Core Viewpoint - Tianli International Holdings reported impressive mid-term results for the fiscal year 2025, with significant growth in revenue, gross profit, and net profit, indicating strong operational performance and a robust business model [1] Financial Performance - The company achieved revenue of 1.876 billion RMB, a year-on-year increase of 14% - Gross profit reached 705 million RMB, up 21% year-on-year - Net profit for the period was 390 million RMB, reflecting a growth of 36.3% - Gross margin and net margin improved to 37.6% and 20.8%, respectively [1] Business Segments - Tianli operates in multiple business segments, including comprehensive education services, logistics services, product sales, and franchise fees - Revenue from these segments for the first half of fiscal year 2025 was 1.013 billion RMB, 332 million RMB, 475 million RMB, and 56 million RMB, with year-on-year growth rates of 18.9%, 12.9%, 0.2%, and 116.3% respectively [1] - The overall revenue compound growth rate from 2022 to 2025 is 67.5% [1] Market Position and Expansion - Tianli is a leading player in the private K12 education sector, managing 58 schools, including 18 under management contracts - The number of students served reached 130,000, a 30% increase year-on-year, with high school students growing by 46% to 54,000 [2] - The company has achieved significant academic success, with 90% of its mature schools surpassing the Chinese undergraduate admission score and 55% exceeding the first-tier admission score [2] Growth Drivers - The management expects the management business to become a key growth driver, with a potential market size estimated at around 100 billion RMB, while current market share is below 10% [3] - The company is actively developing AI education products through its platform, Qiming Daren, which has received recognition for its innovative applications in education [3][4] Financial Health and Shareholder Returns - Tianli maintains a healthy financial position with a debt ratio of only 21.7% and cash equivalents of 454 million RMB as of February 2025 [4] - The company has a history of returning value to shareholders through buybacks and dividends, with a mid-term dividend of 5.78 cents per share, a 38.6% increase year-on-year [5] - Since its listing, the company has repurchased 60.12 million shares, representing 2.85% of its share capital, and has consistently paid dividends, totaling 650 million RMB since its IPO [5]

Investment Rating - The report maintains a rating for the company [3] Core Views - The company is projected to experience significant revenue growth, with expected revenues of 3,321 million in 2024, increasing to 5,256 million by 2027, representing a compound annual growth rate (CAGR) of approximately 13.91% [10] - Net profit is forecasted to rise from 576 million in 2024 to 1,099 million in 2027, indicating a strong growth trajectory with a CAGR of 19.38% [10] - The company's gross margin is expected to remain stable, with a slight increase from 33.69% in 2024 to 34.50% in 2026 and 2027 [10] - The report highlights a decrease in the company's debt-to-asset ratio from 75.74% in 2024 to 58.61% in 2027, suggesting improved financial stability [10] Financial Summary - The company's total assets are projected to grow from 57 billion in 2024 to 77 billion in 2027 [9] - Current assets are expected to increase significantly from 2,219 million in 2024 to 5,912 million in 2027 [9] - The cash flow from operating activities is forecasted to rise from 827 million in 2024 to 1,206 million in 2027 [9] - Earnings per share (EPS) is anticipated to grow from 0.28 in 2024 to 0.52 in 2027 [10] - The price-to-earnings (P/E) ratio is projected to decrease from 15.74 in 2024 to 7.58 in 2027, indicating potential undervaluation [10]

Core Viewpoint - Tianli International Holdings (01773.HK) reported a solid growth in its mid-term performance, with revenue reaching 1.876 billion RMB, a 14.0% increase year-on-year, and a profit of 390 million RMB, up 36.3% from the previous year [1] Group 1: Business Performance - The company continues to strengthen its core high school education business while exploring growth opportunities in diversified education [2] - The unique Lida curriculum has developed into a comprehensive education system that meets various family educational needs [2] - The number of high school students in the company's network increased from 37,000 to 54,000, a growth rate of 46.8% [2] Group 2: Academic Success - Approximately 90% of graduates from mature schools exceeded the Chinese university admission score line, with about 55% surpassing the first-tier university score line [3] - 272 high school graduates received admission offers from top 50 global universities, enhancing the company's reputation and brand effect [3] Group 3: Technological Integration - The company is leveraging AI technology to enhance educational quality and efficiency, responding to national policies [4] - The subsidiary Qiming Daren has developed an AI-driven teaching management cloud platform, successfully integrating with 107 schools and serving over 250,000 teachers and students [4] - The chairman emphasized that the AI strategy is not just a technological upgrade but a transformation of the educational value chain [4] Group 4: Future Outlook - With the dual drive of diversified business and AI-enabled education, the company shows strong resilience and potential for high-quality growth [5] - The ongoing national policy support for the integration of education and technology positions the company favorably for future development [5]

Investment Rating - The report maintains a "Buy" rating for the company [5][4][6] Core Views - The company reported FY25H1 revenue of 1.876 billion RMB, a year-on-year increase of 14%, and a net profit of 390 million RMB, up 36.3% year-on-year, indicating performance in line with expectations [1][2] - The mid-term dividend payout ratio remains at 30%, reflecting stable shareholder returns, and the company is expected to benefit from the relatively inelastic demand for private higher education degrees and a stable policy environment [1][3] - The company has significant potential for improving the utilization of existing schools and expanding into diversified new businesses such as management and franchising, which could further enhance growth opportunities [1][3] Summary by Sections Financial Performance - For FY25H1, the comprehensive education services segment generated revenue of 1.013 billion RMB, a year-on-year increase of 18.9%, driven primarily by a 46.8% year-on-year growth in high school student enrollment [2] - The management and franchising (custodial) business achieved revenue of 56 million RMB, a remarkable year-on-year increase of 116.3%, with the number of managed schools reaching 18, an increase of 8 schools year-on-year [2] - The gross profit margin for FY25H1 reached 37.6%, up 2.2 percentage points year-on-year, while the net profit margin improved to 20.8%, up 3.4 percentage points year-on-year [3] Valuation and Forecast - The adjusted net profit forecasts for FY25, FY26, and FY27 are 771 million RMB, 995 million RMB, and 1.132 billion RMB respectively, with a target price adjusted slightly to 5.89 HKD, corresponding to an adjusted FY25 PE of approximately 14.8x [4][11] - The report employs a DCF valuation method with a WACC of 10.76% and a perpetual growth rate of 1% [4][10]

Financial Performance - For the six months ended February 28, 2025, the company reported revenue of RMB 1,876,050, an increase of RMB 230,607 or 14.0% compared to RMB 1,645,443 for the same period in 2024[3]. - Gross profit for the same period was RMB 705,069, reflecting a growth of RMB 122,144 or 21.0% from RMB 582,925 in the prior year[3]. - The company's profit for the period reached RMB 389,503, up by RMB 103,640 or 36.3% from RMB 285,863 in the previous year[3]. - Basic earnings per share increased to RMB 0.1928, a rise of 38.7% from RMB 0.1390 in the prior period[3]. - The company declared an interim dividend of RMB 0.0578 per share, which is 38.6% higher than the RMB 0.0417 per share declared in the previous year[3]. - Revenue for the six months ended February 28, 2025, was approximately RMB 1,876.1 million, an increase of 14.0% from RMB 1,645.4 million for the same period in 2024[19][21]. - Gross profit for the same period was RMB 705.1 million, compared to RMB 582.9 million in 2024, reflecting a significant increase[19]. - Revenue from comprehensive education services rose by 18.9% to RMB 1,012.5 million, driven by the growth in high school enrollment[21]. - Revenue from integrated logistics services increased by 12.9% to RMB 332.3 million, attributed to the rise in the number of students served[21]. - Management and franchise fees revenue surged by 116.3% to RMB 56.4 million, due to the addition of eight new managed schools during the reporting period[21]. - Total sales costs for the six months ended February 28, 2025, were RMB 1,170.98 million, compared to RMB 1,062.52 million in 2024[23]. - Sales cost increased by 10.2% to approximately RMB 1,171.0 million, driven by a 14.0% revenue growth during the reporting period[24]. - Material consumption cost rose by 24.0% to approximately RMB 259.1 million, attributed to increased dining numbers and enhanced service quality[24]. - Employee costs increased by 19.4% to approximately RMB 242.1 million, mainly due to hiring new teachers for the growing number of high school students[24]. - Gross profit increased by 21.0% to approximately RMB 705.1 million, with a gross margin of 37.6%, up 2.2 percentage points from the previous period[26]. - Administrative expenses decreased by 9.8% to approximately RMB 117.3 million, primarily due to reduced stock option plan expenses[28]. - Financial costs rose to RMB 60.3 million from RMB 35.6 million, as there were no capitalized interest amounts during the reporting period[29]. - Income tax increased by 11.2% to approximately RMB 107.0 million, with an effective tax rate of 21.6%, down 3.6 percentage points from the previous period[30]. - The pre-tax profit for the group was RMB 397,656,000 for the six months ended February 28, 2025, compared to RMB 288,881,000 in 2024, indicating a growth of 37.7%[61]. - The total income tax expense for the six months ended February 28, 2025, was RMB 107,022,000, compared to RMB 96,274,000 in 2024, which is an increase of 11.5%[56]. Student and Educational Services - The total number of high school students receiving comprehensive education services was 53,900 during the reporting period[4]. - In the 2024 national college entrance examination, 272 graduates were admitted to the world's top 50 universities, an increase of 145 students from 127 in 2023[6]. - The number of high school students in the network increased by approximately 46.8%, from 36,708 in the fall of 2023 to 53,900 in the fall of 2024[17]. - The company successfully established seven high schools with independent operating licenses, enhancing operational structure[17]. - The company aims to expand its profitable high school business and enhance service offerings, including online campus malls and international education consulting[17]. Employment and Workforce - The company employed 2,682 full-time teachers as of February 28, 2025, an increase from 2,060 teachers in the previous year[7]. - The company employed 6,149 employees as of February 28, 2025, an increase from 5,106 employees as of February 29, 2024[77]. Financial Position and Liabilities - As of February 28, 2025, the company recorded a net current liability of approximately RMB 2,434.0 million, slightly down from RMB 2,438.4 million on August 31, 2024[31]. - The debt-to-equity ratio increased to 21.7% from 20.1%, with total borrowings of approximately RMB 2,029.7 million[33]. - The company reported a total current liabilities of RMB 3,817,185 thousand as of February 28, 2025, down from RMB 4,657,047 thousand as of August 31, 2024[44]. - The company has unused bank financing totaling RMB 1,761,775,000, significantly up from RMB 844,000,000 as of August 31, 2024[48]. - The company has approximately RMB 200 million allocated for potential acquisitions of high-quality targets[41]. - The total borrowings as of February 28, 2025, amounted to RMB 2,029,725,000, slightly down from RMB 2,052,995,000 as of August 31, 2024[68]. Dividends and Shareholder Returns - The group declared an interim dividend of RMB 0.0578 per share, totaling RMB 121,725,000, compared to RMB 88,237,000 for the same period last year, an increase of 37.9%[73]. - The company declared an interim dividend of RMB 5.78 per share for the six months ended February 28, 2025, representing a total dividend payout of approximately RMB 121.7 million, with a dividend payout ratio of 30%[75]. - The company repurchased a total of 9,389,000 shares at a total cost of HKD 33,266,636 during the six months ended February 28, 2025, reflecting confidence in its growth prospects[79]. Governance and Compliance - The company confirmed compliance with the corporate governance code and has established an audit committee to oversee financial controls and risk management[81][82]. - The company has not reported any significant events after the six months ended February 28, 2025, up to the date of this announcement[84]. - The interim report for the six months ended February 28, 2025, will be published on the company's website and the HKEX news website[85]. - The company has adopted a restricted share incentive plan to reward eligible participants since January 26, 2018[88]. - The company has implemented a stock option plan approved by shareholders on June 24, 2018[88]. - The board of directors includes the chairman and CEO, Mr. Luo Shi, along with other executive and non-executive directors[89].

Group 1 - The education sector in Hong Kong and A-shares experienced significant gains, with notable increases in stocks such as Xijiang International Holdings (up 12.59%) and China Tongcai Education (up 9.27%) [1] - The Ministry of Education and nine other departments issued a document to accelerate the digitalization of education, emphasizing the role of artificial intelligence in educational transformation [1][2] - The Ministry of Education plans to develop a national smart education platform 2.0, incorporating advanced technologies like AI and knowledge graphs to enhance educational resources and assessment [2] Group 2 - The global AI education market is projected to grow to $26.2 billion by 2025, while the domestic AI+ education B-end market is expected to reach 47.7 billion yuan and the C-end market 28.2 billion yuan by 2027 [3] - Investment firms are optimistic about the potential of AI in education, recommending attention to companies leading in AI integration within the education sector and related IT industries [3][4]

Investment Rating - The report maintains a "Buy" rating for Tianli International Holdings (01773) with a target price not specified [5]. Core Views - The company has signed a project investment agreement with the Haikou Education Bureau, marking a significant step in its national expansion strategy. The project aims to establish a modern smart high school with a capacity of no less than 2,500 students, leveraging the advantages of the Hainan Free Trade Port policy [1]. - The company is accelerating its integration of AI technology in education, collaborating with leading AI firms and experts to explore the potential of AI applications in personalized learning and educational management [2]. - Tianli International Holdings has achieved notable educational outcomes, including awards for its research projects and student achievements in various competitions, showcasing its commitment to educational excellence [3]. Financial Projections - The company projects revenues of RMB 4.6 billion, RMB 6.4 billion, and RMB 8.8 billion for FY25, FY26, and FY27 respectively. Adjusted net profits are expected to be RMB 800 million, RMB 1.1 billion, and RMB 1.4 billion for the same periods. Earnings per share (EPS) are forecasted at RMB 0.38, RMB 0.51, and RMB 0.67 [4].

Investment Rating - The report maintains a "Buy" rating for Tianli International Holdings (01773) with a target price not specified [5]. Core Insights - The company has signed a project investment agreement with the Haikou Education Bureau, marking a significant expansion in its national footprint and establishing a modern smart high school with a capacity of no less than 2,500 students [1]. - The strategic layout in Hainan Free Trade Port is seen as a key breakthrough for the company, leveraging policy advantages to explore diversified educational models [1]. - The company is accelerating its integration of AI technology in education, collaborating with leading AI firms to enhance personalized learning and optimize teaching management [2]. - Tianli's subsidiary, Qiming Daren Technology, has been recognized as a pioneer in educational digitization, with its cloud platform covering various educational aspects [2]. - The company has achieved notable educational outcomes, including awards in national competitions and recognition for innovative educational projects [3]. Financial Projections - Revenue projections for FY25-27 are estimated at 4.6 billion RMB, 6.4 billion RMB, and 8.8 billion RMB respectively, with adjusted net profits of 800 million RMB, 1.1 billion RMB, and 1.4 billion RMB [4]. - Earnings per share (EPS) are projected to be 0.38 RMB, 0.51 RMB, and 0.67 RMB for the same periods [4].

Investment Rating - The report assigns a "Buy" rating for Tianli International Holdings (01773.HK) [3]. Core Views - Tianli International Holdings is a leading private K12 education group in China, demonstrating strong brand effects and a solid industry position. The company has successfully adjusted its business structure post-2021 regulatory changes and is expected to maintain a growth trajectory with annual expansions of 3-5 new high schools [3][31]. - The company is projected to achieve significant revenue growth, with total revenue expected to reach 6.94 billion yuan by FY2027, reflecting a compound annual growth rate (CAGR) of approximately 24.52% from FY2024 [3][34]. - The net profit attributable to shareholders is forecasted to grow to 1.34 billion yuan by FY2027, with a corresponding price-to-earnings (P/E) ratio decreasing from 12 times in FY2025 to 7 times in FY2027, indicating an attractive valuation [3][34]. Summary by Sections Company Overview - Founded in 2002, Tianli International Holdings has expanded from a K9 focus to a comprehensive K12 education provider, establishing 58 schools across 18 provinces by November 2024, serving over 130,000 students [3][16]. - The company has effectively adapted its business model post-2021 regulatory changes, focusing on high school and management services, which has led to a rapid recovery in performance [3][31]. Industry Analysis - The policy environment for private education is stabilizing, with strong local demand for high-quality private high schools. The government continues to support the development of private education, which is expected to drive growth in the sector [39][41]. - The competitive landscape is stable, with high entry barriers for new players, allowing established firms like Tianli to maintain their market positions [41]. Financial Performance - For FY2024, Tianli reported total revenue of 3.32 billion yuan, a year-on-year increase of 44%, and a net profit of 576 million yuan, reflecting a 72.53% growth [31][34]. - The company’s gross profit margin remained healthy at 33.7%, with significant contributions from the increase in student enrollment and the expansion of service offerings [34][36]. Growth Strategy - Tianli plans to continue its expansion by opening 3-5 new high schools annually, aiming to operate 40-50 high schools by 2027, which will provide comprehensive educational services to 60,000-80,000 high school students [3][31]. - The company is also focusing on enhancing its management and operational efficiency through a light-asset model, which is expected to open new growth avenues [3][31].

Investment Rating - The report assigns a "Buy" rating for Tianli International Holdings (01773.HK) for the first time [3]. Core Views - Tianli International Holdings is a leading private K12 education group in China, demonstrating strong brand effects and a solid industry position. The company has successfully adjusted its business structure post-2021 Education Promotion Law, maintaining an expansion rate of 3-5 new high schools annually, with a target of operating 40-50 high schools by 2027 [3][31]. - The company is expected to achieve significant revenue growth, with total revenue projected to reach CNY 6.94 billion by FY2027, reflecting a compound annual growth rate (CAGR) of 24.52% from FY2024 [3]. - The net profit attributable to shareholders is forecasted to grow to CNY 1.34 billion by FY2027, with a corresponding price-to-earnings (P/E) ratio decreasing from 12x in FY2025 to 7x in FY2027 [3]. Summary by Sections Company Overview - Tianli International Holdings was established in 2002 and has expanded from a K9 focus to a comprehensive K12 education provider, with 58 schools across 18 provinces as of November 2024, serving over 130,000 students [16][31]. - The company has shown a 30% year-on-year increase in student enrollment, particularly in high school, where the number of students has grown by 46% [3][31]. Industry Analysis - The policy environment for private education is stabilizing, with strong local demand for high-quality private high schools. The government continues to support the development of private education, emphasizing high-quality growth [39][41]. - The competition landscape is stable, with high entry barriers for new players, allowing established firms like Tianli to maintain their leading positions [41]. Financial Performance - For FY2024, Tianli reported a revenue of CNY 3.32 billion, a 44% increase year-on-year, and a net profit of CNY 576 million, reflecting a 73% growth [31][34]. - The company’s gross profit margin remained healthy at 33.7%, with gross profit increasing by 43.7% year-on-year [34]. Competitive Advantages - Tianli's strong academic performance, including high college admission rates, supports its brand reputation and facilitates its expansion into new regions [60]. - The company employs a differentiated teaching approach, including a tiered training system to cater to various student needs, enhancing its educational offerings [62].