Q2 business result will expectantly suffer more badly in Q2. The quarantine orders in the first three weeks of April will possibly influence Q2 statistics. Q1 business performance was supported by Tet holiday while in Q2 HVN may only experience a slight recovery from domestic demand. International market plunges in Q1 and Q2 due to Covid-19 pandemic. Statistically, about 25% of Vietnam’s aviation output comes from Chinese market. 13 of VNA’s 98 flight routes are back and forth from Vietnam to different destinations in China. The number of international air passengers to Vietnam in the first 3 months of 2020 was 2.99 million people (-15% YoY). Air passenger traffic from China, Korea, and Japan dropped respectively by 32%, 26%, and 14%.

1. Vietnam Airlines Corporation
Ticker: HVN Bloomberg: HVN VN
Aviation Industry
Q2 2020 Update Report
May 13th
, 2020
Q2 business result will expectantly suffer more badly in Q2. The quarantine
orders in the first three weeks of April will possibly influence Q2 statistics. Q1
business performance was supported by Tet holiday while in Q2 HVN may only
experience a slight recovery from domestic demand.
International market plunges in Q1 and Q2 due to Covid-19 pandemic.
Statistically, about 25% of Vietnam’s aviation output comes from Chinese market.
13 of VNA’s 98 flight routes are back and forth from Vietnam to different destinations
in China. The number of international air passengers to Vietnam in the first 3 months
of 2020 was 2.99 million people (-15% YoY). Air passenger traffic from China,
Korea, and Japan dropped respectively by 32%, 26%, and 14%.
Domestic revenue expectantly starts to recover by the end of Q2. HVN has
planned to operate all of its domestic routes after 5/17 to restore the entire flight
network. However, flight frequency may not soon rebound to pre-pandemic level.
Indefinite closure of international routes also triggered an increase in domestic travel
demand in late Q2 and early Q3.
Passenger yield decreases following HVN’s adjustment in airfares under
competitive pressure. In 2020, passenger is expected to continually decrease to
stimulate people’s travel demand once the pandemic is over.
Gross profit margin is expected to improve in the last quarters of the year.
Fuel cost/ASK in 2020 will be possibly lower than last year, thanks to (1) a more
fuel-efficient fleet and (2) a reduction in aircraft fuel prices.
2020 Earnings Forecast. We anticipate that HVN’s net revenue in 2020 will be
VND61,125 billion (- 38.31% YoY). Meanwhile, consolidated profit after tax is
forecast to have a negative growth of -55.7% YoY, at VND1,009 billion.
NEUTRAL recommendation
Using P/E and EV/EBITDAR methods, we forecast HVN stocks’ fair value at
VND30,000/share. Therefore, we maintain our NEUTRAL recommendation on HVN
stocks.
Recommendation NEUTRAL
Target price (VND) 30,000
Market price (May 13, 2020) 27,950
Expected Return 7.3%
STOCK INFORMATION
Exchange HOSE
52-week price range VND17,800-43,430
Capitalization VND39,641 billion
Outstanding shares 1,418,290,847 shares
10-day average volume 1,069,895 shares
Foreign ownership 9.5%
Beta 1.15
Analyst
Khanh Do
(84 4) 3928 8080 ext. 209
dolongkhanh@baoviet.com.vn

2. 2
Q2 2020 Update Report – HVN
May 13th
, 2020
Number of flights will suffer more severely in Q2
Covid-19 pandemic has clearly shown adverse effects since late Q2 on both
international passengers and domestic travel demands. The suspension of all
international routes since mid-March and the minimization of domestic routes since
early April with social distancing orders have reduced the number of operating flights
of all brands of the corporation compared to the same period last quarter.
People’s travel demand during Tet Holiday partly alleviated the impacts of Covid-19
pandemic in Q1 2020. Meanwhile, social distancing orders were issued and executed
in April, therefore, we believe that Q2 will witness more severe influences of the
pandemic as airlines are only allowed to operate domestic routes at the termination
of social distancing orders.
Vietnam has well contained Covid-19 pandemic; therefore, we expect that the
flight routes will be gradually reopened. However, travel demand may hardly
rebound to pre-pandemic level soon.
International revenue plummeted
International arrivals to Vietnam by air in the first 3 months of 2020 were 2.99 million
(-15% YoY). Air passenger traffic from China, Korea, and Japan dropped respectively
by 32%, 26%, and 14%. These important markets with cultural similarities and
geographical advantages made up 50% of Vietnam’s total international air-
passenger traffic in the first 3 months of the year.
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
VNA Jetstar Vasco
Number of flights in Q1
Q1 2019 Q1 2020
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
50,000
VNA Jetstar Vasco
Number of flights in the first 4 months
4M2019 4M2020

3. 3
Q2 2020 Update Report – HVN
May 13th
, 2020
According to Vietnam National Administration of Tourism, with an assumption of
80% international arrivals by air, we believe that international routes will
gradually be reopened in Q3. Business travel will possibly recover earlier with
global demand to recover business and production activities.
With an estimation of 69% decline in international arrivals, HVN’s international
ASK will drop 56% (assuming that HVN serves 70% of Vietnam’s international
air-passenger traffic).
Domestic revenue recovers faster thanks to travel
demand
HNV is currently running 116-166 flights/day, about 30% of the capacity before
pandemic. After 5/17, HVN would reopen all of the domestic flights, raising
HVN’s daily flights to 142-196 flights/day.
Besides, to boost people’s travel demand for the domestic market, HVN will
launch 5 more low-cost flight routes by the end of May, including Ho Chi Minh
City – Tuy Hoa, Hai Phong – Nha Trang, Vinh – Da Lat, Vinh – Buon Ma Thuot,
and Thanh Hoa – Buon Ma Thuot routes.
-200
0
200
400
600
800
1,000
1,200
1,400
1,600
T1 T2 T3 T4 T5 T6 T7 T8 T9 T10 T11 T12
International air-passenger traffic to Vietnam
(thousand people)
2018 2019 2020

4. 4
Q2 2020 Update Report – HVN
May 13th
, 2020
Assuming that the pandemic is well under control and will not break out again in
Vietnam, domestic flight routes will gradually recover thanks to business travel
and tourism demand. However, with people’s cautiousness, we expect that the
travel demand will not recover immediately. Based on BVSC’s assumption, the
total number of domestic air passengers will drop 34.8% to 24.46 million
passengers (-35.7% YoY), equivalent to a -48.89% YoY reduction in domestic
ASK to 28,039 million passengers.km.
Low passenger yield to stimulate travel demand
HVN lowered airfares in 2019 to compete with Bamboo Airways. We believe that
HVN will continue to lower domestic airfares to boost travel demand once Covid-
19 pandemic is under control, in response to other airlines’ promotions. HVN will
launch 5 new flight routes, each running 3 flights/week with an airfare of
VND99,000 from 5/13-6/30/2020.
With difficulties in overall operation and indefinite closure of international market
under the impact of Covid-19 pandemic, we believe that HVN’s passenger yield
in 2020 will decrease by 3% from VND1,839/pax in 2019 (-1.85%).
400
900
1,400
1,900
2,400
2,900
3,400
3,900
T1 T2 T3 T4 T5 T6 T7 T8 T9 T10 T11 T12
Domestic air-passenger traffic
(thousand people)
2018 2019 2020

5. 5
Q2 2020 Update Report – HVN
May 13th
, 2020
High aircraft lease rates and high maintenance cost
negatively influence gross profit margin
HVN added 21 new aircraft in 2019, including 16 narrow-body A321neo and 5
wide-body A350-900 and A787-10, and retired 7 old aircraft. All of the 21 aircraft
were dry leased, adding VND1,700 billion to total annual leasing expense,
equivalent to a rate of VND7 billion/aircraft/month. With low travel demand under
the influence of Covid-19 pandemic, we expect that HVN will replace 2 old
aircraft which have run for 16 years with 2 new ones during the last 6 months of
the year. HVN may add 5 new aircraft in total in 2020 for a fleet of 108 aircraft.
Aircraft leasing expense, accordingly, will increase to VND14,911 billion (+2.89%
YoY).
HVN’s profit margin slumped in late Q1 and early Q2 2020 with a huge fleet
amidst poor business performance under the impacts of Covid-19 pandemic.
However, these negative impacts have been alleviated by lower fuel cost per
ASK, thanks to (1) a more fuel-efficient fleet and (2) a reduction in aircraft fuel
prices. Besides, adopting policies such as unpaid leave, reduced salaries, and
working rotation, HVN has cut a significant amount of operating expense during
this period.
Despite the gradual recovery of oil price since early May, oil price remains
relatively lower than 2019 average. With a young fleet, we expect that HVN’s
gross profit margin will recover considerably during the last two quarters of 2020.
We estimate that HVN’s gross profit margin will drop from 11.37% in 2019 to
9.15% in 2020, due to negative impacts of Q1 business result.
-6%
-3%
0%
3%
6%
9%
1,500
1,600
1,700
1,800
1,900
2015 2016 2017 2018 2019 2020P
VND/ pax
Changes in passenger yield
Yield Change
82,000
84,000
86,000
88,000
90,000
92,000
94,000
96,000
98,000
0
50
100
150
200
250
300
350
400
450
500
Flights
Revenue per flight
(Million VND/flight)
Revenue/flight No. of flights

6. 6
Q2 2020 Update Report – HVN
May 13th
, 2020
2020 Earnings Forecast
Year 2019 2020 %YoY Forecast Base
Revenue 99,100 61,125 -38.31%
Air
transport
78,88 49,611 -37.1% Domestic and international air-passenger traffic respectively decreases by
35.7% and 69%, with occupancy rate of 75%. Passenger yield drops 3% to
VND1,784/pax.
International ASK falls 65% YoY with LF of 70%.
Domestic ASK declines 46.89% YoY to 28,039 million passengers.km.
Domestic market share decreases slightly due to continuous competition.
Ancillary
services
5,188 3,026 -41.66% HVN has offered in-flight wireless connectivity on Airbus A321neo and Internet
on different routes since October 2019.
Sales 14,022 8,089 -42.31% Sales falls under the impacts of declining international flights making up 16.31%
of total air-passenger transport.
Others 1,001 397 -60.25%
Gross
profit
11,162 5,586 -49.95% Younger fleet and the reduction in oil price earlier this year help lower fuel cost.
Aircraft leasing cost increases by 2.89% YoY with the launch of new 5 aircraft.
SLB 165 22 -86.67% Most of SLB revenue comes from engine SLB with the current low demand for
new aircraft. HVN will still place orders for new aircraft in upcoming years.
13.68%
15.47%
12.87%
12.67%
11.37%
-2.67%
10.47%
13.20%
14.54%
Change in growth profit margin

7. 7
Q2 2020 Update Report – HVN
May 13th
, 2020
Profit
before tax
3,389 1,500 -54.86% Administration expenses decreases by 49.3% compared to 2019 thanks to a
reduction in management salary.
Profit after
tax
2,279 1,009 -55.7%
EPS 1,723 763
Valuation and Recommendation
We maintain our NEUTRAL recommendation on the stocks of Vietnam Airlines
Corporation at target price of VND30,000/share.
We use P/E and EV/EBITDAR comparative method to compare HVN to other
traditional airlines in Asia.
With EPS of VND763/share, HVN’s stock price is estimated at VND43,562/share
under P/E method and VND17,228/share under EV/EBITDAR, equivalent to
average P/E of 22.58x and EV/EBITDAR of 4.36x.
HVN Valuation
HVN Valuation Value Weight
P/E multiples 43,562 50%
EV/EBITDAR 17,228 50%
Fair price 30,395

8. 8
Q2 2020 Update Report – HVN
May 13th
, 2020
DISCLAIMER
I, Khanh Do, confirm that I am totally honest and have no personal motivation in making this report. All information in this report has been
verified carefully and is deemed to be the most reliable; however, I shall take no responsibilities with regard to the accuracy and
completeness of the information provided herein. Viewpoints, comments and assessments in this report are of my personal opinions with
no purpose of advising the readers to buy, sell or hold any securities. This report is only for the purpose of providing information; readers
should only use this analysis report as a source of reference. Baoviet Securities Joint Stock Company (BVSC) and I shall take no
responsibilities to investors as well as subjects mentioned in this report for losses incurring during investments or incorrect information
about the enterprise.
This report is an asset of Baoviet Securities Joint Stock Company. Therefore, no part of this report may be (i) copied or duplicated in any
form by any mean or (ii) redistributed without the prior consent of Baoviet Securities Joint-stock Company.
CONTACT
Research and Investment Advisory Department – Baoviet Securities Joint Stock Company
Equity Research Macro & Market Research
Luong Luu
Deputy Head of Research
luuvanluong@baoviet.com.vn
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Deputy Head of Research
ledangphuong@baoviet.com.vn
Dung Pham
Deputy Head of Research
pham.tiendung@baoviet.com.vn
Nguyen B. Nguyen
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tranhaiyen@baoviet.com.vn
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Consumer goods
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Khanh Do
Aviation
dolongkhanh@baoviet.com.vn
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Construction
trandangmanh@baoviet.com.vn

9. 9
Q2 2020 Update Report – HVN
May 13th
, 2020
Baoviet Securities Joint Stock Company
Head office: Branch:
▪ 72 Tran Hung Dao, Hoan Kiem Dist., Vietnam ▪ 8th
floor, 233 Dong Khoi, Dist. 1, HCM City, Vietnam
▪ Tel: (84 4) 3 928 8080 ▪ Tel: (84 8) 3 914 6888