- VJC reported Q2 2021 revenue that was down 29% YoY to VND3.5tn (USD152mn) while NPAT-MI was VND5.8bn (USD247,000), plunging 99.5% YoY. For H1 2021, VJC’s revenue was VND7.6tn (USD326mn; -31% YoY), achieving 25% of our 2021 forecast. H1 2021 NPAT-MI was VND130bn (USD6mn; +182% YoY) vs our 2021F NPAT-MI forecast of VND73bn.
- EBIT of VJC’s standalone company (which mainly represents the airline’s transportation segment) was -VND1.7tn (-USD73mn) in Q2 2021. This EBIT loss was 35% larger than the one in Q1 2021; however, VJC’s EBIT loss in Q2 2021 was smaller than its VND2.2tn loss in Q2 2020.
- Excluding financial income of VND3.2tn in H1 2021, VJC’s bottom line would be -VND3tn vs -VND1tn in H1 2020. H1 2020 included normal operations pre-COVID-19 in the two first months of the year.
- The performance of VJC’s transportation segment tracked behind our forecast and the recent COVID-19 resurgence in Vietnam has been beyond our current expectation, negatively affecting Vietnam’s domestic aviation market. We therefore see potential downside risk to our 2021F forecasts for VJC’s core business, pending a fuller review. 

Recovery of transportation segment hindered by resurgence of COVID-19. VJC’s passenger transportation and ancillary revenue jumped 54% YoY and 9% YoY in Q2 2021, respectively, from a low base in Q2 2020 when COVID-19 severely hit key tourism hubs in Vietnam such as Da Nang and Khanh Hoa.  However, revenue from these two sub-segments showed negative QoQ growth that we attribute to the impact of the fourth wave of COVID-19 in Vietnam starting from mid-Q2 2021. In Q2 2021, VJC’s passenger transportation and ancillary revenue decreased by 21% QoQ and 33% QoQ, respectively.  

Aircraft sales profitability continued to be volatile. In Q2 2021, VJC recognized VND1.2tn (USD52mn) of revenue from aircraft sales with a gross margin of close to zero. This margin is identical to the one in Q4 2020. However, VJC recognized VND1.4tn of revenue from this business segment with a high gross margin of 27% in Q1 2021.

Financial income continued to support the bottom line in Q2 2021. VJC recognized VND1.6tn (USD69mn) of net other financial income in Q2 2021. Although the breakdown of this income has not been disclosed, we believe this income was from VJC’s non-aviation investments with its related group Sovico, which was similar to what happened in Q1 2021 when VJC reported VND1.4tn of other financial income to support its bottom line.

Debt still looks manageable. VJC’s net debt/equity ratio was 0.56x vs 0.52x at the end of 2020. However, VJC’s cash on hand was VND2.3tn at the end of Q2 2021 vs negative CFO of VND3.9tn in H1 2021; therefore, we believe VJC has to raise more capital in the near future to sustain its liquidity.