Strog 1Q result. Solid full year outlook.
I 1Q, TAL delivered reveue of USD322m, +65% YoY ad 6%
aboveDBe/cosesus. Erollmet icreased by 62% YoY vs. +57% i 1QFY17.
1QNo-GAAP opm was 12.3%, 105bps ahead of cosesus. No-GAAP EPSrecorded
USD0.43, 13%/9% above DBe/cosesus. Maagemet guided 2Qreveue growth of
58-60% YoY (61-63% YoY i RMB terms), i lie withDBe/street estimates.
Deferred reveue was USD959m, +72% YoY. TALaouced to chage ordiary
share/ADS ratio from 1:2 to 3:1, effective oAugust 16. We expect 2Q opm
to declie by 2.6ppts YoY due to thecotiuous capacity expasio ad summer
promotio. We believe i 2H thiscapacity will have much better utilizatio
rate due to the strog demad.
Summer promotio studets will also flow to full-price class. So
reveue couldmaitai 60% above YoY growth i Q3 ad Q4, meawhile margi will
haveYoY improvemet. For full year FY18, we expect o GAAP operatig
profitwill icrease 57% YoY to USD268m.
Small class reveue growth recorded 71% YoY i RMB, with erollmet upby
69% YoY. 1×1 class reveue grew by 55% YoY ad olie coursereveue growth
was over 100% YoY. Reveue cotributio from smallclass/1×1 class/olie
course was 81%/13%/5%.
I 1Q, bleded utilizatio rate improved 2ppts YoY. The compay
added澳门英皇赌登入，~1,500 classrooms ad etered five ew. TAL curretly has presece i
35cities ad 567 LCs. The compay plas to expad capacity by 30-50% iFY18
ad add 20-25 LCs i 2Q.
The small class reveue from cities other tha five major cities
(Beijig,Shaghai, Guagzhou, Shezhe ad Najig) grew by 88% YoY adaccouted
for 39% of small class reveue i 1Q.
Reveue from Maths/Sciece, Chiese ad Eglish is
70%/10%/20%,respectively. ASP for small class/1×1 class/olie icreased
by1.4%/7%/42% YoY, respectively.
Lifting target price to USD155; maintain Buy
We reiterate Buy rating on TAL and raise TP to USD155 to incorporate
fasterexpected revenue growth. We lift FY18E-20E revenue estimates
by3%/6%/10%, thanks to fast expansion of small class. Our target price
is basedon a 1.1x PEG valuation against CY17E non-GAAP EPADS of USD2.47
andCY17-19E non-GAAP EPADS CAGR of 57%. We maintain PEG as a
primaryvaluation methodology. Risks: competition and failure in online