ACV – 2H21 remains tough – Update

• In 2Q21, ACV posted VND413bn in NP vs. VND320bn net loss in 2Q20. 1H21 NP inched up 3.8% yoy, fulfilling 29.2% of our FY21F forecast.
• The share dividend plan in 2021F, the HSX listing plan in 2022F and business recovery from 2022F onwards are near-term catalysts.
• Reiterate Add with lower DCF-based target price of VND86,400.

Financial income continued to save 2Q21 net profit
In 2Q21, ACV’s revenue increased 56.4% to VND1,913bn on the back of (1) VND340bn revenue from airfield assets, and (2) total passenger (pax) throughput increased 6.8% yoy, in which most of the pax throughput are domestic while international traffic is still frozen since 2Q20. 2Q21 net financial income hiked 422.0% yoy mainly due to VND447bn FX gain from JPY depreciation against VND in 2Q21 while in 2Q20, ACV recorded FX loss of VND359bn. 2Q21 G&A expenses increased 156.2% yoy as ACV spent VND200bn to support the Covid-19 vaccine fund. As a result, ACV recorded 2Q21 NP of VND413bn versus 2Q20 net loss of VND320bn. 1H21 NP inched up 3.8% yoy, mostly thanks to the increase in 1H21 net financial income (+163.5% yoy), fulfilling 29.2% of our full-year forecast.

Total pax throughput to gradually recover from 4Q21F
At the average vaccination rate of 400,000 doses/day recently and the vaccine supply is improving, we expect 29.9%/62.2% of Vietnam population will be vaccinated by end 3Q21/4Q21, in which 3.3%/20.7% of Vietnam population will be fully vaccinated. With government’s efforts to control the pandemic and the vaccination, we expect the current outbreak to be contained by the end of 3Q21 and Vietnam domestic & int’l air traffic may gradually recover from 4Q21. ACV’s total domestic/international pax may drop 18.1%/25.9% yoy in FY21F, but will strongly recover in medium-term, in which ACV FY22-23F domestic pax may increase 75.3%/7.5% yoy while FY22-23F international pax can increase 483.7%/17.2% yoy.

Reiterate Add with a lower target price of VND86,400
We reiterate our Add rating on ACV with a lower DCF-based TP of VND86,400 as we decreased FY21F EPS by 64.0% following the current pandemic outbreak while almost maintaining our FY22-23F forecast as the positive outlook remains intact in the period. Potential re-rating catalysts include (1) domestic and international air travel resume sooner than expectation, (2) dividend plan is announced and (3) listing on the main bourse is approved. Downside risks include (1) a longer-than-expected Covid-19 pandemic, (2) a stronger-than-expected JPY vs VND, and (3) slower-than-expected construction of LTIA.

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