TAL(US:TAL)2024-08-04 13:01Investment Rating - The report maintains a Buy rating for TAL Education Group (TAL US) with a target price of $13.80, representing a potential upside of 52.0% from the current price of $9.08 [1][2] Core Views - TAL Education's Q1 FY2025 performance exceeded expectations, with revenue reaching $410 million, a 50% YoY increase, driven by strong demand for quality education training and learning device sales [1] - The company's adjusted operating profit was $0.88 million, significantly better than the expected loss of $27 million [1] - TAL Education plans to increase investments in Q2 FY2025, which may lead to a decline in operating margin to around 2% [2] - The company's learning device sales are growing rapidly, with nearly 100,000 units sold in Q1 FY2025, and the higher-priced xPad2 accounting for over 50% of sales [2] Financial Performance - TAL Education's revenue growth is expected to continue, with FY2025E revenue projected at $2.07 billion, a 38.9% YoY increase [3] - The company's non-GAAP net profit is forecasted to reach $100 million in FY2025E, up from $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 - The target price of $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]