Investment Rating - The report maintains a Buy rating for TAL Education Group (TAL US) with a target price of **13.80∗∗,representingapotentialupsideof∗∗52.09.08 [1][2] Core Views - TAL Education's Q1 FY2025 performance exceeded expectations, with revenue reaching 410million∗∗,a∗∗500.88 million, significantly better than the expected loss of 27million∗∗[1]−TALEducationplansto∗∗increaseinvestmentsinQ2FY2025∗∗,whichmayleadtoa∗∗declineinoperatingmargin∗∗toaround∗∗22.07 billion, a 38.9% YoY increase [3] - The company's non-GAAP net profit is forecasted to reach 100millioninFY2025E∗∗,upfrom∗∗85 million in FY2024 [3] - Gross margin is expected to remain stable at around 55% from FY2025E to FY2027E [9] Business Segments - Learning Services: Quality education revenue grew over 50% YoY, accounting for over 45% of total revenue, driven by strong growth in offline tutoring centers [2] - Content Solutions: Learning device sales are expected to grow 65% YoY in Q2 FY2025, with the launch of the new xPad Classic 2024 priced at around 400∗∗[2]Valuation−Thetargetpriceof∗∗13.80 is based on a 25x P/E for the education business and 2x P/S for the learning device business [2] - The valuation reflects an expected 40% revenue growth for FY2025 [2] Industry Context - TAL Education is part of the education sector, which includes other companies like New Oriental Education & Technology (9901 HK) and Gaotu Techedu (GOTU US), both of which also have Buy ratings [8]
TAL(TAL)2024-08-04 13:01