TLG Update – OUTPERFORM

Although the company reported stunning EAT growth of 48% YoY driven by a strong sales jump and heightened gross margin in 1Q2026, we revise 2026 EAT projection down by 15% considering potential margin compression in 4Q2026 in view of elevated input costs. Downgrade rating from BUY to OUTPERFORM and target price to VND51,000/share by YE2026, 15% lower than the prior update.

Net revenue and EAT surged by 25.9% YoY and 48% YoY, to VND1,000bn and VND116bn, respectively, in 1Q2026, better than our expectations.

Solid overseas momentum and domestic surge fueled revenue growth. Domestic revenue, accounting for 66% of overall net revenue, soared by 29.3% YoY, likely stemming from customers stockpiling ahead of potential price increases, based on our interpretation (the company did not provide a detailed explanation). Export revenue, accounting for 34% of the total, extended its vigorous momentum with a 19.7% YoY upturn. This aligns with the company’s strategy of boosting overseas sales as its growth engine (targeting annual growth of 20%) while reinforcing its position in the domestic market. With the strategic partnership with Kokuyo, if successful, TLG also aims to leverage the complementary product portfolios of both companies to better meet the international customer demand and expand overseas markets.

Margin strength further bolstered earnings before input cost headwinds emerge. The widened gross margin in 1Q2026 benefited from favorable plastic material prices prior to the escalation of Middle East tension. Despite rising raw material prices attributed to higher oil prices and logistic costs in recent time, management expects the impact to materialize from 4Q2026, as materials through 3Q2026 were already secured.

We project net revenue and EAT for TLG at VND4,692bn (+12.4% YoY) and VND434bn (-2.5% YoY) in 2026, 15% lower than our prior update given potential margin compression in 4Q2026. Though selling price increases may be considered, management noted that such increases will be likely limited to preserve market share against low-cost imported products. TLG does not intend to compete with low-cost products through price war due to their devastation on product quality and profitability. Instead, together with its established brand reputation, focusing on high value-added products, product innovations, material alternatives that have lower costs whilst ensuring quality, developing its self-supply for certain production components are believed to sustainably enhance its efficiency and competitiveness.