The development of the vietnamese jewelry industry over time a 1975 1988

1988-2001 Trading gold bars and gold jewelry was formally re-established with Decree 33/ND-CP along with the establishment of state-owned Gold & Jewellery companies from the central to l

TRƯỜNG ĐẠI HỌC KINH TẾ QUỐC DÂN CHƯƠNG TRÌNH CHẤT LƯỢNG CAO

Môn học: Thẩm định tài chính dự án

Nhóm 6: Bùi Duy Tùng

Lê Hoàng Khánh Nguyễn Thảo Linh Nguyễn Thanh Mai

Lê Phương Anh Trần Quang Huy

I The jewelry industry in Vietnam

1 The development of the Vietnamese jewelry industry over time

a 1975-1988

The gold market was officially frozen after the Liberation Day Business operations and manipulation were completely hidden and limited in an absolutely narrow scope

In this period, the consumption output is approximately 5 tons/year

b 1988-2001

Trading gold bars and gold jewelry was formally re-established with Decree 33/ND-CP along with the establishment of state-owned Gold & Jewellery companies from the central to local levels (SJC, PNJ, ) are allowed to import gold bars, gold raw materials for production and trading on a large scale Private businesses were still small business

The consumption output is approximately 10 tons/year

c 2001-2012

Decree 174/ND-CP promoted the private sector of Gold & Jewellery to develop business production in a typical way with the establishment of DOJI Group and attracted many foreign companies to invest in manufacturing facilities in Vietnam Many jewelry shops were opened nationwide such as DOJI, PNJ… Consumption was improved, the quality and gold content were guaranteed

The consumption output is approximately 15 tons/year

d 2012-2018

Decree 24/ND-CP has brought stability to the gold market and creates

favorable conditions for large enterprises such as SJC, DOJI, and PNJ to develop production facilities and business networks on a national scale

The consumption output is approximately 20 tons/year

e 2018-2020

With a significant impact of COVID-19, people tend to choose Gold as a stable asset It pushes the price of gold to a new record and improve the liquidity of the market In the future, we can see that the market will remain vibrant, gold still receive the belief of investors

The consumption output is more than 20 tons/year

2 Potential of the market

a. Population and population structure in Vietnam

The current population of Viet Nam is over 96 million people with agestructure from 15-64, accounting for 69% -> Viet Nam has a goldenpopulation structure.

b GDP and average income

The total population of nearly 100 million is in the state of the goldenpopulation structure, the middle class rising fast, people still carry thetraditional psychology and gold hoarding preferences However, there hasbeen a shift in the habit of buying gold bars to buy gold jewelry with 3purposes Jewelry - Investment - Storage.

c Demand for gold in Vietnam

With 70% of the population aged 15-64, of which 51% are female ->

Generate abundant shopping

According to calculations from the World Gold Council, the value of gold percapita in Vietnam in 2015 is USD$6.2, equivalent to 60% of Malaysia's consumption and 7% of Singapore In addition, the consumption of gold jewelry in Vietnam Vietnam compared to total gold consumption is only 25%while the rate in other countries in the region is over 50% (except Thailand: 14%) → plenty of places to grow in the future Estimated gold jewelry

consumption is expected increase to an average of 40 tons per year by 2025

3 Challenges and limitations of the market

Jewelry production activities in Vietnam are mainly of small scale, so it is difficult to make breakthroughs in product development

The 4.0 technology is taking place strongly in many fields, but due to the specificity of the gold industry, with small and handicraft production bases, most small enterprises and not having access to modern and synchronous technology → to low labor productivity, uneven jewelry quality

The policy on the gold market has many positive points, however, there aresome shortcomings which make it difficult for the development of the goldindustry: the domestic gold price and the world market are quite different asthe Gold producers are not allowed to import gold, and at the same time make

it difficult for enterprises to actively source raw materials →thecompetitiveness of enterprises is reduced and more difficult for export 2010:61tons; 2011: 38tons, 2012 & 2013: 0 tons, 2014: 0.7tons, 2015: 0.3tons,2016: 8tons, 2017: 0.8 tons

4 Opportunities

a For the market

Tectonic government has been creating favorable conditions and timely solutions to many difficulties for the operation and development of

b For the investors

The policy of opening the economy is a consistent policy and implemented in

a synchronous manner to create an attractive investment environment for foreign investors

Vietnam is a member of the WTO, has signed many bilateral trade agreementswith economic powers and important partner countries of Vietnam

Import tax policies are implemented in favor of enterprises, and Vietnam imposes zero tariffs for jewelry on those countries that have trade agreements (currently China and the ASEAN)

Vietnam has strengths with young and skilled workers who are creative and quick to adapt to scientific and technological advances to create more

sophisticated products, unique models → Vietnam Jewellery Industry will be able to reach the level of the country in the area

4.0 technology is a trend that gold companies can not stand outside to avoid falling behind in technology Vietnam has 10,000 enterprises engaged in jewelry production and trading, but only a few large enterprises have the ability to invest in technology However, when the policy is amended, the business environment is more favorable, a lot of companies will invest

strongly in the production and import of many modern machines and

equipments

II Overview of PNJ- Phu Nhuan Jewelry Trading Store

In April 28th, 1988, Phu Nhuan Jewelry Trading Store was founded with aninvestment of only VND 14 million – equivalent to only 9.0 ounces of gold at thattime – and its rst 20 employees In present, PNJ keeps growing in all aspects:manufacturing system investment and workforce development The company’s

asset has raised up to 2,500 billion VND, the number of employees has now beennearly 2,428 people and PNJ has an international-standard jewelry factory with1,000 professional goldsmiths Until now, PNJ’s retail system has expanded to morethan 161 stores nationwide.

PNJ is very proud of its famous and prestige jewelry brands in Vietnam,which include the PNJ Gold, PNJSilver, CAO Fine Jewelry, Jemma… PNJ hasreceived di erent awards throughout years, such as Top 500 Retailers in Asia – PacicAward (from 2004 until now), High Quality Vietnamese Products Award for 15consecutive years from 1998 until now, Vietnamese Golden Star Award, BestVietnamese Brand Award, Vietnamese Quality Award, etc Since 1995, PNJ jewelryproducts have been introduced in Hongkong Jewelry Fair, as well as exported toDenmark, Germany, U.S.A, Australia

Throughout 24 years of development, PNJ has successfully completed businesstasks, taken care of social community, contributed for the Vietnamese jewelryindustry, and also contributed to the development of the economy – society of thecountry

Development process

1988–1992: ESTABLISH AND DETERMINE STRATEGY

On 28/04/1988, Phu Nhuan Jewelry Trading Store was founded under thePeople’s Committee of Phu Nhuan District The prematureness of Vietnam jewelryindustry and the limitations of the market are the major challenges that the first 20people founded the PNJ have to pass

In 1992, PNJ officially named Phu Nhuan Jewelry Joint Stock Company aftertwice renaming from “Phu Nhuan Jewelry Trading Store” and “Phu Nhuan Jewelry,Fine Arts and Currency Exchange Company” PNJ’s strategy is to become

a professional jeweler At that time, PNJ also expand the business by founding theDong A Bank with 40% equity ratio.

1993-2000: EXPAND BRANCHES AND PRODUCT LINES

In 1994, PNJ Hanoi branch establishment, which is the start of the strategy toexpand branches around Vietnam later such as Da Nang branch opened in 1998,Can Tho branch opened in 1999 PNJ’s distribution system is constantly expanding

This period also states the performance of PNJ in term of professional branding Notonly spreading nationwide, PNJ also exports to foreign markets After a few yearssince its founding, PNJ jewelry brand quickly dominate the market, consumers trustand its prestige with honors and awards achieved: Certification of “Vietnam HighQuality”, Third Labor Medal, Second Labor Medal and Certification of SystemQuality Management at the standard of ISO

2001 -2004: PROMOTE BRANDING AND EQUITATION

In 2001, The brand PNJSilver officially launches to meet the needs of youngpeople Besides, PNJ continues to develop PNJ gold jewelry with really bigmarketing campaigns sponsored by the World Gold Council

On 02/01/2014, PNJ changed into a new type of business: Joint StockCompany, under the full name Phu Nhuan Jewelry Joint Stock Company At thattime, PNJ is awarded Top 500 Retailer Asia Pacific and First Labor Medal

2005 – 2008: RE-LAUNCH THE BRAND AND DEVELOP LUXURY

PRODUCT LINE

In this state, PNJ earns strong development on all aspects, especially in terms

of branding and developing new products PNJ re-launches PNJ Silver with a newlook and launches a premium trademark CAO – Fine Jewelry Moreover, PNJ is thesponsor for Miss Universe 2008 in terms of jewels and crown

On 03/04/2008, PNJ officially changed the new logo to celebrate the 20thanniversary of the establishment and development The new brand identity is a moreprofessional image, more modern to meet the challenge in the next journey.

In 2007, PNJ was ranked Top 200 Largest Enterprises in Vietnam by theUnited Nations Development Program (UNDP) and awarded the ThirdIndependence Medal by the President

2009 – 2011: OFFICIALLY LIST SECURITIES AND TRY TO GROW

SUBSTANTIALLY

On 03/2009, PNJ share was officially listed at HOSE, which increased itscharter capital to VND 400 billion 08/2009 Company Limited Fashion CAO wasestablished with the addition of watch trading business from world-renowned brands

in the PNJ branch system Moreover, PNJ is the sponsor for Miss Earth 2010 interms of jewels With 142 branches, PNJ has the largest branch system in theVietnam jewelry industry

In 2010, PNJ was recognized as the national brand by the Government and awardedthe golden prize of National Quality In addition, PNJ is one of three Vietnamesecompanies awarded the prize of Asia Pacific Quality Plimsoll announces that PNJ

is ranked 16th among the top 500 largest jewelry companies in the world PNJ is theonly Vietnamese company included in this chart

On 03/2011, PNJ started the construction of the most modern jewelry factory inVietnam Simultaneously, PNJ constantly upgrades the scale of distribution systemand inaugurates headquarters as well as jewelry centers in Kien Giang, Binh Duong,Bien Hoa, Hanoi…

2012 – 2017: RESTRUCTURE TO DEVELOPAND CONSERVE

Determining the need to restructure operations apparatus for SustainableDevelopment, in 2012, PNJ hired foreign consultants to standardize the

management system according to international standards Before inviting experts togive advice, PNJ has organized many workshops to affirm the necessity of change.PNJ realizes bad issues hindering the development Then they draw conclusions tochange in order not to fall behind.

On 18/10/2012, PNJ started using the new jewelry factory after 18 monthsunder construction With the investment up to VND 120 billion, this factory issupposed to be one of the biggest jewelry factories in Asia It can reach the capacity

of 4 million items per year

In 2013, there were many significant milestones in the brand developmentstrategy of PNJ On 12/01/2013, PNJ opened the biggest center in Vietnam forjewelry, diamond and watch at 52A- 52B Nguyen Van Troi, Phu Nhuan district, HoChi Minh city

On 10/09/2013, PNJ Silver officially re-positions its brands and launches thenew brand identity with the modern purple of “The world She shines” and thebreakthroughs in the development strategy Simultaneously, PNJ gold jewelryannounces a new message “Honoring the true value” for the purpose of honoringgolden values, the noble qualities of women in modern society in harmony with thetraditional values of Vietnam women

In 2014, PNJ open a series of jewelry center in many provinces with nearly

200 branches in Vietnam Superior business results of 2014 is the success ofrestructuring to grow substantially, give PNJ a chance to become one of leadingjewelers in Asia and the best in Vietnam

Logo definition: Converge to Shine

o Symbol:

The logo is inspired from diamond, which is known as the most luxury

gemstone, a symbol of longevity and transparency

This logo shows all diverse business areas of PNJ that are based on the

company’s core values that have been established and constantly strengthened

5 glimmers are simple, but powerful and equally soft and flexible, which isthe feature of jewelry creation – the main business of PNJ Besides, 5 glimmers alsoimply five basic elements (metal, wood, water, fire, earth, according to Easternphilosophy), reflecting the active and ongoing development of PNJ

PNJ is the abbreviation of the company name – a valuable asset being

established and developed during the last 20 years

o Color: The main colors are golden yellow and PNJ blue.

Golden yellow is the color of gold – the main material in jewelry creation as well as the symbol of prosperity and wealth

PNJ blue is the color of the sky and sea – a symbol of trust It is the color of cooperation, success and sustainability

The combination of golden yellow and PNJ blue demonstrates the fashion, style andbelief

o Slogan: Faith and Style

Vision and Mission

o Vision: We aim to become the leading jewelry fashion brand, with core

attributes being Creativity, Fineness, and Reliability

o Mission: Our mission is always to enhance customers’ satisfaction, by

diversifying products and services at highest quality and reasonable price, byadvancing management and manufacturing systems, and improving

craftsmen’s skills

o Philosophy: Customer benefits are our commitment.

The outstanding numbers:

Profit after tax: 1.190 billions dong

Gross margin: 20,4%

Brand value: 78,6 million USD

CSR activity: 11,7 billions dong

Net revenue: 17.000 billions dong

Gross profit: 3.460 billions dong

Retail network: 346 stores

The best retailer in the Asian jewelry industry

Boost selling watch: PNJ has 22 PNJ Watch stores - specialized in sellingwatches and dedicated a separate floor of PNJ Next flagship store for this item as of2019Q3 PNJ is also gradually working with brands to distribute directly Revenuefrom this segment will grow by 300% in the first 6 months of 2019 It is expectedthat the retail sales of watches will reach VND 200-300 billion in 2021

Increasing investment in Technology and Ecommerce: PNJ successful go liveERP - SAP system with the newest version of SAP S4 / HANA and combine E-commerce with store network to create omni-channel

Valuation and recommendation: We identify that the target of 25% revenuegrowth and 23% profit after tax in 2019 PNJ seems difficult to achieve, so weproject that net revenue may reach VND 16,781 billion (+ 15.2% YoY) and netincome will reach VND 1,055 billion (+11% YoY) assuming PNJ gross profitmargin was at 18.2% We conservatively adjust our forecasts for 2019 as PNJ'srevenue plummeted in 2019Q2 due to the ERP problem However, the ERP systemperformed better in 2019Q3 plus its leading position in the jewelry industry, thisallows PNJ to continue to achieve double-digit growth in the following years Byusing the P/E and P/S valuation method, the fair price for PNJ share is estimated atVND 96,925/share, +14% higher than the current price From that, we recommendBUY for this stock