- We maintain a BUY rating and keep our target price almost unchanged at VND46,800/share as a 7% cut in our 2021F NPAT-MI forecast due to higher forecast SG&A which is partly offset by a higher cash balance at end-Q2 2021. We make no material changes to our 2022-2025F NPAT-MI forecasts.
- TLG reported strong H1 2021 results with NPAT-MI reaching VND176bn (USD7.7mn; +929% YoY), which was mainly driven by a 1) a recovery in stationery demand, 2) TLG continuing to benefit from low-cost input plastic, and 3) TLG pushing sales of product categories with higher margins.
- We trim our 2021F NPAT-MI by 7% to VND266bn (USD11.6mn; +11% YoY) mainly because we raise our forecast for SG&A as we expect 1) TLG’s logistics costs and spending related to COVID-19 prevention in production sites to increase and 2) TLG will be more aggressive in pushing sales amid a prolonged COVID-19 situation in Q3 2021.
- We note that although H2 is the high season for TLG and the company’s H1 2021 NPAT-MI completed 66% of our current full-year forecast, we expect H2 2021 to post more modest earnings as 1) we expect TLG’s gross margin to experience some pressure in H2 2021 due to the input plastic price rally in H1 2021 and 2) the current fourth wave of COVID-19 in Vietnam posing a risk of prolonged school closures in Q3 2021 (back-to-school season).
- We believe TLG’s valuation is attractive at a 2021/2022F P/E of 12.6x/9.1x vs the 12-month average peer LTM P/E median of 14.5x given our forecast for a 21% EPS CAGR over 2020-2023F.
- Downside risks: Weaker-than-expected margins from high plastic costs; prolonged school closures.

We continue to forecast positive sales growth in 2021 despite the recent resurgence of COVID-19. TLG recorded stronger-than-expected sales growth in H1 2021 across product segments amid a rebound in stationery demand. In addition, the company was more aggressive in pushing sales. Nevertheless, we keep our 2021F revenue forecast of VND3.0tn (USD132.2mn; +13% YoY) unchanged as we believe the ongoing COVID-19 situation in Vietnam could shorten TLG’s main sales season from normally April-September to June-September (details in Figure 3).

Low input plastic prices supported H1 2021 gross margin — we expect contraction in H2 2021. We continue to expect 2021F gross margin to fall vs 2020 as plastic prices have bounced back since late-2020. Nevertheless, we raise our 2021F gross margin forecast to 37.5% vs 36.7% previously due to better-than-expected gross margin in H1 2021.

Management aims for new long-term growth initiatives. At its recent AGM, TLG’s management provided information about the company’s ongoing projects, which focus on 1) developing new products that are closely related to TLG’s current stationery — but with wider applications — and 2) continuing to develop e-commerce channels — both through TLG’s self-developed website and through other e-commerce platforms (details are in our AGM note, dated June 29, 2021). These projects are still in their early stages; however, we believe they are positive for TLG’s long-term growth — especially as post-pandemic consumer behavior has been shifting toward a more digital lifestyle.