TLG reported strong Q2 2021 results with revenue of VND748bn (USD32.5mn; +16% YoY) and NPAT-MI of VND91bn (USD4.0mn; +146% YoY). These strong Q2 2021 business results were driven by 1) a recovery in stationery demand in Q2 2021 vs Q2 2020’s low base, 2) TLG continuing to benefit from low cost input plastic, and 3) TLG pushing for sales of product categories with higher margins. TLG’s Q2 2021 gross margin remained high at 43.5% vs 42.0% in Q1 2021 and 33.5% in Q2 2020.

For H1 2021, TLG recorded revenue of VND1.4tn (USD62.1mn; +28% YoY) and NPAT-MI of VND176bn (USD7.7mn; +929% YoY). We note that H1 2020 was a low base for TLG as the company incurred a loss of VND20bn (USD0.9mn) in Q1 2020. Although H2 is the high season for TLG and TLG’s H1 2021 NPAT-MI already completed 62% of our full-year forecast, we foresee insignificant changes to our current forecasts for TLG as we expect 1) the company’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). More details on our forecasts can be found in our last Update Report, TLG [BUY +31.4%] - Earnings to rebound in 2021 despite higher input prices, dated May 24, 2021.