VIC posted Q2 2021 revenue of VND38.5tn (USD1.7bn; +65% YoY) with strong growth in property sales while its NPAT-MI reached VND1.2tn (USD53mn; -41% YoY). As such, H1 2021 results recorded strong revenue growth of 59% YoY to reach VND61.7tn (USD2.7bn) along with encouraging positive EBIT of VND1.2tn (USD52mn) vs H1 2020’s EBIT loss of VND2.2tn (USD96mn). 

Overall, VIC’s H1 2021 revenue results were mostly in line and fulfilled 46% of our full-year forecast. On the other hand, the company’s EBIT performance trailed our expectation mainly due to a higher-than-expected loss for the industrial segment in Q2 2021. 

VIC recorded VND7.5tn (USD325mn) in pre-tax gains from divesting all of its ~13% remaining stake in The Crown X (TCX) in H1 2021, which also supported the company’s NPAT-MI in H1 2021 to reach VND3.3tn (USD144mn; +33% YoY) — equivalent to 73% of our full-year forecast. 

Property sales segment (accounting for 61% of VIC’s H1 2021 revenue)

This segment’s H1 2021 results were mainly driven by scheduled handovers of ~7,300 retail units and the recognition of bulk sales transactions at Ocean Park and Grand Park. Please find further details in our VHM Earnings Flash, dated July 29, 2021.

Leasing segment (accounting for 5% of VIC’s H1 2021 revenue)

This segment posted a recovery in H1 2021 vs a low base in H1 2020; however, the current COVID-19 situation poses pressure in H2 2021. We note that VRE spent VND424bn (USD18.4mn) for a tenant support package in H1 2021 vs VND675bn (USD29.3mn) in H1 2020 and VND865bn (USD37.6mn) for full-year 2020. Please find further details in our VRE Earnings Flash, dated July 29, 2021.

Hospitality segment (accounting for 3% of VIC’s H1 2021 revenue)

The hospitality segment continued to be hit by the resurgence of COVID-19 — especially for the 2021 peak summer vacation season. In Q2 2021, this segment recorded 15% YoY revenue growth on the back of a recovery of domestic tourism vs Q2 2020’s low base. Nevertheless, this segment’s revenue declined 29% YoY to VND1.9tn (USD81mn) while its EBIT loss reached VND4.9tn (USD211mn) vs H1 2020’s EBIT loss of VND4.1tn (USD177mn). As this segment’s EBIT loss in H1 2021 reached 54% of our full-year forecast, we anticipate insignificant change to our segment forecast, pending a fuller review.

Industrial segment (accounting for 15% of VIC’s H1 2021 revenue)

We estimate that VinFast delivered ~12,600 internal combustion engine (ICE) cars, achieving 32% of our 2021 car sales volume forecast of 40,000 units. This segment’s H1 2021 revenue recorded positive 50% YoY growth to reach VND9.5tn (USD413mn) with an EBIT loss of VND11.5tn (USD500mn) — equivalent to 37% and 67% of our full-year forecasts, respectively. We note this segment’s higher-than-expected EBIT loss in Q2 2021 was partly due to VinFast’s auto registration fee subsidy campaign, the clearance of VinSmart inventory after the shutdown TV and smartphone businesses, and a change in accounting estimate for depreciation and amortization of the segment. We foresee downside risk to our 2021F segment EBIT forecast, pending for a fuller review. 

Management shared that the first electric vehicle (EV) model VF e34 received 25,500 advance booking orders from March to July 2021, which is encouraging for a newly introduced product, in our view. Management also introduced Mr. Michael Lohscheller — an industry veteran with 20+ years of leadership at Volkswagen and other global carmakers — as CEO of VinFast Global to facilitate the export path of VinFast cars. VinFast has opened offices in the US, Canada, Netherlands, Germany and France in addition to scheduling to open showroom locations in various locations, including California, San Francisco and Santa Clara.