world jewelry market
share) recorded a decline of more than 15% year-on-year in 2019-2020 and
rebounded by 10% in 2021 (Figure 17). According to Euro-monitor, this estimate for
2021 recovery is a step for the jewelry industry to grow back to pre-pandemic levels
in 2023 and increase its growth rate to 2026. Furthermore, although Vietnam's
jewelry demand in 2021 recovers 10% year-on-year, this demand growth is
significantly slower than that of other countries in the region and slower than the
world’s (Figure 18). Together with the rapid growth of the economy combined with a
positive demographic forecast, the outlook for the jewelry industry in Vietnam is
positive.
Growth in gold consumption demand in ASEAN countries and the world –
Vietnam is the focus of attention
According to WGC, the world's gold consumption demand in Q1 2022 will grow more
than 34% compared to Q1 2021 due to 2 main reasons: (1) global inflation
fluctuates abnormally, and (2) geopolitical instability Southeast Asia,
especially Vietnam recorded a strong recovery with 10% for jewelry demand and
4% for gold bullion and copper demand in Q1 2022, ranking 3rd compared to other
countries in the region, and 10th in the world (Figure 18). Therefore, the growth rate
in gold and jewelry in the Vietnam market is considered to be very potential in the
coming period.
Government and the State Bank’s management of the gold and jewelry market
are increasingly strict
With the demand for gold growing over the years, promoting the Government of
Vietnam to stabilize the gold business market to avoid the phenomenon of
"dollarization" and "goldenization" of the economy, strengthening the community's
belief (Figure 19). During the development period of this industry from 1975 to now,
the Government has issued and revised 3 main decrees on trading gold and the
jewelry market.
​Decree 174/ ND-CP, recently Decree 24/ ND-CP combined with the current situation
have brought stability to the gold and jewelry market, and expressed strict quality
control, thereby expanding development opportunities for large corporations such as
2021
SJC, DOJI, PNJ, BTMC, etc. to develop and expand business networks nationwide.
Figure 18: Growth in demand for
jewelry
50%
The rise of the middle and upper class - The main driving force behind the
middle and high-end jewelry line​
Disposable income per household is forecast to grow to $7,447 in 2026 from $4967
in 2021 with a CAGR of 6.9%, and inflation of 3.2 percent of Vietnam (Figure 16). It
is estimated that by 2026 there will be 55.9% of households with disposable income
above $5,000. The above estimation is still very low compared to many countries in
the region. Although Vietnam is one of the fastest-growing retail markets in Asia,
Vietnam will take a long time to develop.
The middle and upper classes play a large role in the growth of demand for luxury
goods, especially jewelry. In the Vietnamese market, these classes have unique
personalities, and knowledge about fashion, as well as want to assert their position,
so they focus on middle and high-end brands with exquisite quality. With an estimate
of the fast development of the middle and upper classes in the coming period,
jewelry is becoming a bright product in the retail industry in Vietnam.
World
Thế
Giới
Source: WGC, Euromonitor, 2022
PNJ
Figure 19: Gold demand growth
30%
COMPETITIVE ADVANTAGES
As disposable income increases, modern life drives the demand for branded
jewelry. The playgrounds of big guys such as DOJI, Bao Tin Minh Chau, SJC, and
PNJ have been expanded. However, we believe that PNJ will still be the leader in
the branded segment thanks to the unique competitive advantage and differentiated
value that PNJ has built.
20%
10%
0%
-10%
-20%
-30%
-40%
2017
2018
2019
Việt
Nam
Vietnam
2020
2021
Đông
Nam Á
Southeast
Asia
World
Thế
giới
Source: World Gold Council, 2022
Figure 20: Review of brands
Criteria
BTMC
PNJ
Retail
Distributors
Number of
stores
167
342
6000
Location
North
South
Nationwide
Core product Gold jewelry
Gold jewelry
Gold jewelry
Price
Intermediate
- Advanced
Intermediate Advanced
Low –
Medium
Brand value
Medium
High
Low
Fashion
Medium
High-class
Low
Quality
Medium
High
Low
Service
Medium
High
Low –
Medium
Input control
Good
Good
Medium
Production
capacity
Medium
Good
Low –
Medium
Source: Synthesis and team analysis
Figure 21: Growing PNJ's Loyalty
Customer
% growth in loyalty
Source: Company report
Figure 22: Store Coverage of PNJ
Number of stores
Source: Team analysis
Top jewelry brands in every way:
With a brand value of over 33 years and a distribution network overwhelming its
competitors, PNJ quickly prevailed over competitors from small retailers to
institutional distributors like Bao Tin Minh Chau. PNJ pioneered the application of
digital technology in production, management, and sales to improve product quality
and the shopping experience that traditional distributors often leave open. Those
factors help PNJ win customers' trust and expand market share to have a
sustainable differentiating position from its competitors (Figure 20).
Effective vertical integration value chain:
PNJ's ability to control the entire production process is a great competitive
advantage compared to other competitors, especially small jewelry stores. From a
stable supply, a modern production line that makes efficient use of input materials,
and a wide distribution system for both marketing and after-sales services, PNJ
operates effectively by applying advanced technology, digital technology and
training quality human resources. (Appendix B.3, and Appendix B.4)​​.
The most powerful distribution systems
The number of stores of PNJ is superior to that of competitors, which 60% of stores
are located in the South - the region with the best living standards in Vietnam
(Figure 22). Particularly in Ho Chi Minh City, the number of PNJ stores are more
than the number of DOJI and SJC stores combined. PNJ's stores are located in
densely populated locations and on important roads to maximize customers' store
accessibility and enhance brand recognition. In 2020, PNJ restructured and
upgraded its store network and promoted shop-in-shop integration to further
improve the efficiency of the distribution system.
The best team of jewelry artisans in Vietnam
Losing designers and artisans is one of the biggest risks in the jewelry industry but
since 2020 the number of PNJ artisans has increased from 70% to more than 75%
of Vietnamese artisans. Accordingly, the quality of PNJ's products is also
competitive. This also shows that PNJ's human resource policies are extremely
effective.
PNJ
INVESTMENT SUMMARY
Figure 23: Disposable income
growth
8000
60%
50%
6000
40%
4000
30%
20%
2000
10%
0
0%
Disposable income
Thu nhập khả dụng (USD/Hộ gia
above (USD/household)
đình)
% of gia
households
withtrên
%Hộ
đình thu nhập
income over $5,000
5000USD
Source: Fitch Solution, 2022
Figure 24: Integrated value chain
along the Michael Porter model
Main activities
Input
R&D
activ
ities
Dist
Operate ribu
tion
Sell
Lợi
Nhuận
Profit
Activities sub
Human Resource
Management
Technology application
development
Competitive advantage
Source: Team analysis
Figure 25: Growth average net
income of grades 20-34
Source: Euromonitor
Figure 26: Net revenue structure
2017-2021
0%
0%
1%
2%
2%
20%
18%
21%
22%
25%
27%
26%
2%
2%
21%
2%
16%
2%
13%
2%
51%
54%
55%
58%
57%
2018
2019
2020
2021
2017
Khác
Other
Kinh
vàng miếng
Golddoanh
bar business
Bán
sỉ tranggold
sức vàng
Wholesale
jewelry
Retail
silversức
jewelry
Bán
lẻ trang
bạc
Bán
lẻ trang
vàng
Retail
gold sức
jewelry
Source: Company Report
After the evaluation and analysis, we conclude that we recommend BUY PNJ
stocks with the following points: (1) Huge growth potential for the branded ornament
segment when disposable income related to PNJ continued to grow strongly thanks
to great economic development, (2) PNJ owns an economic moat from a unique
vertically integrated value chain.
[1] Huge growth potential for the branded jewelry segment​
The branded jewelry segment is becoming potential in Vietnam, by 2026 Vietnam
is estimated that 55.9% of households will have a disposable income of more than
5,000 USD (Figure 23), outstanding growth compared to 32% in 2021. This is a
potential customer group for the jewelry industry. Furthermore, Vietnam is
projected to grow at an average annual rate of 7.5% in disposable income per
household (Figure 23) which is higher than the IMF's estimate for inflation in
Vietnam by an average of 3.2%. However, the above growth rate is still small when
compared to other countries in the region, so we believe that Vietnam still has
room for growth, leading to the development of the branded jewelry industry in the
future.
[2] Vertically integrated value chain | PNJ's economic moat
Right from the input stage, PNJ has well-controlled costs and risks as PNJ's supply
mainly comes from domestic current customers. Moreover, PNJ owns two valuable
resources that no domestic competitor can compete with at the moment, including
(1) The largest capacity manufacturing factory with modern technology
imported from Germany, helping PNJ achieve have production capacity far
ahead of competitors; (2) The team of artisans is the most advanced when
there are more than 50 designers and accounts for 75% of Vietnamese artisans.
These two resources combined with a large distribution network have helped PNJ
affirm its leading position in the current market. All of the above factors create a
strong value chain that helps PNJ have an absolute competitive advantage over
competitors, thereby achieving better selling prices with lower costs while
maintaining loyalty. of customers (Figure 21). To have such a value chain, in
addition to large capital, effective production management capacity like PNJ is very
difficult to achieve. Therefore, we believe that PNJ's value chain is a sustainable
economic moat that no rival can threaten PNJ's position in the next 5 years,
especially after PNJ successfully mobilized VND 1,425 billion in 2021 to continue
improving production capacity and expand its distribution system.
[3] Style By PNJ and Gen Z - Infinite Growth Potential​
Gen Z and Millennials will be the dominant force driving the ornament market in the
coming years. Therefore, we believe that PNJ will fully exploit the potential of this
customer file through the exclusive product segment Style By PNJ, thereby
consolidating its leading position.
FINANCIAL ANALYSIS
In the financial analysis, we rely on data from 2017 to 2021. 2017 was chosen as the
milestone for PNJ's 10-year long-term development plan (2017-2027).
PNJ
Figure 27:Cơ
Gross
profit
structure
2017cấu lợi
nhuận
gộp 2017-2021
2021
11%
89%
2017
8%
92%
2018
13%
11%
11%
87%
89%
89%
2019
2020
2021
Table: Important Financial Ratios 2017 - 2021
G
Trang
sức
vàng
(bán sỉand
vàretail)
lẻ)
Khác
Gold
jewelry
(wholesale
Others
Gold
jewelry
(wholesale
Source: Company Report, team analysiso
l
Figure 28: Ratio of selling and
administrative expenses to gross
profit of jewelry business 2017-2021
10%
13%
15%
15%
15%
42%
43%
42%
43%
49%
2018
2019
2020
2021
2017
General and administrative
Chi
phí quản lý doanh
nghiệp/Lợi
expenses/Gross
profit
of corenhuận
gộp
mảng cốt lõi
segment
Chi
phí bán
hàng/Lợi nhuận
gộp mảng cốt
Selling
expenses/core
profit
lõi
Source: Company Financial Report
Figure 29: Growth in operating
expenses 2017-2021
100%
80%
60%
40%
20%
Source: PNJ, team evaluates
Gold jewelry retail is the core segment that helps PNJ maintain its leading position
in the whole Vietnam jewelry market
Thanks to the leading number of independent stores (mainly PNJ Gold stores) compared
to industry competitors (Figure 4), product diversification is accompanied by improved
customer care service quality. Over the years, it has created a foundation for the
continuous expansion of the loyal customer base (Figure 21), helping the jewelry
segment's revenue (especially the gold jewelry retail segment with an average weight of
55%) always accounts for a high proportion of PNJ's total revenue (Figure 26). In
addition, the gold jewelry business contributes greatly (an average of about 90%) to
PNJ's total gross profit (Figure 27).
During the 5-year period (2017-2021), PNJ continuously broke records in terms of
revenue and gross profit, while maintaining the No. 1 position in the market even during
the peak period of the COV19 pandemic (2021) - shown by the growth rate of total
revenue, which always maintains a positive number and rebounds by the end of 2021
(from 3% in 2020 to 12% in 2021) when Vietnam begins to relax its social distancing
policy. Therefore, we expect that the retail segment of gold jewelry will always be the
leader and the segment that will help PNJ strengthen its leading position in the future.
0%
-20%
-40%
2017
2018
2019
2020
2021
%Tăng
trưởng
chi phí
bán hàng
% growth
in cost
of sales
% growth
in administrative
%Tăng
trưởng
chi phí quản lý
expenses
doanh
nghiệp
%Tăng
trưởng
chi phí expense
lãi vay
% growth
in interest
Source: Company Financial Report
Figure 30: Structure of total cash
resources in 5 years 2017-2021)
4% 3%
19%
74%
Newmới
short-term
loan
Vay
ngắn hạn
OCF
OCF
Khác
Other
Phát
hành Releases
thêm vàand
ESOP
Additional
ESOP
Source: Company Report
Digital transformation helps PNJ improve operational efficiency and save business
costs significantly
Ever since operating and continuously optimizing the ERP-SAP4HANA resource
management system (early 2019), PNJ saved time to carry out procedures as well as
allocate resources more efficiently, thereby slowing down the growth of operating
expenses, in which the growth rate of administrative and sales expenses was
significantly reduced since it has benefited the most from digital transformation – a
decrease from 51% (2018) to 19% (2021) for selling expenses and decrease from 84%
(2018) to -1% (2021) for general and administrative expenses (Figure 29). In addition, the
ratio of SG&A expenses to gross profit of gold and silver jewelry segment remained
approximately at 43% and 15%, respectively (Figure 28). In the future, we expect retail
and administrative expenses to continue to slow down as PNJ successfully integrates
new digital transformation and resource management systems such as HRM, RFID,
CRM ... in accordance with the company's 2022-2027 orientation.
Gross profit margin grows and remains stable even during the pandemic period
Putting the ERP-SAP4HANA resource management system into operation before the
pandemic helped PNJ optimize the inventory management segment (slightly increasing
0.01 points from 2.07 in 2020 to 2.08 in 2021) and sales – this is a solid fulcrum to help
the company maintain profit margin ranging from 18% to 20% (in which the profit margin
of the gold jewelry segment only decreased slightly by 1% - from 24% to 23%). Besides,
consolidating and expanding the loyal customer file is also important to help PNJ
maintain its profit margin throughout the pandemic. We expect that through inventory
management on the current resource planning system, PNJ will reduce COGS thanks to
strong growth in inventory turnover and make gross profit margin grow significantly in the
future.
PNJ
Figure 31:
Effective working capital investment thanks to the strong self-generating ability
As a company whose inventory to total assets ratio is always above 74%, investment in
inventory is always an extremely important factor to help the company always have
enough supply for the market and serve customers. The new store opening strategy
follows the direction of the management, specifically, each store needs an average
inventory of 11 billion VND (mainly gold jewelry). Therefore, to ensure that the inventory
always keeps up with the market demand, PNJ has increased the limit of annual short-term
loans, and increased the ratio of short-term debt to newly purchased inventory (reaching
55% in 2020 and decreasing to 43% in 2021).
The interest solvency index is always above 4.0, showing that the company is always fully
prepared to pay. The current ratio is always above 1.5, showing that the company fully
meets its ability to pay short-term debt and ensure financial safety during operation. In the
future, we expect PNJ will continue to maintain strong cash flow generation capacity
(Figure 31) and maintain the company's financial safety position thanks to the integrated
ERP-SAP4HANA resource management system with digitization and data analysis
projects underway.
Source: Company report, team analysis
Figure 32 :
Fixed assets – leverage to help PNJ maximize growth potential
With the issuance of additional shares in 2017 and most recently in March 2022, the
company focused on upgrading existing stores, opening new stores, digital transformation,
and expanding and upgrading production lines (specifically upgrading the factory in Go
Vap and expanding production area in Long Hau factory). Thanks to continuously
improving and opening new stores, improving production capacity, and incorporating digital
technology into business management, fixed asset turnover has increased by the end of
2021 (from 18.9 in 2020 to 21.2 in 2021). Therefore, we expect that production and sales
capacity will be further improved when PNJ expands to a production division in Long Hau
and continues to deploy and upgrade the digital system to help manage sales and
distribution. More detailed analysis of customer portraits contributes to expanding the loyal
customer fill.
Table: PNJ 's Dupont analysis
2017
2018
2019
2020
2021
2022F
2023F
2024F
2025F
2026F
2027F
Profit margin
6.6%
6.6%
7.0%
6.1%
5.3%
5.1%
5.2%
5.2%
6.9%
6.9%
6.9%
Total assets turnover
2.40
2.26
1.98
2.06
1.84
1.85
1.98
2.09
2.07
2.06
2.05
1.51
23.9%
1.72
25.6%
1.88
26.1%
1.62
20.4%
1.77
17.1%
1.54
14.6%
1.53
15.6%
1.51
16.5%
1.46
20.8%
1.42
20.2%
1.38
19.7%
Equity multiplier
ROE
Source: PNJ, team evaluates
Source: Company report, team analysis
Figure 33:
Negative operating cash flows in some past years but those are not big concerns
Although the operating cash flow has been continuously negative in the past (Figure 31)
which caused by the increase in inventories, our team believes that this is not a big worry for
the future financial health of the company because the sudden rise in inventory is only in the
short term and is a precautionary strategy of the company against fluctuations in the
domestic gold price as well as the chance of a new disruption to the supply chain. Therefore,
the group expects, this figure will be positive again when Vietnam's economy shows signs of
growth by the end of this year and people start to spend a lot on jewelry shopping.
Dupont decomposition
With Dupont analysis (Figure 32 and Table above), we believe that the main driving force in
improving PNJ's ROE will be its total asset turnover and net profit margin for the following
two reasons. Firstly, the strategy outlined in the company's annual report in the future will be
to keep the leverage ratio stable at a reasonable level. Second, its profit margin will continue
to improve and grow to the 9% mark thanks to the cost reduction that our team explained
above.
Stable dividend policy
We take the arithmetic average of 5-year dividend per share (excluding 2021 because this
figure is an outlier) since the historical data shows us that the dividend policy of PNJ is quite
stable overtime except the pandemic (Figure 33)
Source: Company report, team analysis
PNJ
Figure 34: Business situation, forecast (20212027F), VND billion, %
60,000
21%
20%
50,000
20%
40,000
19%
30,000
19%
18%
20,000
VALUATION
We conduct the stock valuation of PNJ stock by discounted cash flow method FCFF and FCFE. The
recommendation result is BUY for PNJ stock with a target price within 12 months of VND 132,071.
17.08% growth from the closing price of 112,800 VND on November 29, 2022.
Strong recovery after the pandemic, a solid foundation for a breakthrough
In the context of the epidemic, PNJ recorded a strong recovery when business results in 2021 brought
prosperity: Net revenue grew by 11.6% YoY in weak market conditions, and demand and purchasing
power dropped sharply, especially for non-essential goods such as jewelry.
18%
10,000
17%
2027F
2026F
2025F
2024F
2023F
2021
17%
2022F
-
Doanh thu thuần
Net Revenue
Lợi nhuận gộp
Gross profit
Biên lợi nhuận gộp
Gross profit
margin
Source: PNJ, Analysis team
Figure 35: Summary of WACC
E(RM)
12.24%
Rf
4.80%
ERP
7.44%
Lev. Beta
1.06
ke
12.70%
Pre-tax kd
5.36%
Tax rate
20%
Tar. D/D+E
9%
WACC
11.95%
Source: Appendix C.4, Team analysis
Figure 36: Summary table of valuation results
Method
Result (VND)
Weight
FCFE
131,018
33.33%
FCFF
143,972
33.33%
P/E Forward
121,224
33.33%
Result
132,071
Source: Team analysis
Figure 37: Projected FCFF, and FCFE of PNJ
(2022 –2027)
Source: Team analysis
Figure 38: Growth rate of FCFF, and FCFE
(2023-2027)
Source: Team analysis
• Gold jewelry retail: On that recovery momentum, accumulated in the first 5 months of 2022, PNJ
recorded a 50% increase in retail revenue and according to WGC jewelry demand, Vietnamese gold
recovered strongly at 6%. This will be a promise for a strong breakthrough year in the gold jewelry
retail segment of PNJ.
• Retail silver jewelry: Silver jewelry is being narrowed down by PNJ's number of independent stores.
Up to now, PNJ Sliver has only 9 independent stores and will continue to close to switch to a more
streamlined form of Shop in Shop, which predicts a steady growth in the coming years for this
business.
Cost of goods sold is high but will improve over time
With the import of a large amount of wine from abroad, PNJ's gold bar business is contributing to large
revenue, but that is why it causes the problem of high cost of goods sold, resulting in significantly
reduced aggregate. However, the strategy of expanding and focusing on jewelry retailing shortly, in
addition to PNJ's unique production value chain in the industry, will help PNJ be more proactive in the
supply of raw materials, thereby significantly improving cost of goods sold.
Selling and administrative expenses
PNJ will continue to expand stores, invest heavily in customer service and come up with new sales
strategies, helping to attract more customers in the future. Upgrading the business management system
to SAP/ERP will help PNJ manage business activities, thereby significantly reducing selling costs.
Therefore, we expect a steady growth in selling and administrative expenses in the future.
Capital expenditure and depreciation - CAPEX
The management board of PNJ has just made a decision to raise capital by private placement and
collected more than 1,400 billion VND to upgrade the factory, expand the business, open more stores,
conduct digital transformation, etc. The team estimates and has a reasonable allocation of this capital in
future years. Depreciation is calculated using the straight-line method because company use this
method to recognize its depreciation as mentioned in its financial footnotes with tangible fixed assets at
10 years and intangible fixed assets at 3 years.(Detailed in Appendix.C3).
Weight average cost of capital - WACC
Based on the calculation and estimation of 4 factors: (1) cost of capital, (2) pre-tax cost of debt, (3) tax
rate, and (4) expected capital structure, we calculate the WACC to be 11.95% for PNJ (Figure
35). Specifically, the cost of debt is computed by using data updated Q3/2022 to reflect accurately the
current required return by creditors. We use the CAPM method for calculating cost of equity of 12.7%,
based on the assumption that we are from a domestic fund. (Detailed in Appendix.C4).
Long-term (Terminal) growth rate
According to Banking Journal No24/2019, Vietnam is currently developing a Development Stratergy for
the period 2021 – 2030 in the context of international and regional difficulties and fluctuations, including
concerns about political tensions, trade wars, and so on. However, Vietnam remains committed to
implementing the United Nations' 2030 Agenda for Sustainable Development goals.
So, about the Viet Nam economic, the average GDP growth rate is expected to increase from 56% annually (from 2020 to 2030) and GDP per capita is expected to remain at 44.45% annually while labor productivity growth rate is expected to maintain at an annual growth rate of 5
%. Based on those information mentioned above, the long-term growth rate of the
PNJ would normally be accepted at 5.5% since its business is sensitive to Viet Nam economic cycle.
DCF Methodology – FCFF, and FCFE
Our DCF valuation employs the Free Cash Flow to the Firm (FCFF), and Free Cash Flow to Equity
(FCFE) methodology to value PNJ because it allows us to better control over the parameters and
assumptions. We apply a 5-year FCFF, and FCFE, forecasting VND 143,972 per share and VND
131,018 per share respectively (Figure 36). We believe this method best reflects the current situation
and future growing picture of PNJ in specific as (1) PNJ has already stepped into maturity phase,
currently maintain sustainable growth, and (2) we want to examine carefully internal cash flow to
shareholders, and debtholders of the business (Detailed in Appendix.C5, and C.6).
Comparative Methodology – P/E Forward
With the comparative methodology, we don't construct peer groups (relative P/E) in both foreign and
nation for 3 reasons: (1) PNJ is the leading listed company in VN's jewelry industry, (2) jewerly
industry is a specific sector, involving in many different risks related to government, and social; (3) we
are a domestic fund. We also don't use P/E in Vietstock due to (1) the uncertainty calculation,
and (2) biased from only 4 latest quarter historical data. Therefore, we conduct P/E forward from
cummulative present value of FCFF, forecasting VND 121,968 (Figure36, and detailed in Appendix.C.7).
PNJ
INVESTMENT RISKS
Figure 38: Risk Matrix
[O2]
[M3]
[M4]
[O3]
Medium
Strong
Impact
[O1]
Weak
[M2]
Low
Average
[F1]
[M1]
High
Probability
Source: PNJ, team evaluates
[M1] Market Risk| Gold price volatility (High probability, Weak impact)
This is a common risk faced by manufacturing enterprises that import input materials such as PNJ, but
the company is and will focus on promoting the core segment of ornament retail, no longer doing
business with gold bars as before, this will significantly reduce the impact of gold price fluctuations on
PNJ's business results. Besides, the company often plans to buy inventory3-6 months in advance to
ensure the production schedule.
[M2] Market risk| Exchange rate risk (Medium probability, Weak impact)
Because PNJ jewelry export accounts for less than 1% of total revenue over the past 5 years,
exchange rate risk doesn't affect much total sales. However, with the current tighten money policy can
increase the probability of this risk.
[M3] Market Risk| Cyclical Industry (High Probability, High Impact)
The demand for ornament products will increase when the economy develops and people's living
standards increase. On the contrary, when the economy declines, the demand for products will
decrease because this is not an essential item of life. PNJ is aiming to diversify products, always
innovate, catch up with trends to satisfy every customer, and target a customer file with many
segments, thereby dispersing categories of this risk.
[M4] Market risks| Interest rate risk (High Probability, Moderate Impact)
Due to inflationary pressure, the tight monetary policy of the State Bank will be a considerate risk to
PNJ. Our analysis shows that a 1% increase in the average lending interest rate will result in 132,068
VNĐ (17.10% upside from target price). Interest expenses from short-term debt can slow down PNJ's
recovery, although the company already paid off its long-term debt in 2020. We believe that PNJ
can control and maintain loans at an appropriate rate by looking for the most preferential interest rate to
cut costs for businesses due to the leading company in this industry.
[F1] Financial Risk| Large inventory management risk (High probability, Moderate impact)
Inventories are problems that PNJ always faces, however, unlike other retail industries, gold and silver
ornament is a raw material that does not lose value when stored. Looking at the world, ornament
brands all have poor inventory turnover, accounting for a high proportion, so at the current level of PNJ,
although it is not perfect, it is still relatively stable. Also the new ERP system that has been deployed,
promises to help inventory management more effectively in the future.
[O1] Operational Risk| Rapid growth in the number of stores leads to sales cannibalization
risk (Medium probability, Medium impact)
The rapid expansion of retail stores has the potential to lead to the cannibalization of revenue.
However, PNJ always researches the market carefully before expanding the store, in addition, the
prospect of the ERP system will help reduce costs, thereby maximizing revenue per store.
[O2] Operational Risk| Products largely depend on the artisans (Low probability, Strong impact)
Designers, especially artisans, play an important role in the product quality and reputation of a
ornament company. PNJ currently owns about 75% of the artisans in Vietnam. Because of the high
dependence, the loss of artisans to competitors in the industry is said to be the "fatal" point of PNJ,
because it directly affects the existence of the business. However, being aware of that early on, PNJ
has always developed many remuneration policies (including ESOP) for artisans and created an
internal culture - hereditary to protect strategic assets. The company also recruits new artisans and
provides on-the-job training to build new generations of artisans.
[O3] Operational Risk| Risk of new entrants (Low probability, Medium impact)
Risks from competition due to new competitors entering the industry are always an issue that
businesses must take into account if they want to develop strongly and sustainably in the future.
However, for the ornament market, the Government does not intend to open this market to foreigners
due to the sensitivity of the market. Therefore, from the perspective of newcomers in the country, then:
Capital, technology, prestige and experience are the main barriers to entering the market. However,
with the current size of more than 300 stores and the goal of 500 stores by 2025, an estimated capital
expenditure of VND 5,000 billion and the need for at least 20 years of PNJ experience, opportunities for
new competitors to compete are very low.
PNJ
LIST OF APPENDICES
A – Finance
B– Industry and
Competition
C– Assumptions, and
Valuations
D– Governance and
ESG
1. Income Statements, and
Financial Ratios
1. Industry structure
1. Revenue by segments
1. ESG Assessment
2. Balance Sheets
2. Industry value chain
2. Performance Ratios
2. Appraisal of the apparatus
3. Cash Flow Statements
3. Michael Porter value chain
analysis
3. Capital expenditure,
depreciation
4. Altman’s O Z-score
4. Compare competitive
advantages
4. WACC calculations
5. Beneish’s M-score
5. Michael Porter's 5
Competitive Forces
Assessment
5. DCF Valuation, and P/E
Forward
6. Piotroski’s F- score
PNJ
APPENDIX A.1 - INCOME STATEMENTS AND FINANCIAL RATIOS (2021 - 2027F)
Unit: Billion VND
Net Revenue
2021
2022F
2023F
2024F
2025F
2026F
2027F
19.547
23.661
28.306
33.910
39,322
45,688
53,186
24%
20%
20%
20%
20%
20%
14.031
17.118
20.884
25.479
31.084
37.924
Growth rate
Business segment
Retail gold ornament
11.225
Growth rate
25%
22%
22%
22%
22%
22%
386
456
524
603
693
797
917
2%
2%
2%
2%
2%
2%
2.617
2.879
3.109
3.358
3.627
3.917
4.230
10%
8%
8%
8%
8%
8%
4.842
6.295
7.554
9.065
10.878
13.053
15.664
30%
20%
20%
20%
20%
20%
COGS
15.949
19.402
23.211
27.806
32.542
39.082
46.987
Gross profit
3.589
4.259
5.095
6.104
8.136
9.770
11.747
Selling expenses
1.688
1.893
2.264
2.712
3.254
3.908
4.698
501
709
849
1.017
1.220
1.465
1.762
1.306
1.526
1.847
2.236
3.521
4.252
5.135
16
7
8
10
9
10
9
Retail silver ornament
Growth rate
Wholesale gold ornament
Growth rate
Gold Bars
Growth rate
Management costs
Net profit from operating
activities
Financial revenue
Other profits
EBIT
Interest expenses
-27
-4
-4
-4
-4
-4
-4
1.383
1.646
1.967
2.356
3.641
4.372
5.255
104
124
124
124
124
124
EBT
1.279
1.521
1.843
2.231
3.517
4.247
5.130
CIT
259
308
374
452
713
862
1.041
9
4
4
4
4
4
1.029
1.209
1.465
1.774
2.799
3.381
4.085
0
0
0
0
0
0
0
Attribute to owners of the
parent company
1.029
1.209
1.465
1.774
2.799
3.381
4.085
EPS (đ)
4.197
3.501
4.186
4.981
7.719
9.188
10.93
EBITDA
1.485
1.756
2.112
2.520
3.825
4.575
5.477
Depreciation
75.118
109.825
144.532
164.659
183.794
202.928
222.063
Tax deferred
Net income after CIT
Minority interests
PNJ
APPENDIX A.1 - INCOME STATEMENTS, AND FINANCIAL RATIOS (2021 - 2027F) (Continued)
2021
2022F
2023F
2024F
2025F
2026F
2027F
Gross profit margin
18.41%
18%
18%
18%
20%
20%
20%
Net profit ratio
ROE DuPont
5.26%
18.29%
5.11%
16.91%
5.18%
16.58%
5.23%
17.64%
6.87%
22.80%
6.91%
22.09%
6.94%
21.78%
ROA DuPont
10.77%
10.33%
10.80%
11.62%
15.37%
15.35%
15.36%
Unit: Billion VND
Profitability Ratios
EBIT/Revenue Ratio
7.08%
6.96%
6.95%
6.95%
8.95%
8.95%
8.95%
Net income/EBT
80.44%
79.45%
79.49%
79.53%
79.59%
79.60%
79,62%
EBT / EBIT
92.46%
92.43%
93.67%
94.71%
96.46%
96.95%
97.38%
Total asset turnover
2.05
2.02
2.09
2.22
2.24
2.22
2.21
Financial leverage
1.70
1.64
1.53
1.52
1.48
1.44
1.40
Performance Ratios
1.2
1.2
1.2
1.2
1.2
1.2
1.2
Number of days in
inventory
175.1
170.7
158.5
149.7
141.0
133.3
126.4
Number of days payable
13.3
13.0
13.0
13.0
13.0
13.0
13.0
Cash cycle
163.0
158.9
147.7
137.9
129.2
121.5
114.6
1.8
2.1
2.1
2.3
2.5
2.6
2.8
Liability/Assets
0.3
0.2
0.2
0.2
0.1
0.1
0.1
Liability/Equity
0.5
0.3
0.3
0.2
0.2
0.2
0.1
Bank Liability/Equity
0.5
0.3
0.3
0.3
0.2
0.2
0.1
Firms' Liability/Equity
0.0
0.0
0.0
0.0
0.0
0.0
0.0
Interest Coverage Ratio
13.3
13.2
15.8
18.9
28.3
32.8
38.2
Number of days receivable
COGS / Inventory
Financial leverage
APPENDIX A.2 - CASH FLOW STATEMENTS (2021 - 2027F)
Unit: Billion VND
Beginning Cash
Profit after tax
+ Depreciation
+ Adjustment
+ Change in working capital
Cash from business activities
2021
422
1,029
75
65
-1,862
-722
2022F
355
1,209
110
-113
-766
512
2023F
1,771
1,465
146
-95
-1.139
402
2024F
1.,721
1,775
165
-111
-609
1,256
2025F
2,525
2,703
184
-158
-101
2,680
2026F
4,754
3,156
203
-227
-1,499
1,723
2027F
6,153
3,690
222
-288
433
3,296
+ Liquidation of fixed assets
13
5
5
5
5
5
5
-61
-228
-182
-182
-182
-182
-182
0
0
0
0
0
0
0
0
-48
-177
1.524
883
0
-223
-530
1.403
0
0
-177
-530
1.634
0
0
-177
-530
1.634
0
0
-177
-530
1.634
0
0
-177
-530
1.634
0
0
-177
-530
1.634
0
+ Expenses for purchasing fixed
assets
+ Increase (decrease)
investment
+ Other investment contracts
Cash from investment activities
+ Dividends paid
+ Increase (decrease) capital
+ Change in debt
+ Other financial activities
Cash from financial activities
Total cash flow
Ending cash
0
0
0
0
0
0
0
704
-67
355
1,216
1,415
1,771
-275
-49
1,721
-275
804
2,525
-275
2,228
4,754
-275
1,272
6,026
-275
2,844
8,871
PNJ
APPENDIX A.3 - FINANCIAL STATEMENTS (2021 - 2027F)
Unit: Billion VND
Cash & Cash equivalents
Short-term investments
Short-term receivables
Inventory
Other current assets
Current assets
Historical cost tangible fixed
assets
Accumulated depreciation
Net tangible fixed assets
Long-term investments
Other long-term assets
Construction in progress
Non-current assets
TOTAL ASSETS
Short-term trade accounts
payable
Short-term borrowings
Bonus and welfare fund
Short-term liabilities
Long-term borrowings
Other long-term borrowings
Long-term liabilities
TOTAL LIABILITIES
Share premium
Owners' capital
Undistributed earnings
OWNERS' EQUITY
TOTAL RESOURCES
2021
355
0
112
8,754
70
9,292
2022F
1,770
0
161
9,392
81
11,405
2023F
1,721
0
187
10,894
80
12,882
2024F
2,525
0
213
11,913
79
14,730
2025F
4,754
0
230
12,394
79
17,457
2026F
6,026
0
273
14,301
81
20,682
2027F
8,870
0
324
15,161
84
24,440
634
817
1,001
1,185
1,368
1,552
1,735
-374
259
0
302
31
1,326
10,619
-454
363
0
233
29
1,384
12,879
-553
448
0
253
27
1,449
14,331
-671
514
0
266
25
1,488
16,218
-808
560
0
270
22
1,499
18,956
-964
588
0
265
20
1,488
22,164
-1,139
596
0
258
18
1,446
25,886
680
691
827
990
1,120
1,302
1,515
2,722
126
4,563
0
0.519
43
4,606
991
2,276
1,949
6,012
10,619
2,722
131
4,489
0
0.555
9
4,498
2,242
3,282
1,810
8,292
12,790
2,722
147
4,895
0
0.555
9
4,904
2,242
3,282
2,691
9,375
14,279
2,722
177
5,360
0
0.555
9
5,369
2,242
3,282
3,782
10,744
16,114
2,722
244
5,820
0
0.555
9
5,829
2,242
3,282
5,520
12,968
18,797
2,722
304
6,331
0
0.555
9
6,340
2,242
3,282
7,517
15,610
21,950
2,722
363
6,858
0
0.555
9
6,867
2,242
3,282
10,056
18,748
25,616
PNJ
APPENDIX A.4 – ORIGINAL ALTMAN Z-SCORE QUANTITATIVE MODEL
We use the Original Altman Z-Score (O Z - score) quantitative model proposed by Altman in 1968 to assess the probability of
bankruptcy of PNJ in the next 2 years with a correct probability of 94% within 1 year and 74% within 2 years. This model is
applied to PNJ because the company has a production and trading model, and the company is listed on Vietnam's HOSE.
[1] The model of Altman (2000) and Altman et al. (2007) includes 5 variables as follows:
O Z - score = 1.2A + 1.4B + 3.3C + 0.6D + 1.0E
In which:
A = (Current Assets - Current Liabilities)/Total Assets​
B = Undistributed profit after tax/Total assets
C = Profit before interest and taxes/Total assets
D = Book value of equity/Book value of total liabilities​
E = Total net sales/Total assets
[2] Interpret the results:
O Z - score < 1.81
1.81 < O Z - score < 2.99
2.99 < O Z - score
Financial stress zone
Warning zone
Safe zone
Enterprises in dangerous areas, high risk of
bankruptcy
Enterprises in warning zones are at risk of
bankruptcy
Enterprises in a safe area, not in danger of
bankruptcy yet
[3] Result:
PNJ's O Z-score in the past 5 years has always been greater than 2.99, which means that the company is still in a safe financial
zone and is not in danger of bankruptcy within the next 2 years​​.
APPENDIX A.5 – BENEISH M-SCORE QUANTITATIVE MODEL
We use the Beniesh M-score (M - score) quantitative model published by Professor Messod Beneish in 1999 to identify the risk of
manipulating the profit value on the financial statements of PNJ. The team applies both 8-variable and 5-variable models to have
a more multi-dimensional view of the company's ability to manipulate profit value. Enterprises are classified as risk-adjusted
earnings if M-Score > -2.22 with a 5-variable model and M-Score > -1.78 with the 8-variable model.
[1] The Beniesh’s M-score model includes 8 variables and 5 variables, respectively, as follows:
M - Score = -4.84 + 0.92 * DSRI + 0.528 * GMI + 0.404 * AQI + 0.892 * SGI + 0.115 * DEPI – 0.172 * SGAI + 4.679 * TATA –
0.327 * LVGI
M - Score =-6.065 + 0.823 * DSRI + 0.906 * GMI + 0.593 * AQI + 0.717 * SGI + 0.107 * DEPI
[2] Interpret the results:
[3] Result:
PNJ's M-score (5 variables) in the
past 4 years has always been less
than -2.22, which means that the
company's financial statements show
no signs of profit manipulation.
However, only the M-score (8
variables) in 2020 is less than -1.78.
Therefore, our team decided to
classify PNJ in the group with a low
ability
to
manipulate
financial
statements.
PNJ
APPENDIX A.6 – PIOTROSKI F-SCORE SCORE MODEL
The Piotroski F-Score Scorecard was developed by Professor Joseph D. Piotroski and introduced to the public for the first time in
2000. He has developed a set of rules for finding businesses with financial health in terms of profitability, capital structure,
liquidity and operational efficiency. Therefore, we use this scorecard to take a deeper look at PNJ's financial health in addition to
using the quantitative O Z - score model..
F- SCORE = F-ROA + F-CFO + F-ΔROA + F-ACCRUAL + F-ΔLEVER + F-ΔLIQUID + EQ_OFFER + FΔMARGIN + F-ΔTURN
Interpretation of results from 2018 to 2021
PNJ's F-score from 2018 to 2021
Diễn giải kết quả từ năm 2018 đến 2021
2021
2020
2019
2018
0
1
2
3
bình
Yếu
Weak Trung
Average
4
5
Mạnh
Strong
6
7
8
F-SCORE
của PNJ
PNJ’s F-score
Conclusion: In general, PNJ's financial position is in the average range in 2021 and 2020, the above results are consistent with
the data and conclusions in the financial analysis.
9
PNJ
APPENDIX B.1 - INDUSTRY STRUCTURE
MANUFACTURING
Exploit
Screenin
g
Producer
DISTRIBUTION
Distributors
Retailers
CONSUMPTION
RECYCLING
Consumers
Product
Scrap
gold
collector
Waste
Waste
APPENDIX B.2 - INDUSTRY VALUE CHAIN
Industry value chain
Supply
Distributors
Materials
o Raw material
gold
o Gold Bars
o Gemstone
o Diamond
Retailers
Big brand
DOJI, SJC, PNJ,
Bảo Tín Minh Châu
Store
Client
Physical store
Cửa hàng vật lý
o Product display
o Product consulting
Leading:
Demand
DOJI, SJC, PNJ,
SBJ
Origin
Small shop
o Domestic
(mostly)
o Import:
Hongkong, India,
Small retail stores
that source from
industry-leading
distributors
Ecommerce
o Product
introduction
o Advertising,
Marketing
o Jewels
o Accumulate gold
bars
o Buy wholesale
PNJ
APPENDIX B.3 - ANALYSIS OF PNJ VALUE CHAIN BY MICHAEL PORTER MODEL
SUPPORTED ACTIVITIES
Human Resource Management
Policies to attract attractive talents:
- PNJ talent network
- ESOP
- Attractive salary benefits
Technology Development & Application
Leveraging technology to optimize the operation process, customer analysis
- Big Data: Analysis of consumption trends
- Camera AI: Analyzing customer behavior
- SAP S/4HANA: Improving management capacity
- Manufacturing factory (PNJP) with the largest capacity in Vietnam
Operation&Production
Input
Raw
materials &
supplies
-
-
Purchase of
raw material
gold and
silver,
preferential
import tax
rates for
raw gold
PNJLap
checks
input quality
Product
research &
developme
nt
Output
Operation &
Production
Distributio
n
-Using
technology to
analyze
fashion needs
and trends
-Technology: 2 jewelry
factories: PNJP - Ho Chi
Minh City (the largest in
Vietnam), PNJP - Long
An
- 342 stores
from North to
South
- More than 50
leading
professional
designers in
Vietnam
- Human:
-More than 1000
artisans
-More than 150 artisans
make up 75% of
Vietnamese artisans
- Inventory
management
system: SAP
S/4HANA,
AI.
Marketing &
Sales
- Technology
application has
increased sales
efficiency
- Diversified
products.
- Comprehensive
customer
experience with
- Big brand with
wide store scale.
MAIN ACTIVITIES
Conclusion:
Revenue growth, not creating a sustainable competitive advantage. The core issue of creating sustainable profits
is the difference so that competitors in the industry cannot "imitate".
Through the process of evaluating and analyzing PNJ's value chain according to Michael Porter's method, we
found that there are 3 core factors that help PNJ affirm its competitive advantage: (1) Distribution system and
brand strong brand, (2) strong production and supply capacity, (3) research and development of unique
product models
APPENDIX B.4 - COMPETITIVE ADVANTAGES
Criteria
BTMC
DOJI
SJC
PNJ
Retail Distributors
Number of stores
167
196
58
342
6000
Location
North
Nationwide
Nationwide
South
Nationwide
Core product
Gold jewelry
Gold Jewelry - Diamond
Gold Bars
Gold jewelry
Gold jewelry
Price
Intermediate Advanced
Intermediate - Advanced
Intermediate
Intermediate - Advanced
Low – Medium
Brand value
Medium
High
High
High
Low
Fashion
Medium
Advanced
Medium
Advanced
Low
Quality
Medium
High
High
High
Low
Service
Medium
High
Medium
High
Low – Medium
Input control
Good
Medium
Good
Good
Medium
Production capacity
Medium
Medium
High
Good
Low – Medium
PNJ
APPENDIX B.4: MICHAEL PORTER'S 5 COMPETITIVE FORCES ANALYSIS
Point ladder
0: No effect
1: Insignificant degree of influence
2: Low level of influence
3: Medium Influence
4: Significant degree of influence
5: High level of influence
1. Threats to enter the industry: LOW
The jewelry industry is an industry with high barriers to entry due to (1) the State's regulations on the gold
market are becoming more and more stringent, such as Circular 22/2013/TT-BKHCN regulating the gold quality
and Decree 24/ 2012/ND-CP manages gold trading activities. (2) Restrictions on the number of artisans.
Meanwhile, PNJ has accounted for more than 75% of Vietnam's artisans. Moreover, for a new competitor to
achieve a position like PNJ, the minimum investment capital is also up to more than 10,000 billion. Therefore, we
rate the entry threat to PNJ as LOW.
2. Threat of buyers: MEDIUM
Low product switching costs make the power of jewelry buyers stronger. The reason is that PNJ focuses on the
mid-high-end segment, but Vietnam's per capita income is currently at an excellent average level. Therefore,
customers can convert their purchases to retail jewelry stores. However, with the strategy of diversifying brands
suitable for each customer segment, plus the PNJ brand in terms of distinctive designs and sales services, PNJ can
control the power of buyers and even create a community of loyal customers. Therefore, we cautiously rate the
threat level from buyers as MEDIUM.
3. Threat of sellers: LOW
We rate the threat to sellers as LOW due to: (1) PNJ's raw material supply is always abundant with low
switching costs. More than 50% of PNJ's revenue comes from jewelry gold, and PNJ's raw gold is mainly from
current customers or other domestic sources. (2) Macro context: To deal with persistent inflation in the future, the
US will continue to raise interest rates, causing the dollar to appreciate day by day, then investment demand, and
gold holdings decrease, and supply becomes abundant with low prices. (3) Big brand names and large customer
communities give PNJ the strength to negotiate with better suppliers.
4. Competitors: MEDIUM
In addition to big names such as DOJI, SJC, and BTMC, PNJ also have to face more than 6000 retail ornament
stores with better price competitiveness. Despite being the leader of the ornament market in the southern provinces,
60% of PNJ's stores are still threatened by DOJI's expansion after DOJI acquires Diamond World 2020. In the North,
Bao Tin Minh Chau holds the upper hand in both market share and brand. In addition, emerging baby brands are
constantly popping up such as KAT ornament, Shimmer, and Floral. Still, most of them focus on the low-end
segment and mainly outsource or import existing models, so there is nothing to worry about. PNJ has a more
competitive advantage from vertical integration, controlling the entire production process to minimize costs.
5. Substitute: LOW
We rate the possibility of substitute products as LOW because in nature it is difficult to find a metal or alloy with
similar properties to gold but with low mining and processing costs.
PNJ
APPENDIX C.1 – REVENUE BY SEGMENTS (2021- 2027F)
Once it has gradually recovered strongly due to short-term instability issues, in the future, with a strategy of focusing,
investing in strongly developing the retail business, reducing the proportion of non-essential segments such as
wholesaling or gold bar segment that brings low gross profit, PNJ will continue to affirm its top 1 position in the jewelry
segment not only in the country but also in the world.
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
2021
2022F
Retail Gold
Trang sức vàng lẻ
Ornament
2023F
Retail Silver
Trang sức bạc
Ornament
2024F
2025F
2026F
Wholesale Gold
Trang
sức vàng sỉ
2027F
Goldmiếng
Bars
Vàng
Ornament
Source: Synthesis and analysis group
APPENDIX C.2 – PERFORMANCE INDEX (2021 – 2027F)
Jewelry, gold, silver and gems are industries with fast payment characteristics in the retail industry, so the number
of days receivable is not high, it is forecasted to keep a stable level over the years. Inventories still account for a
high proportion of assets, especially in 2022 when it is anticipated that the proceeds from the issuance will be
disbursed to spend on business expansion. Later, when the set goals (number of stores, factories, software
investment, ..) combined with the management efficiency of the ERP system, the reduction in inventory turnover will
be expectable.
2021
2022F
2023F
2024F
2025F
2026F
2027F
1,2
1,2
1,2
1,2
1,2
1,2
1,2
Number
of days in
inventory
175,1
170,7
160,0
149,7
141,0
133,3
126,4
Number
of days
payable
13,3
13,0
13,0
13,0
13,0
13,0
13,0
Number
of days
receivable
Source: synthesis and team analysis
PNJ
APPENDIX C.3 – CAPITAL EXPENSE, DEPRECIATION (2021 – 2027F)
According to the NQHĐQT on March 31, on approving the results of a private placement of 15 million shares to
upgrade the factory (currently factories are operating at maximum capacity, PNJ plans to invest in increasing the
capacity of Long Hau factory. 1-2 more lines), business expansion (increase in number of stores, brand
investment, customer service), digital transformation, etc. and the capital use plan was approved at NQ No. 484
days December 27, 2021, the team calculates the ratio of the actual capital obtained from it, and then allocates it
to reasonable asset categories. Depreciation is used on a straight-line basis over 10 years for tangible fixed
assets and 3 years for intangible fixed assets. Land use rights are not amortized.
Unit: Billion VND
2021
2022F
2023F
2024F
2025F
2026F
2027F
Total fixed asset expenditure
233
233
233
233
233
233
233
3
3
3
3
3
3
3
125
125
125
125
125
Average Cost/Store
Inventory
125
125
Factory upgrade cost
58
58
58
58
58
58
58
Digital conversion cost
47
47
47
47
47
47
47
Depreciation of current fixed assets
61
61
61
61
61
61
61
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
Depreciation of fixed assets invested more from
2022
Depreciation of fixed assets invested more from
2023
Depreciation of fixed assets additional
investment from 2024
Depreciation of fixed assets additional
investment from 2025
Depreciation of fixed assets additional
investment from 2026
Depreciation of fixed assets additional
investment from 2027
19
Total Depreciation
61
80
99
Depreciation of current intangible fixed assets
15
15
15
16
16
16
…
…
…
Depreciation of intangible fixed assets added
from 2022
…
118
137
156
175
…
…
…
Depreciation of intangible fixed assets added
from 2027
Total Depreciation
16
15
30
46
47
47
47
47
PNJ
APPENDIX C.4 – WACC CALCULATION
Weighted Average Cost Of Capital (WACC): Based on the calculation and estimation of 4 factors: (1) cost of
capital, (2) pre-tax cost of debt, (3) tax rate, and (4) expected capital structure, we calculate the WACC to be
11.95% for PNJ. Specifically, the cost of debt is computed by using data updated Q3/2022 to reflect accurately the
current required return by creditors. For the cost of equity, we use the CAPM method based on the assumption that
we are from a domestic fund.
Weighted Average Cost Of Capital (WACC) calculations, and assumptions
Annual market return E(RM)
12.24%
Arithmetic average return of VN-Index (2017 2022).
We use annual returns to avoid biased by increase
significantly Q4/2020 - Q1/2022, and sudden
decrease in Q1-Q4/2020, and Q2-Q3/2022.
Risk - free rate (Rf)
4.80%
Historical Equity Risk Premium
7.44%
Levered Beta
Market Capitalization
1.06
Annual VN 10-year G-Bond, updated 29/11/2022
Calculate by regression, and assume alpha = 0.
27,749,032,480,800VN
Đ
Based on closed price on 29/11/2022,
and actual outstanding shares from Resolutions of
PNJ’s
BoDs
No.
505/2022/NQ-HĐQT-CTY
(29/08/2022).
Cost of equity
12.70%
We are a domestic fund, so we calculate the cost
of equity based on the domestic CAPM model.
Pre-tax Cost of debt
5.36%
Average interest rate from short-term debt of 10
banks lending to PNJ (Q3/2022).
Long-term debt is fully paid in 2020.
Tax rate
20%
Average effective tax rate 2017 - 2021, and
assume tax rate not change, and not above 20%
Target D/D+E
9%
Based on our calculation and analysis until the end
of 2022
Assumption capital structure is not change over the
next 5 years to simplify the calculation.
WACC
11.95%
Source: Synthesis by the authors.
PNJ
APPENDIX C.5 – DISCOUNTED CASH FLOW VALUATION: FCFF
Basic Assumptions
Valuation date:
29/11/2022 WACC
11.95%
Last fiscal year end date
31/12/2021 Cost of equity
12.70%
Year fraction
8.77% g
5.50%
With assumptions above, we use a 5-year FCFE for PNJ.
FCFF: VND Billion
Net income
Income tax expense
Interest expense
2021A 2022F
2023F
2024F 2025F 2026F 2027F
1,029
1,209
1,465
1,775
2,703
3,156
3,690
250
313
378
457
693
809
945
104
125
125
125
125
125
125
1,647
1,317
223
228
1,968
1,574
177
182
2,356
1,885
177
182
3,521
2,816
177
182
4,090
3,272
177
182
4,759
3,807
177
182
766
1,139
609
104
1,499
444
546
0.09
1.00
546
430
1.09
0.88
381
1,271
2.09
0.79
1,004
2,707
3.09
0.71
1,911
1,768
4.09
0.63
1,114
3,359
5.09
0.56
1,891
EBIT before tax
1,384
EBIT after tax
1,107
Add: Dep & Amor Expense
48
Minus: Capex
61
Minus: Change in net
1,863
working capital
FCFF
-769
Discount Period
Discount factor by WACC
Present value of FCFF
Intrinsic stock value by FCFF: VND Billion
Cummulative PV(FCFF)
6,847
Terminal value
54,941
PV(Terminal value)
30,937
PV(Total operating assets)
37,784
Add: Cash and Cash equi.
355
Minus: Debt
2,722
Equity value
35,417
246,002,061
Number of outstanding share
(shares)
Intrinsic stock value
143,972 (VND)
APPENDIX C.6 – DISCOUNTED CASH FLOW VALUATION: FCFE
With assumptions above, we use a 5-year FCFE for PNJ.
FCFE: Billion VND
2021A
FCFF
-769
Minus: After-tax Interest Ex.
84
Add: Net debt borrowing
883
FCFE
30
2022F
546
100
0
447
2023F
430
100
0
331
2024F
1,271
100
0
1,171
2025F
2,707
100
0
2,608
2026F
1,768
100
0
1,668
2027F
3,359
100
0
3,259
Discount period
0.09
1.09
2.09
3.09
4.09
5.09
Discount factor by ke
0.99
0.88
0.78
0.69
0.61
0.54
442
290
912
1,803
1,023
1,774
PV(FCFE)
Intrinsic value by FCFE: Billion VND
Cummulative PV(FCFF)
6,244
Terminal value
47,747
PV(Terminal Value)
25,986
Equity value
32,231
246,002,061
Number of outstanding share
(shares)
Intrinsic value
131,018 VND
APPENDIX C.7 - COMPARABLE VALUATION – P/E FORWARD
With assumptions, and calculation from FCFF above, we use P/E Forward for PNJ.
Implied Equity Value and Share Price
(VND, except per share)​
Enterprise Value
Less: Total Debt
Enterprise Value (VND)​
Cumulative PV(FCFF)​
6,846,992,147,901​
Terminal Value
54,940,817,728,806​
Discount Factor
0.56​
PV(Terminal Value)​
Enterprise Value
30,936,861,831,315​
37,783,853,979,216 ​
37,783,853,979,216​
2,572,853,698,078​
Plus: Cash and Cash Equivalents
1,770,714,998,585
Implied Equity Value
42,127,422,675,879​
Number of share outstanding
Price per Share
Earnings per share 2022P​
Forward P/E 2022P​
Intrinsic value
Gain from Pain Venture
246,002,061​
171,248​
4,915​
34.84x​
121,968 VND ​
PNJ
APPENDIX D.1: ENVIRONMENTAL, SOCIAL AND GOVERNANCE ASSESSMENT
To estimate the environmental, social, and governance quality of the company, each board of directors committee is estimated on a scale of
1 to 4 based on the roles they must fulfill and the standard corresponding to several this role as listed in the MSCI and CFA Institute
Governance Manual for Investors. The following table summarizes the above analysis. How to calculate points:
1 – Company which is not up to standard
3 – Company which is up to standard
2 – Company which is not quite up to standard
4 – Company which has standards-based excellence policies
MSCI FRAMEWORK: ENVIRONMENTAL AND SOCIAL
Environmental
Criteria
Carbon footprint
Description
How does the company's manufacturing activities affect
the carbon footprint?
Points
CO2 emissions
How does the company control CO2 emissions?
3
Financial impact
studies
How much did the company spend on reducing its
environmental impact?
2
PNJ is spending a large budget in sludge from septic tanks and
centralized wastewater treatment systems.
Water use
How does the company treat the wastewater system?
3
At PNJP & PNJ-LH, water is now reused at the Plating Team. Water is
filled in the tubs to clean the product. Used water in the following sinks
is used at the previous sinks until it is no longer usable.
2
Corporate Policy
Emissions from water and wastewater treatment systems mainly come
from cooking unit 1 and the air duct of cooking room 2. PNJ is using
an industrial exhaust gas treatment system that meets the B standard
- National Technical Regulation on industrial emissions of organic
substances to deal with emissions and carbon footprint.
Recyclable waste will be sold to waste recycling units in the city. For
non-usable waste, corporate contracts with Go Vap District Public
Service Company Limited to collect, transport and dispose in
accordance with applicable law. Hazardous waste is collected and
stored separately to comply with the law.
All inputs have been tested with PNJ Lab, which collects source
materials from within the country with a sustainable and abundant
supply.
Biodiversity & Land
Use
Is the company involved in environmental degradation?
2
Sourcing materials
How does the company source raw materials?
2
Waste and Toxic
emissions
How does the company control waste and toxic
emissions?
3
The company's drainage and wastewater treatment system is
designed to be closed so that the environmental impact is negligible.
Resource Saving
How does the company use natural resources in
production?
3
PNJ is at the top for efficient and economical use of natural resources
for sustainable development
Does the company use biodegradable plastics?
4
PNJ launched the movement "Say no to single-use plastic".
3
PNJ converts gas and gasoline vapor welding technology to NH3,
continues to spend investment costs in saving initiatives and
upgrading industrial emission treatment systems
Packaging of raw
materials
Does the company have an opportunity to use eco-friendly
The opportunity to
technology and is it maintaining that use?
use clean technology
2.7
Average
Social
Labor management
Does the company get along with employees?
3
Building good relationships with employees through offering attractive
benefits, flexible working environment.
Human resource
development
Does the company have good human resource
development?
3
The unit leader/head is responsible for developing and organizing the
training and team development programs of their unit.
Health & Safety
How well does the company ensure employee safety?
2
No cases of occupational diseases have been recorded. PNJP is the
organization responsible for monitoring and evaluating, ensuring labor
safety. All health reports must be submitted to the Executive Board
periodically.
Safe & Quality
Products
Do the products manufactured by the company meet the
necessary standards? Does it meet international
standards?
3
PNJ and CAO gold jewelry and art products do not contain substances
harmful to customers' health
Chemical safety
As a manufacturer, can the company control hazardous
and polluting materials well?
3
PNJ is using industrial emission treatment system; regularly clean
production facilities to control harmful materials.
Responsible
Investment
Does the company make efforts to ensure accountability in
the investment?
2
PNJ focuses on bringing iconic products to users, especially women.
Data Protection and
Privacy
Does the company have reasonable and in-depth
safeguards in place to protect data for customers and
suppliers?
2
PNJ has a consumer privacy policy, data is stored at the PNJ level 1
safety center
Health care
Does the company provide good quality healthcare?
2
Having health checks for employees, regular and thorough staffing of
such examinations should be enhanced.
Opportunities in
Health and Nutrition
Does the company provide good quality healthcare?
4
PNJ builds an internal culture, sports activities for employees and
tests the knowledge of kitchen staff to ensure food safety.
Spiritual well-being
Does the company provide healthy options such as a gym
or sports activities?
2
PNJ has teambuilding programs deployed every year to improve
employees' mental health.
Total
2.6
PNJ
APPENDIX D.1: ENVIRONMENTAL, SOCIAL ANDGOVERNANCE ASSESSMENT (CONTINUED)
CFA INSTITUTE FRAMEWORK: GOVERNANCE
Executive Committee
Criteria
Independence
Accountability
Reaction
Description
Board members must be willing and able to scrutinize
management performance and establish reasonable
compensation.
Reflecting the ability of the Board of Directors to answer
questions of the owners
The board of directors responds to the wishes of the
shareholders, which may be through an election or a vote on
the shareholder's proposals. The board of directors must act
in accordance with those recommendations
Points
3
There are 3/9 independent members of the Board of Directors and 3
non-executive members.
3
The accountability and fiduciary duties of the Board of Directors are
clearly shown.
3
All shareholder rights must be guaranteed, especially the ability to
access information, the right to vote, financial interests, the right to
participate in important decision-making processes.
Ability
The board of directors operates the business with specific
skills or relevant expertise in a given area
3
Elections
Annual Board of Directors election
4
BoD meeting
attendance
Attend fully at the Board of Directors and Board of
Management meetings
4
Board of Directors
Reasonable number of BOD members
3
Election
Transactions with
related parties
Member of the
Board of Directors
The majority vote in the election of the Board of Directors
4
No significant related-party transactions
3
The number of members in the Board of Directors must be at
least 5 but not exceed 15
The Board of Directors must have more than 2 independent
Independent
members or have more than 20% independent members in
member
the Board of Directors
The roles of the CEO and the Chairman of the Board of
Separation of roles
Directors must be separated
Establishment of the Executive Committee, Auditing,
Committee
Compensation, Nominations and Compliance
Corporate Policy
The Board includes members from many fields with different
backgrounds such as consulting, technology, auditing, business, ... and
many years of experience.
There is careful screening and detailed election process in the annual
shareholder meetings.
100% of BOD members attended all meetings.
There are 2 members of the Board of Directors who are the Executive
Board
PNJ has a specific executive board election process.
PNJ applies necessary measures to prevent related parties from
conducting transactions that cause loss of company assets.
4
There are 9 members of the Board of Directors
4
PNJ has 3/9 independent members of the Board of Directors,
accounting for 33.33%
4
4
The Chairman of the Board of Directors is Ms. Cao Thị Ngọc Dung and
the Managing Director is Mr. Lê Trí Thông
PNJ establishes Control Committee, Executive Committee,
Compensation Committee and Nomination and Compliance Committee
Audit Committee
Independent audit
Independent audit
Financial integrity
The opinion of the Auditor should be impartial and
professional independence should be preserved when the
Auditor receives payment for non-audit activities.
The audit committee of the Board of Directors should be
independent
Financial integrity of the company (Items of concern include
auditor changes, year-to-year inconsistencies, significant
weaknesses in controls, corporate restructuring, and
excessive costs are paid for non-audit work)
Election of Auditors
The company should allow shareholders to approve the
selection of Auditors
Performance Index
Performance metrics should encourage management to
make decisions that benefit shareholders
4
4
The consolidated financial statements showed significant aspects based
on relevant documents and records, compliance with accounting
standards, Vietnamese corporate accounting system, legal regulations,
relating to the preparation and presentation of the financial statements.
The independence and objectivity of external accountants will be
monitored by the Commission
The Audit Committee is managed by Nguyễn Thành Dự - Head of the
Supervisory Board
4
All publicly available billing statements include additional notes. The
Commission must also ensure that external auditors are qualified to
control the procedures
4
The appointment, re-appointment and removal of external auditors are
all made by the Audit Committee, with the consensus of the board and
approved by the shareholders.
Compensation Board
4
Performance Index Shareholders must be approved of performance indicators
4
Performance Index Executive compensation portions must be equity-based
4
Compensation is determined through annual meetings and offers
attractive bonuses for over-completion
The charter of the board of directors is disclosed and attached to the
annual report and received consensus from the annual meetings to plan
profit after tax.
The Executive Board owns the policy of paying shares as part of
compensation to directors and officers
Shareholders' rights
Election
Shareholders' rights
Average
1 share - 1 voting right
4
Right to receive dividends
4
No need for a majority vote
4
Right to request special meetings
4
Information
4
Right to Appraisal
4
1 share - 1 voting right
Shareholders are entitled to receive dividends according to the
decision of the Board of Directors
The Company reserves the requirement to vote specified in the
relevant laws, including those specified
Shareholders owning 5% of the total number of shares have the right
to propose to hold the General Meeting of Shareholders
Shareholders have unrestricted access to company documents. They
can also exercise their right to dissent and demand payment at the fair
value of their shares.
3,9
PNJ
APPENDIX D.2: APPRAISAL OF THE APPARATUS – PNJ'S BOARD OF DIRECTORS
Cao Thị Ngọc Dung
Chairperson
Non-Executive BOD Members
Lê Quang Phúc
Independence Member of
BOD, Director of
Audit Committee
Lê Trí Thông
Vice Chairman CUM CEO
Huỳnh Thị Xuân Liên
Non-Executive Member
of BOD
Lê Hữu Hạnh
Member of BOD
Trần Phương Ngọc Thảo
Member of BOD
Đặng Thị Lài
Member of BOD
Nguyễn Tuấn Hải
Independence Member of BOD
Member of Audit Committee
Tiêu Yến Trinh
Independence Membe
r of BOD
OWNERSHIP WORKING TIME WITH
RATE
COMPANY
NAME
POSITION
MEMBER OF THE BOARD OF
DIẺCTOR
EDUCATION LEVEL
Mrs Cao Thị Ngọc
Dung
Chairman of the Board
Non-executive member of the
Board of Directors
Bachelor of Business Economics,
University of Economics Ho Chi
Minh City
2,63%
34 years
Mr. Lê Trí Thông
Vice Chairman of the Board of
Directors cum General Director of
Phu Nhuan Jewelry Joint Stock
Company
Non-executive member of the
Board of Directors
- Chemical Engineer, Ho Chi Minh
City University of Technology
- Master of Business
Administration, University of Oxford
0,26%
5 years
Mr. Lê Hữu Hạnh
General Director of PNJ Production Executive member of the Board
of Directors
and Trading
Chemistry engineer, Ho Chi Minh
City University of Technology
1,04%
30 years
Mrs. Đặng Thị Lài
Operating Director and Director of
Executive member of the Board
Finance - Operation of Phu Nhuan
of Directors
Jewelry Joint Stock Company
Bachelor of Business
Administration, Ho Chi Minh City
University of Economics
0,56%
32 years
- Irrigation Construction Engineer,
Da Nang University of Technology
- Master of Business
Administration, WSU, USA
0,01%
6 years
- Bachelor of Marketing, Ho Chi
Minh City University of Economics
0,03%
4 years
- Independent member of
the Board of Directors
- Chairman of the Audit
Committee
Mr. Lê Quang Phúc
Chairman of BDSC Management
Consulting Joint Stock Company
Mrs. Huỳnh Thị
Xuân Liên
Chairman of the Board of Directors
of Cao Fashion Company Limited
Mrs. Trần Phương
Ngọc Thảo
Senior Director - Digitizing Phu
Nhuan Jewelry JSC
Executive member of the Board
of Directors
- Bachelor of Economics and
Business Administration, Oxford
University
- Doctor of Economics, Harvard
University
2,54%
3 years
Mr. Nguyễn Tuấn
Hải
Chairman of Alphanam Investment
Joint Stock Company
- Independent Board Member
- Member of the Audit
Committee
Master of International Business
Administration, University of Irvine
0%
2 years
Mrs. Tiêu Yến Trinh
General Director of Connecting
Human Resources JSC
Independent Board Member
Bachelor of Foreign Languages
Department of Ho Chi Minh City
University of Education
0%
2 years
Non-executive members of
the Board of Directors
PNJ
APPENDIX D.2: APPRAISAL OF THE APPARATUS – PNJ'S BOARD OF MANAGEMENT
Đặng Thị Lài
Senior Chief Finance –
Operation Officier
Lê Trí Thông
CEO
Nguyễn Anh Hùng
Senior Chief Human
Resources Officier
Phan Nguyễn Hoài Anh
Acting Chief Marketing Officier
Đào Trung Kiên
Senior Chief Strategy Officer
Dương Quang Hải
Chief Accountant
Đặng Hải Anh
Senior Chief Information
Technology Officier
NAME
POSITION
EDUCATION LEVEL
Mr. Lê Trí Thông
Chief Executive Officer
- Chemical Engineer, University of Technology – Vietnam National University of
HCMC
- Master of Business Administration, Oxford University - UK
Mrs. Đặng Thị Lài
Senior Chief Finance – Operation Officer
Bachelor of Business Department of University of Economic HCMC
Mr. Đào Trung Kiên
Senior Chief Strategy Officer
MBA in Finance - Hofstra University, US
Mr. Nguyễn Anh Hùng
Senior Chief Human Resources Officer
Master of Business Administration University of Economics HCMC
Mr. Phan Nguyễn Hoài Anh
Acting Chief Marketing Officer
- Irrigation Construction Engineer, Danang University of Science and Technology
- Master of Business Administration, WSU, USA
Mr. Dương Quang Hải
Chief Accountant
Bachelor of Marketing, University of Economics Ho Chi Minh City
Mr. Đặng Hải Anh
Senior Chief Information Technology Officer
Nuclear Technology Engineer, VNU University of Science