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TLG – Stand steadfast in the face of macro headwinds

• In 10M-2023, TLG’s net revenue reached VND 3,036 bn (or USD 127 mn, +0.8% YoY). Of which, domestic & export sales recorded by +0.9% YoY and +0.4% YoY, respectively. This growth was due to the stable demands for writing instruments & school supplies, even in the context of an economic slowdown.
• 10M net profit margin narrowed by -250 bps compared to the same period last year, mainly driven by an increase in SG&A expenses of +9.4% YoY. Since Q4-FY22, TLG has boosted their branding activities, such as a debut of Clever Box stores, proceeding Mega Color events & “key store program”, or recruiting more marketing and sales staff.
• In 2024, we expect that TLG‘s profitability would improve YoY in the pillar of (1) the continuous efficiency of “brand-repositioning strategies”, (2) the recovery of office supplies and art material’ consumption in both domestic and export markets, (3) the low levels of input material’ prices, and (4) optimizing the sales channel structure and product portfolio.
• TLG is currently trading at trailing P/E ratio of 12.5x, which is higher than its 10y-historical average of 11.6x. We believe the company’s PER has been re-rated in recent years owing to its strategies to expand its market share in both domestic and export markets and improving the profit margin. Hence, investors should closely monitor the company’s  sales and profit margin improvements in the upcoming quarters for the stock investment timing. Last but not least, the company’s ability to maintain a cash dividend of at least 20% (even during the Covid-19 years) is a plus which investors should be noticed