ACV – Waiting for fully recovery of int’l travel – Update

• In 4Q22, ACV posted VND1,072bn in NP (+494.6% yoy). FY22 NP hiked 12 times yoy, fulfilling 93.4% of our full year forecast.
• We expect ACV’s NP to increase 27.0%/6.8% yoy in FY23-24F, driven by the recovery of international pax (+205%/14.2% yoy in FY23-24F).
• Reiterate Add with unchanged DCF-based target price of VND117,900.

Flourishing int’l market offset the slowdown domestic market in 4Q22
In 4Q22, int’l pax continues to show a strong recovery (+93 times yoy) and reached 67% of pre-pandemic level. Despite increasing 406% yoy, domestic pax growth is slowing down (-36.4% qoq, equal to pre-pandemic level) as (1) 4Q is the low season and 2) people tend to travel abroad after 3 years grounded. Thus, 4Q22 revenue and NP increased 330.8% yoy/494.6% yoy to VND4,109bn/VND1,072bn. On a qoq basis, revenue inched down 1.9% qoq as flourishing int’t market offset the slowdown domestic market, but NP dropped 49.4% qoq as (1) lower financial income (-31% qoq due to lower FX revaluation), (2) higher G&A expenses due to increasing labor cost and provision from the airlines. For the whole FY22, ACV’s NP hiked 12 times yoy to VND6,236bn, fulfilling 93.4% of our full-year forecast.

Int’l air business to maintain solid momentum from China reopening
Although Vietnam has not been in China’s tourist visa resumption list yet and the number of China tourist to Vietnam decreased 6.6% month-on-month in Jan-23, we still believe in the great recovery prospect of Chinese visitors to Vietnam in 2023F as (1) the visa issuance is being urgently resolved by both sides and we expect it may be restored in the middle of 2Q22F, and (2) the airlines is urgently resuming flights between the two countries. We expect the number of China’s passenger to Vietnam may recover to 80% of pre-pandemic level by the end of FY23F, along with air traffic to other countries will fully recover by the end of FY23F, we expect ACV’s international pax to surge 205% yoy to 24.7m pax in FY23F (87.9% of pre-pandemic level), and may continue to increase 14.2% yoy to 28.2m pax in FY24F (100.2% of pre-pandemic level).

Reiterate Add with unchanged DCF-based TP of VND117,900
We reiterate our Add rating on ACV with unchanged DCF-based TP of VND117,900 on the mixed impact of (1) we roll our DCF valuation to end-2023F, and (2) we revise down FY23-24F EPS forecast by 8.7%-7.5% on lower domestic pax forecast. Re-rating catalysts include (1) int’l air traffic recovers strongly, (2) dividend plan is announced. Upside risk is listing on the main bourse is approved. Downside risks include (1) uncertainties from China’s visa policy, (2) a stronger-than-expected JPY vs VND

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