- We increase our target price (TP) for PNJ by 2% but downgrade our rating to OUTPERFORM from BUY as PNJ’s share price has increased ~18% over the past three months. Our higher TP is attributed to our 2% increase of PNJ’s 2023F NPAT, which is mainly due to our 60-bp downward revision in 2023F SG&A/retail sales as the ratio was lower than expected in 2022.

- In this Update Report, we maintain our view that the reverse wealth effect in the Vietnamese middle-affluent class stemming from the woes in financial markets and increased interest rates in H2 2022 will undermine the growth prospects of branded jewelry spending in 2023.

- We forecast a retail revenue CAGR of 12% in 2022-2025F vs 80% YoY growth in 2022. Our expected improvement in PNJ’s product mix and operating efficiency further drive our EPS CAGR forecast of 16% in 2022-2025F.

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