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TAL Education Group ADR TAL

Rating as of

Morningstar’s Analysis

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Economic Moat


Capital Allocation


TAL Continues to Face Near-Term Margin Pressure

Jenny Tsai Senior Equity Analyst

Analyst Note

| Jenny Tsai |

We maintain our narrow-moat rating for TAL Education and lower our fair value estimate to USD 70 from USD 83, based on DCF, which implies 77.9 times fiscal year 2022 P/E versus industry peers' average of 37.5 times P/E. Our fair value estimate revision is mainly to reflect the lowering of our estimated fiscal 2021 earnings to net losses of USD 11 million from the previous net profit of USD284 million. This is as we factored in lower third-quarter results and anticipate weak fourth-quarter results, while we also revised down our longer-term margin trend with slower margin improvement from the previous expectation. 

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Company Profile

Business Description

Founded in 2003, TAL Education is one of the leading K-12 after-school tutoring providers in China. The firm offers tutoring services to students from pre-school to the twelfth grade via small classes, one-on-one personalized premium services, and online courses. In fourth-quarter fiscal 2020, TAL's small classes account for 68% of its revenue, one-on-one 8%, and 24%. Its tutoring services cover the core academic subjects in China’s school curriculum, such as Math (K-12), English (K-12), Chinese (K-12), Physics (Grade 8-12), Chemistry (Grade 9-12), and Biology (Grade 10-12). TAL's learning centers currently cover 70-plus cities in China and a total of 871 learning centers. In fourth-quarter fiscal 2020, current normal priced long-term course student enrolment was 4.65 million.

6 Danling Street, 15th Floor, Danling SOHO
Beijing, 100080, Cayman Islands
T +86 1052926692
Sector Consumer Defensive
Industry Education & Training Services
Most Recent Earnings Nov 30, 2020
Fiscal Year End Feb 28, 2021
Stock Type
Employees 45,271