Weathering Today's Storm, while a Silver Lining Quietly Gathers on the Horizon 📊 1Q FY27 Performance: TJL reported a net loss of LKR 479.9mn in 1Q FY27, compared with a profit of LKR 207.2mn in the corresponding period. Revenue declined 0.8% YoY to LKR 15.4bn, while cost of sales increased 6% to LKR 15.3bn, driving gross margin down to 2.0% from 7.9%. 📦 Improving Order Book Supports Volume Recovery: Despite a 7% YoY decline in volumes, the order book has improved over the past three quarters, with 1Q FY27 showing sequential improvement from 4Q FY26. 🌎 Lower US Tariffs Support Competitiveness: The 10% US tariff on Sri Lanka and India should support order growth and competitiveness against Vietnam and China, which face 12.5%. However, pricing recovery remains important for margin improvement. ⚡ Energy Cost Efficiencies to Support Margins TJL’s biomass and solar projects are expected to reduce energy costs by 25%–30%, providing meaningful margin support from 2H FY27. 🎯 Valuation & Recommendation We upgrade TJL to BUY from HOLD, with a FY27E DCF-based TP of LKR 36.40, implying 21.3% upside. Improving demand visibility and cost efficiencies support the earnings recovery outlook, while the 14.0% YTD share price decline provides greater scope for the recovery to be reflected in the valuation. ⚠️ Key Risks: Rising energy & raw material costs | Supply chain disruptions | Limited pricing flexibility