- We cut our target price (TP) by 9% to VND102,800/share and downgrade our rating to UNDERPERFORM from MARKET PERFORM. VJC’s stock price has increased 15% over the past three months.

- Our lower TP is driven by our increased forecast 2021 loss for VJC’s transportation segment (excluding gains from aircraft sales and financial income) to VND7.3tn (USD315mn) from VND2.4tn (USD103mn). The lower TP is also driven by a 4% cut in our forecast NPAT to VND1.8tn for VJC’s transportation segment in 2022. The lower forecasts in 2021F and 2022F are to reflect the impact of the fourth wave of COVID-19 in Vietnam.

- Our TP is partially cushioned by our change in EV/EBITDAR valuation. We change the weight of 2022F EBITDAR in mixed EBITDAR to 75% from 50% to better reflect the projected recovery in 2022F.

- In 2021, we forecast VJC’s reported NPAT-MI at VND72bn (USD3mn), including VND7tn (USD302mn) of financial gains mainly from non-aviation investment activities. 

- For 2021-2031F, we cut our aggregate forecast for reported NPAT-MI by 15% mainly due to the impact of the fourth wave of COVID-19 on VJC’s domestic transportation segment. 

- We believe that Vietnam’s aviation sector will ultimately recover as it has exhibited strong rebounds after past epidemics and economic shocks. However, we believe the recent stock price gains reflect the recovery ahead while not discounting the impact of the current fourth wave of the pandemic in Vietnam. 

- Upside risks: Faster-than-expected resumption of international flights; sustained lower oil prices.

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