2

GROUP 8

NO. FULL NAME STUDENT CODE

1 Trương Duy Mẫn K174050523
2 Hồ Thiên Bảo K174091018
3 Phạm Thị Tuyết Nhung K174091052
4 Trịnh Thị Thanh Thảo K174091066
5 Nguyễn Đường Anh Thi K174091067
 3

................................................................................................................ 7

............................................................................................................................ 9
2.1. INDUSTRY ANALYSIS .................................................................................................................................... 9
2.1.1. Rivalry among existing firms ................................................................................................................ 9
2.1.2. Threat of new entrants........................................................................................................................ 11
2.1.3. Threat of substitute products .............................................................................................................. 12
2.1.4. Buyer’s Power ................................................................................................................................... 13
2.1.5. Supplier’s Power ................................................................................................................................ 13
2.2. COMPETITIVELY STRATEGY ANALYSIS ..................................................................................................... 13
2.3. CORPORATE STRATEGY ANALYSIS ............................................................................................................. 16
2.3.1. Solid growth ....................................................................................................................................... 16
2.3.2. Competency development ................................................................................................................... 16
2.3.3. Resources enrichment......................................................................................................................... 18
2.3.4. Future preparation ............................................................................................................................ 18
2.4. SWOT ANALYSIS....................................................................................................................................... 18
.................................................................................................................... 20
3.1. IDENTIFY KEY ACCOUNTING POLICIES....................................................................................................... 20
3.1.1. Accounting concepts........................................................................................................................... 20
3.1.2. Currency ............................................................................................................................................ 20
3.1.3. Revenue recognition ........................................................................................................................... 21
3.1.4. Trade receivables ............................................................................................................................... 21
3.1.5. Inventories ......................................................................................................................................... 21
3.1.6. Fixed assets, Construction in progress and Provision ......................................................................... 21
3.2. ASSESS ACCOUNTING FLEXIBILITY ............................................................................................................ 22
3.3. EVALUATE ACCOUNTING STRATEGY ........................................................................................................ 23
3.4. EVALUATE THE Q UALITY OF DISCLOSURE ............................................................................................... 24
3.5. IDENTIFY POTENTIAL RED FLAGS ............................................................................................................. 24
3.5.1. Net sales / Inventory ........................................................................................................................... 24
3.5.2. Allowance for doubtful debt / Trade receivables ................................................................................. 25
3.5.3. Gross Profit Margin ........................................................................................................................... 26
3.6. UNDO ACCOUNTING DISTORTIONS ............................................................................................................ 27
3.7. ANALYSIS OF THE STATEMENT OF FINANCIAL POSITION .......................................................................... 27
3.8. ANALYSIS OF THE STATEMENT OF CASH FLOW .......................................................................................... 28
......................................................................................................................... 32
4.1. COMMON – SIZE ANALYSIS ....................................................................................................................... 32
4.1.1. Horizontal analysis ............................................................................................................................ 32
4.1.1.1. Analysis of the Income statement ................................................................................................................ 32
4.1.1.2. Analysis of the Balance Sheet ...................................................................................................................... 33
4.1.2. Vertical .............................................................................................................................................. 34
4.1.2.1. Analysis of the Income statement ................................................................................................................ 34
4.1.2.1. Analysis of the Balance Sheet ...................................................................................................................... 35
4.2. ANALYSIS OF PROFITABILITY .................................................................................................................... 36
4.2.1. Net Profit Margin ............................................................................................................................... 36
4.2.2. Total Asset Turnover and Return on Assets ......................................................................................... 37
 4

4.2.3. DuPont Return on Assets .................................................................................................................... 37

4.2.4. Analysis on operating assets ............................................................................................................... 38
4.2.4.1. Operating profit margin ............................................................................................................................... 38
4.2.4.2. Return on operating assets ........................................................................................................................... 39
4.2.4.3. DuPont Return on Operating Assets ............................................................................................................. 40
4.2.5. Sales to Fixed Assets .......................................................................................................................... 41
4.2.6. Return on investment (ROI) ................................................................................................................ 41
4.2.7. DuPont Framework ............................................................................................................................ 41
4.2.8. Gross Profit Margin ........................................................................................................................... 42
4.3. ANALYSIS OF PROFITABILITY .................................................................................................................... 43
4.3.1. Receivables Issues .............................................................................................................................. 43
4.3.2. Liquidity of Inventory ......................................................................................................................... 44
4.3.3. Payable Issues ................................................................................................................................... 45
4.3.4. Current Assets compared with Currents Liabilities ............................................................................. 46
4.3.4.1. Working Capital and Current Ratio .............................................................................................................. 46
4.3.4.2. Acid – test Ratio and Cash Ratio.................................................................................................................. 47
4.4. ANALYSIS OF LONG – TERM DEBT – PAYING ABILITY ............................................................................... 48
4.4.1. Debt Ratio.......................................................................................................................................... 48
4.4.2. Debt / Equity Ratio ............................................................................................................................. 49
.................................................................................................................................................... 50
 5

FIGURE 1: PERFORMANCE OF PNJ IN 2019 ............................................................................................................... 7

FIGURE 2: JEWELRY MARKET SHARE IN VIET NAM (AT THE END OF 2019)................................................................. 9
FIGURE 3: NET SALES OF GOLD FIRMS .................................................................................................................... 10
FIGURE 4: GROSS PROFIT MARGIN OF GOLD FIRMS ............................................................................................... 10
FIGURE 5: THE AMOUNT OF RETAIL CHAINS OF PNJ OVER THE COUNTRY FROM 2010 TO THE END OF 2019........... 14
FIGURE 6: TOTAL AMOUNT OF RETAIL STORES OF PNJ AT THE FIRST QUARTER OF 2020 ......................................... 15
FIGURE 7: THE PROPORTION OF THE TEMPORARILY CLOSED STORE OF PNJ (PRIOR TO APRIL 1ST, 2020) ................ 16
FIGURE 8: CHART OF NET SALES / INVENTORY BETWEEN PNJ AND GLC .................................................................. 25
FIGURE 9: CHART OF ALLOWANCE FOR DOUBTFUL DEBT / TRADE RECEIVABLES BETWEEN PNJ AND GLC ............... 26
FIGURE 10: CHART OF GROSS PROFIT MARGIN BETWEEN PNJ AND GLC ................................................................. 26
FIGURE 11: CHART OF HORIZONTAL ANALYSIS FOR PNJ'S BALANCE SHEET ............................................................. 34
FIGURE 12: BALANCE SHEET ITEMS IN 2019 ........................................................................................................... 35
FIGURE 13: CHART OF NET PROFIT MARGIN BETWEEN PNJ AND GLC ..................................................................... 36
FIGURE 14: CHART OF TOTAL ASSETS TURNOVER AND RETURN ON ASSETS OF PNJ ................................................ 37
FIGURE 15: CHART OF OPERATING PROFIT MARGIN BETWEEN PNJ AND GLC ......................................................... 39
FIGURE 16: CHART OF RETURN ON OPERATING ASSETS ......................................................................................... 40
FIGURE 17: CHART OF DUPONT FRAMEWORK........................................................................................................ 42
FIGURE 18: CHART OF GROSS PROFIT MARGIN ...................................................................................................... 43
FIGURE 19: CHART OF RECEIVABLE ISSUES ............................................................................................................. 44
FIGURE 20: CHART OF LIQUIDITY OF INVENTORY ................................................................................................... 45
FIGURE 21: CHART OF WORKING CAPITAL AND CURRENT RATIO ............................................................................ 46
FIGURE 22: CHART OF ACID - TEST RATIO AND CASH RATIO ................................................................................... 47
FIGURE 23: CHART OF DEBT RATIO ........................................................................................................................ 48
FIGURE 24: CHART OF DEBT / EQUITY RATIO .......................................................................................................... 49

TABLE 1: SWOT ANALYSIS ...................................................................................................................................... 19

TABLE 2: ESTIMATED USEFUL LIVES OF PPE BETWEEN PNJ AND GLC....................................................................... 22
TABLE 3: ACCOUNTING POLICIES OF PNJ AND GLC ................................................................................................. 23
TABLE 4: FINANCIAL STRUCTURES OF WC / WCN / NC ............................................................................................ 27
TABLE 5: STATEMENT OF FINANCIAL STRUCTURE ................................................................................................... 28
TABLE 6: ANALYSIS OF STATEMENT OF CASH FLOW ............................................................................................... 30
TABLE 7: THE HORIZONTAL ANALYSIS FOR PNJ'S INCOME STATEMENT................................................................... 32
TABLE 8: THE HORIZONTAL ANALYSIS FOR PNJ'S BALANCE SHEET........................................................................... 33
TABLE 9: ANALYSIS OF INCOME STATEMENT .......................................................................................................... 34
TABLE 10: ANALYSIS OF BALANCE SHEET ................................................................................................................ 35
TABLE 11: NET PROFIT MARGIN OF PNG ................................................................................................................ 36
TABLE 12: DUPONT RETURN ON ASSETS ................................................................................................................ 38
TABLE 13: OPERATING PROFIT MARGIN ................................................................................................................. 38
TABLE 14: RETURN ON OPERATING ASSETS ............................................................................................................ 39
TABLE 15: DUPONT RETURN ON OPERATING ASSETS ............................................................................................. 40
TABLE 16: SALES TO FIXED ASSETS ......................................................................................................................... 41
 6

TABLE 17: RETURN ON INVESTMENT...................................................................................................................... 41

TABLE 18: DUPONT FRAMEWORK .......................................................................................................................... 41
TABLE 19: GROSS PROFIT MARGIN ......................................................................................................................... 42
TABLE 20: DAY'S SALES IN RECEIVABLE AND ACCOUNT RECEIVABLE TURNOVER OF PNJ ......................................... 43
TABLE 21: LIQUIDITY OF INVENTORY ...................................................................................................................... 44
TABLE 22: PAYABLE ISSUES .................................................................................................................................... 45
TABLE 23: WORKING CAPITAL AND CURRENT RATIO .............................................................................................. 46
TABLE 24: ACID - TEST RATIO AND CASH RATIO ...................................................................................................... 47
 7

Phu Nhuan Jewelry Joint Stock Company (PNJ VN) is the leading jeweler in
Vietnam established in 1988 and privatized in 2004. PNJ engages in the fine jewelry sector
and owns a manufacturing system with advanced technology. Its business model is
integrated from manufacturing to delivery to end-users as well as wholesales to other
jewelers. Two factors that make PNJ stand out from other (mostly unbranded) jewelers are
its capital raising capabilities (through bank loans with an average interest rate of 5.37%
p.a., and through private placement) and its skilled workforce, which includes roughly one
thousand jewelry craftsmen. Among jewelers in Vietnam, PNJ boasts the largest factory
capacity (4mn products/year).

It has the country’s largest jewelry retail network — with 348 stores in 52
provinces/cities, including 290 PNJ stores, 54 PNJ Silver stores, 4 CAO stores, until
February 2020. Besides, PNJ also owns 27 PNJ Watch stores specializing in watches.
According to an analysis report of Vietcombank Securities (VCBS), until the late of 2019,
27% of jewelry retail market share belonged to modern retail chains, PNJ alone accounted
for 7%, remaining 73% belonged to traditional retail chains.

Figure 1: Performance of PNJ in 2019

Source: tinhhoataichinh.vn
 8

Main business lines: Producing and trading jewelry in gold, silver, precious stones,
fashion accessories, souvenirs, trading watches and buying and selling gold bars, diamond
and gem inspection services, precious metals and real estate business. In which, the
spearhead industry is producing and trading jewelry in gold, silver and precious stones.

Brand and service: PNJ Gold (Gold jewelry), PNJ Silver (Silver jewelry), CAO
FINE Jewelry (Diamond jewelry), JEMMA (Fashion accessories), PNJ Art (Business
gifts), PNJ Lab (Diamond, gemstone, precious metal inspection service), PNJ Watch
(Clock), ... It also is involved in wholesale trade of stamped gold bars named Phuong Hoang
PNJ - DongA Bank.
 9

2.1. Industry analysis

2.1.1. Rivalry among existing firms

In Vietnam, due to the habits of Vietnamese, the industry concentration is low when
traditional stores play an important role in this industry. In the past, Vietnam didn’t have
many professional companies operating in this industry, it just had a number of traditional
stores making and selling jewelry or gold. For example, although PNJ was established in
1988, so early. However it was just a small company in Ho Chi Minh city. Until 1994,
another branch was opened in Ha Noi which opened their market. Moreover the demand of
owning gold or jewelry was high at that time because of difficult life. A recent research
shows that traditional stores account 80% in this industry although the growth of big
company is higher and higher.
In addition, in
gold and jewelry retail
industry, it has low
switching cost.
Customers easily
change their choices
based on the
difference of price,
design, assurance
policies,... This
industry also has high
exit cost while large
Figure 2: Jewelry market share in Viet Nam (At the end of 2019)
economy of scale.
Regarding to high exit cost, gold and jewelry retail industry need the number of high
technical employees to process jewelry and disposal of machines and technological lines
for processing products may cause great losses if the machines have not been fully
depreciated. Profitability in this industry is low because the competition for market share is
strong.
In recent years, the main rivals of PNJ are SJC Inc. and Doji Jewelry. Another
competitors in this industry are Pandora, Bao Tin Minh Chau,... Doji is a potential company
in market. In 2019, along with Vingroup, The Gioi Di Dong, DOJI jewelry Group led the
 10

largest private enterprises in Vietnam, according to VNR500 – Top 500 Largest Enterprises
in Vietnam. This is the position Doji has held for the past decade. After 25 years
establishment, Doji had the estimated revenue about 80,000 billion VND in 2019, which
was at least eight times as high as that in 2009.
This company is depanding their factory and
retail stores to open their market. Not only
inauguration of a factory in HaNoi with about
500 high – technical employees and modern
chain equipment but also this company
opened its own headquarter building, which is
the largest jewelry and gemstone center in
Viet Nam in the same year.
Besides Doji, SJC INC. is also a strong
rival. In recent year, SJC had about 20,000
Figure 3: Net Sales of Gold firms billion VND in revenues. The remarkable
thing is that SJC must be equitized by the end
of 2020 which is considered as the effort to improve the profit of this company. SJC has a
great privilege of being assigned the exclusive gold bar production by the State Bank and
taking SJC as the national gold brand (this decision aims to unify and control the gold
market).
According to Financial Statement in
recent years, it is recognized that the revenue
of PNJ is less significantly than two main
rivals’ because PNJ has concentrated on
developing and selling jewelry products
while gold bar is still the main product of the
others. This different point bring a great profit
to PNJ more than another. Therefore, PNJ has
long distance with two main competitors
about profitability.

Figure 4: Gross Profit Margin of Gold firms

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2.1.2. Threat of new entrants

Profitability in gold & jewelry retail industry is quite high while the threat of new
entrants is low. The first, have to mention about inventory costs and sourcing. The cost of
inventory is a significant barrier to entry faced by new retailers in the jewelry industry.

The new entrants not only have to find the suppliers who had the rights to exploit
gold, gemstone but also need to recruit the number of professional designers and high
technical employees to participate in processing jewelry. It definitely costs them a fortune.
Depending on the planned size of a store, simply stocking the shelves for opening day can
cost millions of VND. On the other hand, they have to overcome entrenched brands. It is
said that jewelry shopping can be a emotional experience, and existing brands in the
industry have learnt to build deep and lasting connections with loyal customers by
leveraging these emotional experience to create strong bonds. Gold, jewelry or gemstone
are customers’ properties therefore they are intended to look for a brand which has
reputation for high quality of products, fashionable designs,... This is the reason a new
entrants need to make a big effort to build bond relationship with customers.

One of things which is more important and more different in this industry than others
is the amount of facilities investment and risk of loss. Jewelry retailers require advanced
security systems to protect their high value inventory. The amount of security required of
retail jewelry store can incur the largest infrastructure expense, after the cost of cameras,
safes and electronic monitoring for doors and windows are taken into account. Even with
advanced security, the risk of loss from theft can be a significant deterrent to entering the
industry. Jewelry retailers should always carry adequate insurance policies to cover
significant loss, but the cost of such policies can be another barrier to entry. Therefore, the
company need adequate startup, an insightful strategic planning and understand the
challenges they will face if they want to enter the gold, jewelry retail industry.

Recently, this market is a fertile ground and it is growing per day. It has witnessed
the establishment of new retail chains such as Thanh Hanh (2013), Quy Tung (2013), Loc
Phuc Jewelry (2015), Precita (2017),... However, there are not many companies which
affect to PNJ because of a lot of barriers. New entrant could effect to PNJ is Precita
Jewelry. On 5th May 2017, Ben Thanh Jewelry (BTJ) – a famous company in jewelry
market opened the first store of Precita in Ho Chi Minh. With establishment of Precita, they
wished to reshape industry standards in terms of value to customers and product accuracy.
After a year, Precita had 13 stores in Ho Chi Minh and one of stakeholders stated that this
 12

brand pretended to open about 100 stores during 5 years. This company strives to build
brand reputation and trust with customers by building different business strategies and
focusing on designing diverse product models. For example, they launched an e –
commerce store. Before their launch, there was no other e – commerce site for jewelry in
the Vietnamese market. After a year of running as an e-commerce, they really see its
potential. For the first six months of this year, their sales revenue doubled compared to what
they made last year. There is potential for us to move forward. With both the e-commerce
footprint and brick-and-mortar, they can offer more products and services for our
customers. Precita is applying this transformation into the business. Automated business
processes help to cut down the unnecessary processes within the company, and allow the
company to move faster. For example, they deployed e-commerce, the Enterprise Resource
Planning (ERP), and the point of sale (POS) system for our retail stores within a month.
They integrated those three systems together to make a smooth transaction. It speeds up the
process and eliminates unnecessary errors.

On the other hand, different with SJC or Doji which focus on selling gold bar, Precita
and PNJ focus on developing jewelry retail. That means PNJ have to share their customers
with Precita, particularly the customers who are college graduates (in their 20-30s) in the
workforce enjoying their lives or middle-aged women who are already experts in their
careers. Although Precita has losses in the early years, it is a potential competitor of PNJ
with the right strategy, the professional and experienced managers and fashionable design.
The brand is looking forward to growing very well in the future.

2.1.3. Threat of substitute products

The threat of substitute products is high in this industry. Although gold, gemstone
seem to be necessary accessories of all women even little girls, it is accessories for people
with average income or higher. Therefore, people often have another choice to replace
them. With different purposes, they have different substitute products.

In Vietnam, people have a habit of storing gold in their houses as a reserve and
saving. Therefore, when necessary or gold price increases, they can sell for profit or buy
other fixed assets such as cars, motorcycles, houses and land. Customers are willing to
switch because the conversion cost is almost low or bring equivalent value. PNJ also sell
and buy gold bars, but that is not the main business line in company because of government
policies.
 13

In society today, there are a lot of trend of using accessories. Teenagers or youth
adult can use turban, choker, stainless steel jewelry to replace jewelry. Due to the fact that
all of them are cheap, easily replaceable, colorful. Women in higher class are keen on using
necklaces made by precious wood or animals which is believed to bring lucky to owners’.
Although PNJ has a variety of products which are suitable with people from lower to higher
but it has to notice the trend of the market and consumer trends to response timely.

2.1.4. Buyer’s Power

All of the above analysis prove strong power of consumers in this market. The
industry concentration is low and threat of substitute products is high so customers are
sensitive of price. Customers have many choices not only from big jewelry retail chain but
also from traditional stores. Therefore, PNJ always make effort to have product warranty
policies, buying old products to allow customers to choose new products of PNJ. In
addition, the company always has attractive promotions to attract customers. These efforts
are aimed at retaining customers, creating a traditional customer community. Thanks for
this, PNJ make decrease the gap between it and its customers.

2.1.5. Supplier’s Power

PNJ use the supply of gold materials from government. In the other hand, PNJ has
another sources from companies that bought from haunt people and some traders in market.
However, according to a recent statistic, the amount of gold reserves in PNJ's system is
sufficient to meet the demand for this business, so the power of the supplier is not high in
this case. However, PNJ needs to well manage the amount of gold reserves in case of
shortage because the only major supplier is the government.

For silver jewelry, the power of the supplier is low because the company can choose
many different suppliers with quality and reasonable prices because there is no government
limit. On the other hand, low conversion costs as well as the number of reputable and
professional customers for suppliers in the market are not much. Therefore, PNJ has the
advantage when the supplier does not really have much power.

2.2. Competitively Strategy Analysis

Competitive strategy of PNJ is differentiation about number of retail stores, beautiful

products and thoughtful customer services.
 14

Circular 22/2013/TT-BKHCN was an important and necessary legal basis to

establish a new order for jewelry and fine art gold trading activities in the market. The State
issued clear and specific regulations on the classification of gold jewelry, regulations on
base metals, etc…, content and forms of self-declaration of applied standards and direct
and attached labeling with accompanying and secondary labels in Vietnamese and the
origin of imported goods. This circular had a noticeable impact on the revenue of jewelry
companies.

Facing that situation, PNJ shifted its structure into the field of jewelry, diamonds,
these were products with much higher profit margins than gold bars. PNJ is a typical case
of improving business results thanks to product restructuring. In the period of 2010 - 2011,
gold bars still accounted for a large proportion in the revenue structure of PNJ (about 80%),
so the gross profit margin of the enterprise was only around 4%.

However, thanks to the change in product structure to jewelry gold, PNJ's gross
profit margin has continuously improved and up to 17.4% in 2017. In 2018, PNJ's gross
profit margin continued to improve to over 19%. Moreover, PNJ also recognized the growth
potential of the market. According to the assessment of the World Gold Council (WGC) in
a report published in early February 2018, 2017 demand for gold jewelry in Vietnam
increased by 7% to 16.5 tons, the strongest increase since 2008. The organization attributed
this to a sharp increase in GDP last year, reaching 6.81%, the highest level in the past nine
years. The middle class and the wealthy, the main consumer of the jewelry industry, are
expected to account
for about one third of
the population by
2020.

PNJ focuses on
its retail chain. Only
in November 2017,
PNJ set a record when
opening 9 stores,
bringing the total
number of retail stores
to 261 stores. By the
Figure 5: The amount of retail chains of PNJ over the country from 2010 to end of February 2020,
the end of 2019 PNJ opened a new
 15

store, bringing the total number of stores to 348, covering 52/63 provinces and cities across
the country. PNJ continues to affirm its transformation into a professional retailer when
launching a flagship store under the PNJ Next model in February 2019 that is completely
new with luxurious, classy spaces, bringing customers special experience. At PNJ Next, the
first flagship store in the retail chain of PNJ jewelry, customers not only admire the entire
range of PNJ products, from jewelry, to watches, but also have the opportunity to visit and
spread out experiment and shape style. In Vietnam, not many investment brands open such
a flagship store. In the same year, PNJ continued to open another PNJ Next store in Ho Chi
Minh City, two other PNJ Next stores in Hanoi and Da Nang respectively. That proves the
difference in PNJ's leading business thinking and product development strategy.

Figure 6: Total amount of retail stores of PNJ at the first quarter of 2020

PNJ also focuses on diversifying its products. PNJ's products range from gold, silver
to gemstones, diamonds to serve a wide range of customers and customer segments from
infant foot shakes to wedding jewelry for couples. PNJ also focuses on developing its
market in watch segment. Continuously produce different collections that are appropriate
at the right time or holiday to stimulate demand. In the first quarter of 2020, PNJ launched
products such as mouse jewelry, eye-catching money, mascots, genius statues or True Love
Locker jewelry collection for Valentine. The flexibility and timely response of PNJ was not
much affected by the Covid pandemic 19. PNJ was also forced to close some of its stores
at the end of March due to the impact of the main pandemic so the monthly revenue was
reduced 10% over the same period.
 16

Figure 7: The proportion of the temporarily closed store of PNJ

(prior to April 1st, 2020)

2.3. Corporate strategy analysis

The successful home model integrated in the Company’s development strategy for
the period of 2012 to 2022 with a vision to 2030 would prove itself a sound and relevant
model for PNJ to head for sustainable development. The robust business performance in
2018 has proved the correctness and strategic vision of the Management Board. To continue
the success of 2018 and the development target for 2019, the Management Board further
builds and adopts 4 main orientations for 2019 on the solid foundation of successful home
model as follows: Solid growth, Competency development, Resources enrichment, Future
preparation.

2.3.1. Solid growth

In 2019 PNJ maintains a solid growth target by focusing on the following solutions:

- Building higher and firmer the No. 1 position in the primary market.

- Occupying the No. 1 position in the markets of Level 2 & 3 nationwide.

- Further promoting the wholesale business.

- Controlling costs - increasing productivity & operational efficiency.

2.3.2. Competency development

PNJ focuses specifically on the competency development as:

 17

- Speeding human resources improvement capacity: Enhancing quality and quality

depth of human resources throughout the training and benefits, improving engagement-
increasing decentralization and clear responsibility…

- Continuous investing crucially: In order to modernize capacity in production,

creation, design, together with strongly applying Internet of Things (IoT), Data Analytics
to improve production, productivity and delicacy of the products.

- Speeding marketing improvement capacity: Transforming form products to

customer marketing, continuing improving digital marketing capacity…

- Improving retail management capacity: Completing retail division model and

manpower-improving the capacity of organization-planning-quantifying-improving the
capacity of training and coaching…

- Improving the advantage of production management capacity: Optimizing

production process, investing and applying new technology in creation, management and
optimizing production fee and improving productivity and capacity…

- Continuing constructing supply chain management capacity: Continuing

improving mechanism and human resources – constructing new capacities for divisions,
improving effective cooperation with related units in the process of products/supply chain
planning, exploiting skillfully and creating based on ERP – SAP foundation…

- Continuing constructing strategy management capacity: The capacity of strategy

orientation and planning at Branch, Division and Subsidiary level.

- Continuing constructing supply technology capacity: Transforming from

consultancy role to business partner role – guaranteeing internal quality service, finance
management capacity in technology investment.

- Speeding Corporate Affairs capacity: To enrich more resources and assets for the
company.

- Bettering finance management capacity: Constructing finance management

capacity for management units, implementing the Programs of fee supervision and
investment effectiveness, bettering Investors relations performance and capital market
capacity.
 18

2.3.3. Resources enrichment

Besides maintaining a sustainable growth on basis of inner competence

development, the Company attaches a high importance to resource enrichment on the
following aspects:

- Human resources

- Enrich PNJ brand asset

- Enrich customer relationship resource

- Enrich the relations with government authorities / social relations / media relations,
financial resources and financial market relations.

- Enrich partnership / business cooperation resource

- Step by step systematize and enrich PNJ’s knowledge resource

2.3.4. Future preparation

The increasingly broader scale and ever-changing business context require PNJ to
take a thorough preparation for the time to come. Some important orientations to deploy in
the near future are:

- Complete the group organization model for PNJ Group: reorganize the institution
– restructure the group & new management methods, regulations/
mechanism/Charter/corporate governance practices, liberate the inner power & improve
self-responsibility.

- Prepare & build new growth drivers for the future and new “weapons” for the future
- Digital Transformation.

- Prepare human resources for the future: deploy the succession planning program
for PNJ Group, continue to develop MT 2018 & improve the quality of MT 2020 Program,
build cooperation programs to select and develop talents.

2.4. SWOT analysis


Opportunities
- The trend of consuming
high – end fashion goods is
strongly increasing.
- Mom-and-pop stores still
account for a large part of
the market (we estimate
50%).
- PNJ’s major rivals are well
behind it and are struggling
to find a way to compete.
- With modern technology
line PNJ has the opportunity
to increase productivity and
boost exports in the future
Threats
- Sudden recession and/or
spike in gold prices could
dampen demand.
- Competition could heat up
as major players such as
Doji and SJC become more
focused on jewelry, and as
new rivals backed by
investment funds (e.g.,
Precita) enter the market.
- Disruption could heat up as
e-commerce paves the way
for customers to access
international luxury brands.
19
Strengths Weaknesses
- Strong brand identity and good reputation. - Difficulty gaining traction
- Wide retail outlet network. in high-end segments.
- High number of new collections and designs. - Gold bars sales are low
- Invest in human resources margin.
- Invest in R&D - Most raw material are
- High level of technology in jewelry bought from recycled gold
manufacturing and floating gold in the
- Professional and effective management system market because the State
- Export market is stable Bank has not licensed any
enterprises to import raw
gold for many years.
SO Strategy WO Strategy
Penetrating the domestic market strategy Strategy of integration in
- PNJ has lots of store network as well as horizontal lines
professional staff, who are trained sales skill and - Increasingly diverse items
customer service behavior; which helps to easily to gradually become more
access to customer. active in providing gold
- Thanks to investing in R&D, PNJ has high jewelry items for targeted
number of new designs, which meets the trend of customers while reducing the
customer nowadays. pressure of suppliers (the
Development exporting strategy quality of goods is not
- Investing in production technology, the inferior to imports, but is
company proactively creates long-term cheaper).
relationships with foreign partners, thereby
accessing new production technologies, current
fashion trends, advanced management methods
to meet apply strict criteria of foreign enterprises
ST Strategy WT Strategy
- Product differentiation strategy Strategy of integration in
Stimulating the creativity of non-stop designers horizontal lines
of the design team, creating a Vietnamese - With the circular 22/2013 /
fashion trend, meeting the increasing demands of TT-BKHCN, enterprises
customers' gold jewelry. focus on opportunities when
- Product development strategy grasping in the
Focusing on promoting investment in the hand of product quality is
research of new combined products technology standard, thereby expanding
development (with the advantage that PNJ is more market share
Vietnam's leading enterprise in owning the most
advanced technology in the world such as laser
& UV prototyping machine, CNC machine,
plating machine, ...) to design the samples The
product fits the trend of fashion
Table 1: SWOT analysis
 20

3.1. Identify key accounting policies

The goal of accounting analysis is to identify key accounting policies that show and
measure the success and risk factors that affect a firm with maximum accuracy. The items
that PNJ produces is luxury products, therefore the first key success factors will be brand
image or reputation. Obviously, people prefer to purchase from popular companies for there
is less likelihood of purchasing fake items since the Companies have much more lose.
Another factors are R&D so that the designs of company can closely follow the changes in
the world, the needs of the market, and new styles.
3.1.1. Accounting concepts

The accounts have been prepared on accrual basis, in accordance with the
Vietnamese Accounting Standards (VAS). The Company has also prepared an additional
financial statement in English but this version is only translated from Vietnamese and still
applies VAS.

In the context of globalization and The Ministry of Finance is drafting a scheme to

apply international accounting standards to Vietnam, PNJ should prepare report based on
IFRS which is more flexible and has many advantages. The establishment of financial
statements under IFRS will increase financial transparency of PNJ and is closely related to
the plan to improve the quality of corporate governance and financial statements. In
addition, the application of IFRS is also an important factor in the PNJ restructuring
strategy, to enhance capital mobilization and attract foreign investors.

3.1.2. Currency

The firm uses monetary units in accounting and submission in the financial
statements are Vietnam Dong ("VND" or "Đồng"). The currency unit used in the Group's
accounting is determined based on the currency mostly used in sales, service delivery
transactions, there is a significantly influence the price of goods and services. The currency
is used to post up prices and receive payments. The currency is mainly used in the purchase
of goods and services, they greatly impact on labor, material and labor costs production and
business costs, and common use to pay for those costs.

In addition, the firm also uses currency to mobilize financial resources (such as
issuing stocks, bonds) and / or frequently obtained from business activities and stockpiling.
 21

3.1.3. Revenue recognition

Revenue from sale of goods is recognised when all five following conditions are
satisfied (Referring to Article 79, Circular 200/2014 / TT-BTC). The Group insist that no
revenue is recognised if there are significant uncertainties regarding recovery of the
consideration due or the possible return of goods. Under the circumstances, revenue is
recognised based on principle of “substance over form” and allocated to each sales
obligation.

3.1.4. Trade receivables

Trade receivables are carried at the original invoice amount less an estimate made
for doubtful receivables based on a review by the Board of Management of all outstanding
amounts at the year end.

Provision for doubtful debts is made for receivables that are overdue for six months
or more, or when the debtor is in dissolution, in bankruptcy, or is experiencing similar
difficulties and so may be unable to repay the debts.

3.1.5. Inventories

The company applies the perpetual method for inventories. Inventories are valued at
cost (determined on weighted average basis) or net realizable value whichever is lower.

In the case of manufactured products, cost includes all direct expenditure and
production overheads based on normal levels of operating activity, normal capacity is the
average number of products achieved under normal production conditions.

Provision is made for obsolete, slow-moving and defective inventory items. The
difference between the provision of this period and the provision of the previous period is
recognised as an increase or decrease of operating expenses in the year.

3.1.6. Fixed assets, Construction in progress and Provision

Fixed assets are stated at historical cost less accumulated depreciation/amortisation.

Fixed assets are depreciated/amortised using the straight-line method.

Properties in the course of construction are carried at cost. Cost includes professional
fees and, for qualifying assets, borrowing costs dealt with in accordance with the
 22

Company’s accounting policy. Depreciation on the same basis as other fixed asset
commences when the assets are ready for their intended use.

Provision is measured at the expenditures expected to be required to settle the

obligation. If the value of money is material, provision will be measured at the present value
using a pre-tax rate. The increase in the provision due to passage of time is recognised as
an interest expense.

3.2. Assess accounting flexibility

For Tangible fixed assets, the company uses straight-line depreciation method.
Every year, same amount is charged as depreciation in profit and loss account. This makes
comparison of profit for different years easily.

PNJ GLC
Buildings and structures 05 – 25 years 10 – 25 years
Machinery and equipment 03 – 15 years 05 – 15 years
Motor Vehicles 05 – 10 years 06 – 10 years
Office equipment 03 – 10 years 03 – 10 years

Table 2: Estimated useful lives of PPE between PNJ and GLC

The above table illustrates that the range of the estimated useful life is quite different
from the GLC. Overall, it also clearly presents that PNJ has a flexibility in estimation
because in the same asset class, there are still mixed variety different types of assets having
diverse useful lives. Therefore, it correctly reflects the nature of the use of properties.

Related to inventory, the Group applies the perpetual method and cost of inventory
are determined on weighted average basis. Perpetual inventory systems are common in
many modern businesses. They are often found in large businesses, businesses with
multiple locations, or businesses that carry expensive products, such as a jeweler store, PNJ
– a jewelry retailer. Besides that, PNJ is also a jewelry manufacturing company so the
application of weighted average method is reasonable, because inventory is often stored or
combined together, which makes it more difficult to distinguish between old and new
materials.

As mentioned in the previous section, as a company specializing in jewelry, the first

key success factor must be brand image. So to maintain the great position as today, PNJ
 23

had to spend a considerable amount of money for Marketing activities. However according
to VAS, all expenses related to advertising must be recognized as expenses, are not
capitalized.

Although most policies are consistent with the characteristics and industries of the
company, they are less flexible when there is no impact on income tax purposes (straight-
line method, weighted average method, expense Marketing cost). Except estimated useful
life, for it based mostly in judgment of managers.

In conclusion, the flexibility in accounting policies of PNJ is medium level.

3.3. Evaluate Accounting Strategy

The important factors of jewelry manufacturing company as PNJ are the control
policies of asset and inventory. The Account for inventory, depreciation in tangible assets
and real estate are reflected in the true nature of business. Generally, PNJ’s accounting
policies are almost the same as GLC and are also consistent with the industry. The only
main difference between PNJ and GLC is time of depreciation.

PNJ GLC
Inventories Weighted average method

Cost of finished goods and Including direct material, direct labour, and
semi finished goods manufacturing overhead allocated

Depreciation Straight-line method

Table 3: Accounting policies of PNJ and GLC

In document for Annual General Meeting 2019, the company agreed to deduct
4.59% of net income in 2018 for bonus and welfare fund, approximately 48 billion VND.
This ratio has been maintained from 2014 to the present despite a decrease in the number
of employees and an increase in the Union's power. Meanwhile, the bonus for the Board of
Directors and the Executive Board is VND 31 billion. It is worth mentioning that both the
Board of Directors and the Executive Board only have 18 people. Thus, on average, each
leader receives approximately 1.72 billion VND in bonuses in 2019.
 24

PNJ’s accounting policies have remained unchanged since 2014. There is no

adjustment in revenue and estimating policies, so it is illustrated there is no significant
difference between the result of quarterly report.

3.4. Evaluate The Quality Of Disclosure

Transparent demonstration of information in annual report is greatly important for

listed companies. Therefore, as an only listed jewelry company till now, quality of
disclosure of PNJ is superior than that of competitors.
In the consolidated financial statements, the firm gave a brief introduction about
themselves and their operations, explain in footnotes accounting policies, assumptions, and
their logic. Thanks to annual report, PNJ gave their shareholders a adequate disclosure of
business strategies to give a fair review of the development of a company’s business and
its position. They also explain current performance, provide informative segment
disclosure, reveal forthcoming bad news, provide detailed reports and business plans to
investors.
Overall, PNJ's voluntary level of information disclosure is quite high. This is quite
understandable because the profit of firm provides the trade with more and better
information. Voluntary disclosure signals the management’s desire to disclose its superior
performance to external parties, because it will enhance the reputation of the company and
its position in the market.

3.5. Identify Potential Red Flags

3.5.1. Net sales / Inventory

 25

Net sales/Inventory
35
31.72
30

25

20
PNJ
15 GLC
11.77
10 6.22
5 2.93 2.42
3.23
0
2017 2018 2019

Figure 8: Chart of Net sales / Inventory between PNJ and GLC

The above line chart illustrates the Net sales / Inventory ratio of PNJ and GLC over
a 2 – year period starting from 2017. Overall, it is obvious that the proportion of net
sales/Inventory of PNJ slightly declines, the opposite was true for that of GLC, which has
major fluctuation increase year by year.

As a general rule, the higher the inventory turnover ratio, the more efficient the
operation. The firm with a high inventory turnover ratio will pay less storage fees and have
fewer dollars tied up in stock. Over the year, PNJ has increase their sales and, as a result,
their inventory. However, their sales have lower rate compare to inventory, lead to a
decrease in those ratio.

High inventories also increase the risk of spoilage or obsolescence. Perishable

products can either go bad in storage or require expensive care. Fashion-driven items like
jewelry may lose their relevance and appeal if they sit in storage too long after production.
A low inventory turnover ratio also hints that the firm failed to reach its original sales goals,
since companies rarely plan to keep excess inventory. High inventories are usually a sign
that the sales department cannot move goods as quickly as the manufacturing department
expected.

3.5.2. Allowance for doubtful debt / Trade receivables

 26

Allowance for doubtful debt / trade

receivables
0.01200
0.00959
0.01000
0.00800
0.00600 PNJ

0.00400 GLC
0.00291
0.00200
0.00000 0.00000 0.00000
0.00000
2017 2018 2019

Figure 9: Chart of Allowance for Doubtful debt / Trade receivables between PNJ and GLC

Compared to GLC, which remarkably grew, PNJ has a greatly better performance
when the ratio from 2017 to 2019 remained relatively stable at 0.00000. Therefore, the
company has completely eliminated bad debt provisions in 2017 until now. Most companies
operating in the jewelry industry carry out trade through retail models, so the Allowance
for Doubtful debt / Trade receivables rate is very low, almost zero. Generally, this ratio of
that is no concern.

3.5.3. Gross Profit Margin

Gross profit Margin

0.35
0.2962
0.3
0.2662
0.25

0.2
0.2036 PNJ
0.15 0.1907
0.1742 GLC
0.1

0.05 0.0397
0
2017 2018 2019

Figure 10: Chart of Gross Profit Margin between PNJ and GLC
 27

The above line chart shows that the Gross Profit Margin ratio of PNJ and GLC from
2017 to 2019. Generally, it is clear that the proportion of PNJ’s slightly jumped, the
opposite was true for that of GLC, which has significantly dropped year by year. Consistent
sales have been growing while the established competitors are experiencing periods of weak
performance. This may be due to its efficient business operations rather than fraudulent
activities. As a result, these show no concern.

3.6. Undo Accounting Distortions

Generally, the above analysis depicts that there is no Accounting Distortions in PNJ.
Through Financial Statement and related documents, the Group has provided entity’s
financial information which could help investors to take most of financial information for
their assessments and decision. Furthermore, they not only provide the users to know how
well or bad the entity financial position is, or how big or small the entity, but also prepare
for the purpose of helping the users, especially the investors in budgeting the entity’s future
cash flow.

3.7. Analysis of the Statement of Financial Position

2019 PNJ GLC

WC=SE+LTL-CA 3,315,503,660,782 (9,282,661,157)
WCN= CA-CL 5,831,181,843,996 (9,307,889,521)
NC=PC- BO (2,515,678,183,214) 25,228,364
2018
WC=SE+LTL-CA 2,727,938,814,941 (8,885,225,521)
WCN= CA-CL 4,079,700,133,338 (13,634,635,478)
NC=PC- BO (1,351,761,318,397) 4,749,409,957
2017
WC=SE+LTL-CA 2,407,383,867,381 (44,619,903,539)
WCN= CA-CL 3,078,454,165,394 (45,840,172,203)
NC=PC- BO (671,070,298,013) 1,220,268,664

Table 4: Financial structures of WC / WCN / NC

 28

PNJ’s financial structures of WC/WCN/NC is case 2 which is a common structure

of a manufacturing companies, while GLC, a competitor of PNJ, is case 1. This means that
PNJ has less risk of the costs of capital than GLC.

PNJ’s net cash of 3 latest years is less than 0, this means PNJ use long-term sources
to invest in short-term activities.

PNJ GLC
2017 2018 2019 2017 2018 2019
WC + + + - - -
WCN + + + - - -
NC - - - + + +

Table 5: Statement of Financial structure

3.8. Analysis of the Statement of cash flow

Cash Flow Indirect Year 2017 Year 2018 Year 2019

I. CASH FLOWS FROM OPERATING ACTIVITIES
1. Profit before tax 907,379,000 1,205,550,000 1,506,712,000
2. Adjustments for:
Depreciation of fixed assets and
properties investment 39,340,000 42,102,000 61,066,000
(Reversal of provisions)/provisions 664,000 (3,415,000)
Foreign exchange (gain)/loss from
revaluation of monetary items
denominated in foreign currencies (604,000) (169,000) (1,243,000)
Loss/(profit) from investment activities (15,184,000) (7,407,000) (1,457,000)
Interest expense 54,981,000 61,109,000 115,368,000
Loss/(profits) from disposal of fixed
asset
Interest income and dividends
Allocation of goodwill
Adjustments for
 29

3. Operating profit before changes in

working capital 986,576,000 1,301,185,000 1,677,032,000
(Increase)/decrease in receivables (41,627,000) (86,038,000) 12,889,000
(Increase)/decrease in inventories (563,270,000) (1,566,187,000) (2,062,274,000)
Increase/(decrease) in payables (other
than interest, corporate income tax) 16,952,000 412,203,000 199,226,000
(Increase)/decrease in prepaid expenses (45,326,000) (44,784,000) (62,082,000)
Changes in available for sale securities
Interest paid (55,961,000) (60,444,000) (114,017,000)
Corporate income tax paid (153,620,000) (231,958,000) (291,572,000)
Other receipts from operating activities
Other payments for operating activities (34,242,000) (26,118,000) (20,293,000)
NET CASH FLOWS FROM
OPERATING ACTIVITIES 109,484,000 (302,140,000) (661,092,000)
II. CASH FLOWS FROM INVESTING ACTIVITIES
1. Payment for fixed assets,
constructions and other long-term assets (115,444,000) (336,378,000) (223,766,000)
2. Receipts from disposal of fixed assets
and other long-term assets 8,426,000 1,076,000 1,775,000
3. Loans, purchases of other entities'
debt instruments (160,000,000)
4. Receipts from loan repayments, sale
of other entities' debt instruments 160,065,000
5. Payments for investment in other
entities
6. Collections on investment in other
entities
7. Dividends, interest and profit received 2,932,000 6,331,000 164,000
8. Increase/(Decrease) in term deposit
9. Purchases of minority shares of
subsidiaries
10. Other receipts from investing
activities
 30

11. Other payments for investing

activities
NET CASH FLOWS FROM
INVESTING ACTIVITIES (264,086,000) (168,906,000) (221,827,000)
III. CASH FLOWS FROM
FINANCING ACTIVITIES
1. Receipts from equity issue and
owner's capital contribution 975,036,000 97,273,000 68,933,000
2. Payment for share repurchases (2,094,000)
3. Proceeds from borrowings 3,091,939,000 4,320,772,000 5,435,682,000
4. Principal repayments (3,707,380,000) (3,647,003,000) (4,387,362,000)
5. Repayment of financial leases
6. Dividends paid, profits distributed to
owners (185,194,000) (268,372,000) (343,875,000)
7. Other receipts from financing
activities
8. Other payments for financing
activities
NET CASH FLOWS FROM
FINANCING ACTIVITIES 174,400,000 502,670,000 771,283,000
Net cash flows during the period 19,798,000 31,624,000 (111,635,000)
Cash and cash equivalents at
beginning of the period 155,348,000 175,209,000 206,721,000
Exchange difference due to re-valuation
of ending balances 62,000 (111,000) 139,000
Cash and cash equivalents at end of
the period 175,209,000 206,721,000 95,224,000

Table 6: Analysis of Statement of cash flow

In 2019, PNJ opened 43 new stores, bringing the total number of stores across the
system to 346. If compared to 324 stores by the end of 2018, PNJ also closed 21 stores last
year, bringing the number of stores to increase in reality is 22. This result increases PNJ's
profit before tax to 300 million.
 31

In 2019, short-term borrowings from banks of PNJ increased to over VND 1,100
billion. Increasing cash flow of PNJ significantly.
 32

4.1. Common – Size Analysis

4.1.1. Horizontal analysis

4.1.1.1. Analysis of the Income statement

% of
2019 2018 Amount of change
change
Revenues 17,144,251,446,632 14,678,799,605,798 2,465,451,840,834 17%
Revenues deductions (143,570,366,109) (107,663,860,948) (35,906,505,161) 33%
Net revenue 17,000,681,080,523 14,571,135,744,850 2,429,545,335,673 17%
Cost of goods sold (13,539,967,588,262) (11,792,052,183,391) (1,747,915,404,871) 15%
Gross profit 3,460,713,492,261 2,779,083,561,459 681,629,930,802 25%
Income from
16,820,020,734 6,846,027,091 9,973,993,643 146%
financial activities
Financial costs (133,678,118,497) (66,345,864,211) (67,332,254,286) 101%
Interest expenses (115,367,610,418) (61,109,042,390) (54,258,568,028) 89%
Selling expenses (1,361,807,553,507) (1,170,069,069,426) (191,738,484,081) 16%
Administrative
(475,831,697,930) (345,868,153,940) (129,963,543,990) 38%
expenses
Net profit from
1,506,216,143,061 1,203,646,500,973 302,569,642,088 25%
operating activities
Other income 4,760,923,089 4,637,809,502 123,113,587 3%
Other expenses (4,264,680,599) (2,734,037,354) (1,530,643,245) 56%
Net other profit 496,242,490 1,903,772,148 (1,407,529,658) -74%
Profit before tax 1,506,712,385,551 1,205,550,273,121 301,162,112,430 25%
Business income tax
(315,667,183,537) (249,485,408,708) (66,181,774,829) 27%
charge - current
Business income tax
2,879,755,229 3,858,482,734 (978,727,505) -25%
charge - deferred
Net profit after tax 1,193,924,957,243 959,923,347,147 234,001,610,096 24%
Table 7: The horizontal analysis for PNJ's income statement
 33

In 2019, net revenues of PNJ increased 17%, profit after tax increased 24%. Profit
before tax in 2019 was more than 1000 billion dong. Gross profit in 2019 was more than
expectation, the gross profit has increased continuously since 2013.

4.1.1.2. Analysis of the Balance Sheet

2019 2018 2017

Current assets 188% 139% 100%
Cash and cash equivalent 54% 118% 100%
Short-term investments - - 100%
Short-term receivables 164% 183% 100%
Inventories 206% 146% 100%
Other current assets 105% 101% 100%
Non-current assets 213% 173% 100%
Long-term receivables 165% 134% 100%
Fixed assets 191% 148% 100%
Tangible fixed assets 128% 110% 100%
Intangible fixed assets 234% 175% 100%
Long-term assets in progress - - -
Long-term investments - - -
Other long-term assets 473% 328% 100%
TOTAL ASSETS 191% 143% 100%

Table 8: The horizontal analysis for PNJ's balance sheet

In 2019, long-term assets have increased compared to 2018. This is because in

2019 PNJ has opened many new stores.

Inventory increased sharply in 2019. And PNJ's cash dropped significantly.

In 2019, PNJ’s intangible assets has increased quickly. PNJ’s 2019 intangible
assets consists of land use right and software. It depends on PNJ’s strategy, they are
extending their retailing system and they are going to invest in e-commerce.
 34

250% 250%

200% 200%
150% 150%
100% 100%
50%
50%
0%
0%
Cash and Short-term Inventories Fixed
cash receivables assets 2019 2018 2017
equivalent
Tangible fixed assets
2019 2018 2017 Intangible fixed assets

Figure 11: Chart of horizontal analysis for PNJ's balance sheet

4.1.2. Vertical

4.1.2.1. Analysis of the Income statement

2019 2018 2017

Net sales revenue 100% 100% 100%
Income and expenses
COGS -79% -81% -83%
Income from financial activities not significant not significant not significant
Financial costs -1% not significant -1%
Interest expenses -1% not significant -1%
Selling expenses -8% -8% -7%
Administrative expenses -3% -2% -2%
Profit from operating activities 9% 8% 8%
Gains not significant not significant not significant
Losses not significant not significant not significant
Other profits not significant not significant not significant
Profit before tax 9% 8% 8%
Current income tax charge -2% -2% -2%
Deferred income tax charge not significant not significant not significant
Profit after tax 7% 7% 7%

Table 9: Analysis of Income statement

 35

PNJ has improved ability of production (decreased costs of goods sold), however the
other expenses have increased, which made profit after tax was still 7% of revenues.

4.1.2.1. Analysis of the Balance Sheet

2019 2018 2017

Current assets 85% 84% 85%
Cash and cash equivalent 1% 3% 4%
Short-term investments not significant not significant 4%
Short-term receivables 2% 2% 2%
Inventories 82% 77% 74%
Other current assets 1% 1% 2%
Non-current assets 15% 16% 15%
Long-term receivables 1% 1% 1%
Fixed assets 11% 11% 11%
Tangible fixed assets 3% 3% 5%
Intangible fixed assets 8% 8% 6%
Long-term assets in progress not significant 1% not significant
Long-term investments not significant not significant not significant
Other long-term assets 3% 3% 3%
TOTAL ASSETS 100% 100% 100%

Table 10: Analysis of Balance Sheet

2019
1%
2%

11% Cash and cash equivalent

Short-term receivables
Inventories
Fixed assets
82%

Figure 12: Balance Sheet items in 2019

 36

Because PNJ is a manufacturing firm, proportion of inventory and fixed asset is high.
Inventory is the most component of PNJ’s assets. Beside that, because of the nature of a
selling jewelry company, which is customer usually pay for their products immediately, so
the proportion of short-term receivable is small. Short-term receivable of SJC, competitor
of GLC is about 1%, lower than PNJ.

4.2. Analysis of Profitability

Consider the Financial Statement of PNJ, which presents the following financial
information:

4.2.1. Net Profit Margin

There is the information about “Net profit margin” of the company below:

2019 2018 2017

Net profit margin 6.96% 6.59% 6.60%
Return on assets 13.88% 14.91% 16.14%
Total assets turnover 2.28 2.67 2.70

Table 11: Net Profit Margin of PNG

Net profit Margin

20.00%
10.00%
0.00%
-10.00%
-20.00%
-30.00%
-40.00%
-50.00%
-60.00%
-70.00%
-80.00%
2017 2018 2019
PNJ 6.60% 6.59% 6.96%
GLC 5.31% 15.33% -72.06%

Figure 13: Chart of Net Profit Margin between PNJ and GLC
 37

In the period, there was an upward trend in PNJ Company, the opposite was true for
net profit margin in GLC Company. While net profit margin of PNJ had a slight growth in
its rate (about 0.36%), GLC has a strong downward fluctuation in its rate (about 77.37%),
especially it hits a lowest point in 2019 at -72.06%. Net profit margin of PNJ had a
continuous increase and hold the higher level than that of GLC, which shows that the line
chart illustrates the positive aspect in generating net income by sales.

4.2.2. Total Asset Turnover and Return on Assets

TAT & ROA of PNJ

2.8 16.50%
2.7 16.00%
2.6 15.50%
2.5 15.00%
2.4 14.50%
2.3 14.00%
2.2 13.50%
2.1 13.00%
2 12.50%
2017 2018 2019
Total assets turnover 2.28 2.67 2.7
Return on assets 13.88% 14.91% 16.14%

Figure 14: Chart of Total assets turnover and Return on assets of PNJ

The chart shows an upward trend in total asset turnover and return on assets ratios.
Specially, ROA ratio had a remarkable rise through 3 years (peak at 16.14% in 2019), which
illustrated that PNJ used well asset resources to create profits. Absolutely, both total assets
and net profit after tax of PNJ went up during the period given (upon financial information
table above). Such a similarity can be seen in return on assets, there was a slight increase
in its number (at 2.7 in 2019), which shows generating sales through the use of assets of
company. Indeed, today, PNJ intent to expand production and business scale (open a
number of retail store and begin to encroach on PNJ watch brand in PNJ Next model).

4.2.3. DuPont Return on Assets

 38

2017 2018 2019

PNJ 6.60% 6.59% 6.96%
Total assets turnover 2.28 2.67 2.7
DuPont Return on Assets 13.88% 14.91% 16.14%
Table 12: DuPont Return on Assets

DuPont analysis is an element of the profitability ratio analysis, which is often being
applied to firm’s financial statement in order to measure its profitability through a few key
ratios: return on assets, return on equity, net profit margin, total asset turnover and financial
leverage. In other words, this model breaks down the return on equity ratio to explain how
companies can increase their return for investors.

This table presents an upwards trend of return on assets in four years from 2017 to
2019. It decreases from 13.88% in 2017 to 16.14% in 2019, mainly because the company
remarkably increases the turnover of its assets, and this process led to the result.

4.2.4. Analysis on operating assets

4.2.4.1. Operating profit margin

2019 2018 2017

Operating income 1,623,074,240,824 1,263,146,338,093 949,049,430,041
Net sales 17,000,681,080,523 14,571,135,744,850 10,976,836,889,964
Operating income margin 9.55% 8.67% 8.65%

Table 13: Operating profit margin

 39

Operating profit margin

40.00%
20.00%
0.00%
-20.00% 2019 2018 2017

-40.00%
-60.00%
-80.00%
-100.00%
-120.00%
-140.00%

PNJ GLC

Figure 15: Chart of Operating profit margin between PNJ and GLC

Operating profit margin has been increasing. In 2019, operating profit margin
increased more than the previous year (9.55%). This shows that the company can not only
expand its profit margins but also control the operating costs involved. PNJ's operating
profit margin is better than its competitor.

4.2.4.2. Return on operating assets

2019 2018 2017

Net sales 17,000,681,080,523 14,571,135,744,850 10,976,836,889,964
Operating expenses (15,377,606,839,699) (13,307,989,406,757) (10,027,787,459,923)
Operating income 1,623,074,240,824 1,263,146,338,093 949,049,430,041
Operating assets 7,437,764,921,293 5,458,491,752,908 3,822,862,322,077
Average operating
assets 6,448,128,337,101 4,640,677,037,493 3,529,101,544,922
Return on
operating assets 25.17% 27.22% 26.89%

Table 14: Return on operating assets

 40

Return on Operating Assets

30.00%

20.00%

10.00%

0.00%

-10.00%

-20.00%

-30.00%
2019 2018 2017
PNJ 25.17% 27.22% 26.89%
GLC -26.07% 21.84% 8.86%

Figure 16: Chart of Return on Operating Assets

PNJ company is using assets to create better profits. The proof is that revenue and
costs are also increasing steadily.

In the period, there was a bit upward trend in PNJ Company and more in GLC
Company. While net profit margin of PNJ had a slight decreasing in its rate (about 2.05%),
GLC has a strong downward fluctuation in its rate (about 47.91%), especially it hits a lowest
point in 2019 at -26.07%. Return on Operating Assets of PNJ had hold the higher level than
that of GLC, which shows that the line chart illustrates the positive aspect in generating net
operating income by average operating assets.

4.2.4.3. DuPont Return on Operating Assets

2019 2018 2017

Operating income margin 9.55% 8.67% 8.65%
Operating asset turnover 2.64 3.14 3.11
DuPont return on operating assets 25.17% 27.22% 26.89%

Table 15: DuPont Return on Operating Assets

In 2019, PNJ was a bit upward in Return on Operating Assets. However, this
decrease is not significantly affected. PNJ still maintains a stable level, still uses good assets
to create profits for businesses.
 41

4.2.5. Sales to Fixed Assets

2019 2018 2017

Net sales 17,000,681,080,523 14,571,135,744,850 10,976,836,889,964
Net fixed assets 235,369,835,919 155,137,888,694 196,083,247,641
Average net fixed
assets 195,253,862,307 175,610,568,168 197,874,151,527
Sales to fixed assets 87.070 82.974 55.474

Table 16: Sales to Fixed assets

Sales to fixed assets has increased year by year, especially high in the period of 2017
- 2018. PNJ has used its fixed assets in operation to create revenue effectively.

4.2.6. Return on investment (ROI)

𝑁𝑒𝑡 𝑖𝑛𝑐𝑜𝑚𝑒 𝑏𝑒𝑓𝑜𝑟𝑒 𝑚𝑖𝑛𝑜𝑟𝑖𝑡𝑦 𝑖𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝑎𝑛𝑑 𝑛𝑜𝑛−𝑟𝑒𝑐𝑢𝑟𝑟𝑖𝑛𝑔 𝑖𝑡𝑒𝑚𝑠+[ 𝑖𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝑒𝑥𝑝𝑒𝑛𝑠𝑒∗(1−𝑡𝑎𝑥 𝑟𝑎𝑡𝑒)]
ROI =
𝐴𝑣𝑒𝑟𝑎𝑔𝑒 (𝑙𝑜𝑛𝑔 𝑡𝑒𝑟𝑚 𝑙𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠+𝑒𝑞𝑢𝑖𝑡𝑦 )

2019 2018 2017

Net income 1,193,924,957,243 959,923,347,147 724,856,448,060
Minority share of earnings - - -
Non-recurring items 496,242,490 1,903,772,148 6,010,723,280
Interest expense 115,367,610,418 61,109,042,390 54,981,032,499
1 - tax rate 0.8 0.8 0.8
Long term liabilities +
equity 4,585,103,597,347 3,760,577,770,904 3,003,487,798,782
Average (LTL&E) 4,172,840,684,126 3,382,032,784,843 2,284,906,855,345
ROI 31% 30% 33%
Table 17: Return on Investment

4.2.7. DuPont Framework

2019 2018 2017

ROE 26.08% 25.63% 24.58%

Table 18: DuPont framework

 42

Figure 17: Chart of DuPont Framework

The ROI has decreased year by year, although the profit and interest expense have
increased but the average (long term liabilities + equity) has increased. Therefore, PNJ
should consider maximizing the use of investment resources to increase profits.

4.2.8. Gross Profit Margin

2019 2018 2017

Net sales 17,000,681,080,523 14,571,135,744,850 10,976,836,889,964
COGS 13,539,967,588,262 11,792,052,183,391 9,064,872,939,048
Gross profit 3,460,713,492,261 2,779,083,561,459 1,911,963,950,916
Gross profit margin 20.36% 19.07% 17.42%

Table 19: Gross profit margin

 43

Net sales COGS Gross profit

40,000,000,000,000

35,000,000,000,000

30,000,000,000,000

25,000,000,000,000

20,000,000,000,000

15,000,000,000,000

10,000,000,000,000

5,000,000,000,000

0
2019 2018 2017

Figure 18: Chart of Gross profit margin

Gross profit margin increased significantly over years. In 2019, PNJ extended their
stores which made net sales increased and so did cost of goods sold. However, the growth
rate of revenue was higher that this of COGS which enabled the gross profits to increase.

Furthermore, PNJ decided to provide products to traditional gold’s shops and sell
through e-commerce. Therefore, PNJ's products have been marketed to customers
extensively through various distribution channels.

4.3. Analysis of Profitability

4.3.1. Receivables Issues

2017 2018 2019

Day's Sales in receivable (days) 4.24 5.33 4.3
Account receivable turnover 101.35 85.69 83
Account receivable turnover in days 3.6 4.26 4.4

Table 20: Day's sales in receivable and Account receivable turnover of PNJ
 44

Receivable issues of PNJ

120 6

100 5

80 4

60 3

40 2

20 1

0 0
2017 2018 2019

Figure 19: Chart of Receivable issues

The nature of PNJ is a retail company so the ratios in receivable are quite lower than
other industries. Days’ sales in receivables of PNJ during the period given had a strong
upwards fluctuation, from 4.24 days in 2017 to 4.3 days in 2019. Although sales of
company in the end-period of business year soared, the number of day of receivables still
had a slight increase. The reasons can be determined that there are many retail store so
company perhaps met some difficulties in receivable. Compare to data in industry average,
this number is plausible. The rising of days’ sales in receivables also dragged on the
decreasing of accounts receivable turnover, obviously, these rates indicated the efficiency
of credit policies and the liquidity of receivables of PNJ which had a downwards trend.
Accounts receivable turnover in days is similar to Number of days’ sales in receivables.
Perhaps, company tends to loosen the credit policies for customers.

4.3.2. Liquidity of Inventory

2017 2018 2019

Day's Sales Inventory (days) 136.98 144.85 189.52
Inventory turnover 2.91 2.81 2.26
Inventory turnover in days 125.64 129.54 161.72

Table 21: Liquidity of Inventory

 45

Liquidity of Inventory of PNJ

3.5 200
180
3
160
2.5 140
120
2
100
1.5
80

1 60
40
0.5
20
0 0
2017 2018 2019

Figure 20: Chart of Liquidity of Inventory

Days’ sales inventory of PNJ increased in the surveyed period, from 136.98 days to
189.52 days, due to the increasing of ending inventory is faster than that of COGS. Overall,
inventory turnover was not change. Lately years, PNJ is being step by step to illustrate itself
in professional retailer, the volume of store soared (more 100 stores in 2019), which support
to the increase of sales so the growth of volume of inventory is an absolute thing. Inventory
turnover slightly dropped that indicated the liquidity of inventory was sustainable and
efficiency of PNJ’s business operating.

4.3.3. Payable Issues

2019 2018 2017

Total purchases 15,584,242,016,488 13,376,238,899,757 9,628,142,555,092
Total accounts
690,808,185,195 342,676,925,196 278,898,463,294
payables
Average Accounts
516,742,555,196 310,787,694,245 302,314,602,186
payables
Accounts payables
30 43 32
turnover

Table 22: Payable issues

 46

The ratio this year is smaller than many years ago, which shows that the business
demonstrates the reputation of payment relations with suppliers and product quality to
customers.

4.3.4. Current Assets compared with Currents Liabilities

4.3.4.1. Working Capital and Current Ratio

2015 2016 2017 2018 2019

Current
assets 2,265,184,856,056 3,102,579,808,767 3,896,141,901,410 5,405,256,600,641 7,333,364,485,251
Current
liabilities 1,581,405,866,182 2,021,660,998,255 1,488,758,034,029 2,677,317,785,700 4,017,860,824,469
Working
capital 683,778,989,874 1,080,918,810,512 2,407,383,867,381 2,727,938,814,941 3,315,503,660,782
Current
ratio 1.43 1.53 2.62 2.02 1.83

Table 23: Working capital and Current ratio

Working capital Current ratio

3,500,000,000,000 3.00

3,000,000,000,000 2.62
2.50

2,500,000,000,000
2.02 2.00
1.83
2,000,000,000,000
1.53 1.50
1.43
1,500,000,000,000
1.00
1,000,000,000,000

500,000,000,000 0.50

0 0.00

Figure 21: Chart of Working capital and Current ratio

It is clear that WC has been increased per year. The current ratio from 2015 to 2019
was between 1.43 and 2.62 which means the financial health of PNJ is quite good.
Particularly in 2016 and 2017, the current ratio reached 2.62 and 2.02, respectively. This
was a proof that current assets were much higher than current liabilities, the company must
 47

have a certain competitive advantage in this industry. Overall, the financial health of the
business is relatively stable.

4.3.4.2. Acid – test Ratio and Cash Ratio

2015 2016 2017 2018 2019

Current
assets 2,265,184,856,056 3,102,579,808,767 3,896,141,901,410 5,405,256,600,641 7,333,364,485,251
Current
liabilities 1,581,405,866,182 2,021,660,998,255 1,488,758,034,029 2,677,317,785,700 4,017,860,824,469
Inventory 2,135,224,563,617 2,838,689,610,580 3,401,959,226,624 4,968,145,942,990 7,030,420,371,216
Cash &
cash
equivalents 37,884,639,212 155,348,026,509 175,208,552,187 206,721,179,629 95,224,439,008
Quick
ratio 0.082 0.131 0.332 0.163 0.075
Cash ratio 0.024 0.077 0.118 0.077 0.024

Table 24: Acid - test ratio and Cash ratio

0.350

0.300

0.250

0.200

0.150

0.100

0.050

0.000
2015 2016 2017 2018 2019
Quick ratio Cash ratio

Figure 22: Chart of acid - test ratio and Cash ratio

 48

4.4. Analysis of Long – term Debt – Paying Ability

4.4.1. Debt Ratio

Debt ratio
10.00%
9.00%
8.00%
7.00%
6.00%
5.00%
4.00%
3.00%
2.00%
1.00%
0.00%
2017 2018 2019
PNJ 9.05% 1.50% 0.60%

Figure 23: Chart of Debt ratio

The above line graph illustrated the debt ratio of PNJ between 2017 and 2019.
Overall, it is obviously that it shows a significant decline from 9.05% in 2017 down 0.6%
in 2019. This rate in the balance is too low. Normally, if the debt ratio is low, it means
that the company seldom passes the debt to pay for its activities. This will maintain stable
income, as the company often has not to pay the accrued interest.
 49

4.4.2. Debt / Equity Ratio

Debt/Equtiy ratio
2.00%
1.80%
1.60%
1.40%
1.20%
1.00%
0.80%
0.60%
0.40%
0.20%
0.00%
2017 2018 2019
PNJ 1.83% 0.41% 0.17%

Figure 24: Chart of Debt / Equity ratio

The given line graph presents the Debt/Equity ratio of PNJ over 2 – years period,
from 2017. Overall, it shows that the ratio remarkably dropped of 1.66% from 2017 to 2019.
Therefore, the ratio leads to us know that company use Equity to invest more and more
assets in PNJ in year by year. In conclusion, the chart illustrated the PNJ had a strongly
downwards trending between 2017 and 2019.
 50

Kỳ Ngọc (2020). PNJ năm thứ hai báo lãi vượt ngàn tỉ, https://forbesvietnam.com.vn/tin-
cap-nhat/pnj-nam-thu-hai-bao-lai-vuot-ngan-ti-8934.html

Báo cáo tài chính PNJ các năm, https://www.pnj.com.vn/quan-he-co-dong/bao-cao-tai-

chinh/?fbclid=IwAR1OhwFQT2CuAQWlVk1y2mSUbMiZzgkgCnJDVxu5wINKeiJK7I
LbgsmezvU

Công ty Cổ phần Vàng bạc Đá quý Phú Nhuận (HOSE), https://s.cafef.vn/hose/PNJ-cong-

ty-co-phan-vang-bac-da-quy-phu-nhuan.chn?fbclid=IwAR32zmEiFSgb12UCA-
G2Nd2FhfB6i6HYJsca7dChmM2QRuyQ9TFUJWtHbjY

Công ty cổ phần Vàng Lào Cai (UpCOM), https://s.cafef.vn/upcom/GLC-cong-ty-co-phan-

vang-lao-cai.chn