TAL Education Earnings: Raising Fair Value Estimate by 5% to USD 10.20 on Positive Growth Momentum

TAL Education’s fiscal 2025 second-quarter results, ending August, beat our expectations. Revenue grew 50% year on year and was 8% ahead of our forecast. Most notably, adjusted operating margin of 10.4% significantly exceeded our 3.3% forecast due to lower-than-expected general and administrative expenses. We increase our revenue forecasts by 3% for fiscal 2025-29 to reflect the upbeat momentum. While we raise our fiscal 2025 adjusted operating margin forecast to 3.1% from 1.3%, our fiscal 2026-29 forecasts are largely unchanged as we think TAL needs to invest more in its products, research & development, and marketing to drive long-term growth. We increase our fair value estimate to USD 10.20 per share from USD 9.70 and think the shares are currently fairly valued.