Vietnam Airlines Soars 179% YTD, Targets 4.2T Profit

Vietnam Airlines' stock surges 179% YTD, targets $3 billion profit in 2024 amid travel rebound.

By Bill Bullington

7/10, 20:58 EDT

Key Takeaway

  • Vietnam Airlines' stock surged 179% YTD, driven by a rebound in travel demand and a significant first-quarter profit.
  • The airline targets an after-tax profit of 4.2 trillion dong for 2024, reversing a 5.6 trillion dong loss in 2023.
  • Despite expansion plans, challenges include macro-economic uncertainties and potential aircraft shortages impacting future growth.

Vietnam Airlines' Stock Performance

Vietnam Airlines JSC has emerged as the world’s best-performing airline stock in 2024, with its shares rallying 179% year-to-date. This remarkable surge is attributed to a significant rebound in travel demand, which has propelled the state-owned carrier to post a substantial first-quarter profit after enduring more than four years of consecutive losses. The airline's impressive turnaround has allowed it to outperform regional competitors such as Singapore Airlines Ltd., which has seen a 7.8% increase, and Air China Ltd., which has experienced a 3.7% decline this year.

PYN Fund Management, one of Vietnam Airlines' few institutional investors, highlighted the airline as PYN Elite’s stock of the month for June. Analyst Huyen Tran from PYN Fund Management noted the forecasted growth in passengers and revenue for the year, stating that Vietnam Airlines is expected to record “all-time high revenue and turnaround profit” in 2024. The resurgence in demand is particularly notable among visitors from China, Vietnam's largest source of tourists before the pandemic, who have tripled in number during the first six months of this year compared to the previous year.

Expansion Plans and Challenges

Despite the positive momentum, Vietnam Airlines remains cautious about the challenges ahead. In a recent statement, Chairman Dang Ngoc Hoa cited “macro-economic uncertainties” as a significant concern for the industry. He emphasized that the airline's “primary goal” is to reduce losses while balancing revenue and spending. Nevertheless, the airline has ambitious plans to expand its operations this year by adding new routes to Southeast Asia and Europe. It is also adjusting the frequency of its flights and increasing capacity on key routes to “capitalize on demand.”

Vietnam's broader economic goals also play a crucial role in the airline's strategy. The country aims to boost its tourism sector, which is expected to be a key driver of economic growth. According to Bloomberg Intelligence analysts Tim Bacchus and Eric Zhu, Vietnam's ambition to attract 70 million international arrivals by 2045 could make it the second-biggest tourism destination in Southeast Asia after Thailand. This growth in tourism is expected to benefit local carriers like Vietjet and Vietnam Airlines significantly.

Financial Outlook

Vietnam Airlines is targeting an after-tax profit of 4.2 trillion dong ($3 billion) for 2024, a significant turnaround from the 5.6 trillion dong loss posted in 2023. The airline's market value currently stands at 76 trillion dong, making it roughly half the size of Australia’s Qantas Airways Ltd. and one-fifth that of Singapore Airlines. The Civil Aviation Authority of Vietnam projects a 15% increase in domestic passenger numbers and an 8.5% rise in domestic cargo trade this year compared to 2023.

However, the airline faces potential hurdles, including a shortage of aircraft. The country’s aviation agency has encouraged airlines to lease more planes to meet rising demand, especially after several jets were grounded due to engine recalls. Additionally, Ho Chi Minh City Securities analyst Che Thi Mai Trang has downgraded the airline's stock to sell from reduce, citing that the stock price “looks overvalued.” The brokerage also lowered its earnings estimates, noting that domestic demand has been weaker than expected.

Street Views

  • PYN Fund Management (Bullish on Vietnam Airlines):

    "Vietnam Airlines is expecting to record 'all-time high revenue and turnaround profit' this year."

  • Tim Bacchus and Eric Zhu, Bloomberg Intelligence (Bullish on Vietnam's tourism sector):

    "Vietnam’s ambition to boost its popularity with foreign travelers is poised to be a key growth driver for local carriers such as Vietjet and Vietnam Airlines. The aim to reach 70 million international arrivals by 2045 could propel the country into becoming the second-biggest tourism destination in Southeast Asia after Thailand."

  • Che Thi Mai Trang, Ho Chi Minh City Securities (Bearish on Vietnam Airlines):

    "The stock price looks overvalued. Domestic demand has been weaker than our expectations."

Management Quotes

  • Dang Ngoc Hoa, Chairman of Vietnam Airlines:

    "[Our] primary goal is to reduce losses while balancing revenue and spending."