20170712-兴业证券-Leading_K-12_Tutoring_Provider,_Progressing_Education_with_Technology_35页_2mb

TAL.US Summary

Core Content

Tomorrow Advancing Life (TAL.US) is a leading K-12 after-school tutoring provider in China, offering both online and offline educational services. The company was founded in 2003 and listed on the Nasdaq in 2010. TAL has a wide range of educational brands and services, covering early childhood education, primary, secondary, and high school tutoring, as well as college entrance examination counseling and overseas school-application consulting.

Key Financial Indicators

Investment Highlights

• Outperform Rating: TAL is initiated with an Outperform rating and a target price of US$146.19, implying a 10.6% upside potential.
• Market Position: TAL has 507 offline learning centers in 30 cities, with 3.93 million student enrollments as of February 28, 2017.
• Growth Projections: The company's capacity is expected to expand by 30-50% over the next three fiscal years.
• Valuation: The projected PE ratios for FY2018-FY2020 are 74.3, 54.5, and 38.9, respectively, while the comparable company EDU had a PE of 42 in FY2017.
• Brand Strength: TAL has a strong brand and a wide competitive moat, which helps in attracting and retaining customers.
• Parent Engagement: The company uses the "Open Class" policy to allow parents to observe classes, enhancing trust and brand reputation.
• Talent Development: TAL's "Xueersi Cup" competition and "Jiazhang Bang" forum serve as platforms for both student and parent engagement, promoting brand visibility.
• Technology Integration: TAL has developed a "Double-Teacher Model" that combines online and offline tutoring, improving teaching efficiency and effectiveness.
• Diversification: TAL has expanded into other education sectors through M&A, including quality education and early childhood education services.

Business Strategy

• Market Expansion: TAL focuses on expanding its offline learning centers and enhancing its online presence.
• Online Services: In FY2017, online education revenue reached 48.9 million USD, accounting for 4.7% of total operating income.
• Educational Ecosystem: TAL has acquired several companies to provide a one-stop education platform for students aged 0-24.
• Curriculum and Teaching: TAL offers a comprehensive curriculum with a strong emphasis on standardized materials and teacher training.

Risks

• Intense Competition: The Chinese education market is highly competitive.
• Teacher Recruitment and Retention: Maintaining a high-quality teaching staff is crucial for the company's success.
• Policy Changes: Potential changes in China's educational policies may impact TAL's operations.

Conclusion

TAL.US is a well-established K-12 after-school tutoring provider with a strong brand and a growing market presence. Its focus on quality education, technological innovation, and brand building has enabled it to achieve significant revenue growth and maintain a high level of profitability. Despite the challenges posed by competition and regulatory changes, TAL's strategic initiatives and operational efficiency position it well for future success. The company's target price suggests strong growth potential, making it an attractive investment for those interested in the education sector.