Tianli International Holdings announced its interim results for the six months ended February 29, 2024. FY24H1 achieved revenue of 1,645 million yuan, +73.8% year-on-year, and adjusted net profit of 319 million yuan, or +70.0% year-on-year. Performance growth exceeded expectations. The company's mature standardized management capabilities and excellent talent team have built solid barriers. In the future, the continuous expansion of the number of people in the company's school network and the number of new hosting services are expected to support rapid growth. They are optimistic about the development prospects of the private education market and the company's diversified business growth potential, and maintain an “increase” investment rating.
Revenue from comprehensive education services is growing rapidly, and the number of students enrolled is rapidly expanding. FY2024H1 Tianli International achieved revenue of 1,645 billion yuan, or +73.8% year over year, of which revenue from comprehensive education services was 851 million yuan, +64.4% year over year, mainly driven by the increase in the number of high school students and strong demand for post-pandemic student study tours. As of the beginning of the fall semester of 2023, the Tianli School Network had 37,000 high school students, +43.8% year over year, and the number of new high school students enrolled reached 19,000, +41.0% year over year, driving a rapid increase in high school tuition income. Currently, the company mainly provides comprehensive education services to students in 50 schools. The total number of students enrolled has exceeded 100,000. It is expected that the number of students managed and served by the Group will reach 140,000 to 150,000 in September 2024.
The hosting business has great potential for growth, improving profitability and expanding the Group's brand influence. FY2024H1 management and franchise fee revenue was $26.06 million, +35% year over year, mainly due to a further increase in the number of school sessions hosted by the company. During the reporting period, the company provided school management and franchise services to 10 trusteeship schools. Up to now, the company has signed a total of 14 trusteeship schools, covering 23 school segments. In addition, the group has reserved nearly 50 intended trusteeship school segments in Zhejiang, Guangxi, Guangdong, Hubei, Yunnan, Hebei and other provinces. It is expected that another 20-30 school segments will be signed within this year. In the long run, various local government public school trusteeship demands are strong, and the market space is broad. On the one hand, Tianli's trusteeship business will help raise the Group's profit level, and on the other hand, it will help expand the influence of the Tianli brand and promote the further promotion of the Group's philosophy of running schools, which is expected to continue to bring new momentum to the Group's growth.
Stable dividends and continuous repurchases demonstrate business confidence. In terms of shareholder returns, the 2024H1 board of directors deliberated and decided to maintain a stable dividend policy. The interim dividend amount will be distributed at 30% of the reported net profit, and the total dividend for 2024H1 will be approximately RMB 88.24 million. Meanwhile, since announcing the repurchase plan in July 2023, the company has continued to repurchase and has spent approximately HK$110 million to repurchase 37.99 million shares, accounting for 1.8% of the company's issued shares. Such repurchased shares will be used for cancellation to enhance earnings per share and shareholder value. In the future, the company will also take the opportunity to continue to repurchase within the authorized amount according to market conditions, demonstrating the company's long-term business confidence.
Investment advice: We expect the Group's adjusted net profit for the 2024-2026 fiscal year to be $5.8/9.2/1.30 billion, +59%/58%/41% year over year, giving the 2024 adjusted net profit 20 times PE, corresponding to the target price of HK$5.93 per share. We are optimistic about the development prospects of the private education market and the company's diversified business growth potential, and maintain the “increase” investment rating.
Risk warning: macroeconomic risk, industry policy risk.