After the regulatory overhaul in education, the company's new business model focuses on providing educational services to schools and gradually increasing the application of artificial intelligence.
<h4>Key Points:</h4>
<ul>
<li>TIANLI INT HLDG's net profit grew by 21% and revenue increased by 14.2% for the half-year ending in February.</li>
<li>The company exited the tutoring business after the regulatory overhaul in 2021 and shifted its focus to school operations, with gross margins roughly doubling compared to before.</li>
</ul>
Tan Ying
TIANLI INT HLDG (1773.HK) is one of the few educational technology companies that not only survived the ban on K-12 subject-based off-campus training for five years in China but also continues to develop. However, it is unfortunate for TIANLI that investors, who were severely impacted during the policy overhaul, seem unwilling to give the company a second chance.
This is quite regrettable for TIANLI, as its transformation was meant to be a rebirth story in the potential field of education, especially in the context of Chinese society's high regard for education. The company's latest performance announced last week showed that for the half-year ending in February, revenue grew by 14% year-on-year to CNY 2.1 billion (USD 314 million), while net profit increased by 21% to CNY 471 million.
Of this, approximately CNY 81.8 million in impairment reversal constituted the main source of profit growth, due to TIANLI obtaining the operating license for its art training business that had been written off due to the policy overhaul. This impairment reversal is only a small part of the over CNY 1 billion impairment that the company had recognized in 2021 due to regulatory adjustments. Excluding this reversal, TIANLI's profit was essentially flat compared to the same period last year.
Despite recording double-digit revenue growth, profits remained largely unchanged, partly due to pressure on profit margins, with the company's latest half-year gross margin falling by 2.4 percentage points to 35.2%. However, it is worth noting that this level is still about double the 17.2% before the regulatory overhaul.
TIANLI's situation is similar to that of peers such as Gaotu (GOTU.US), TAL Education (TAL.US), and New Oriental (EDU.US, 9901.HK), all of which have survived by shifting to education-related services permitted by regulations. Among them, Gaotu has shifted to training for college entrance exams and civil service exams, TAL focuses on small class quality education, while New Oriental concentrates on adult education and non-subject training.
<h4>Shift to Educational Services</h4>
TIANLI has also undergone a transformation. The company's founder, Luo Shi, was a real estate developer who operated private schools in his early years and founded his first school in 2002. He continued to expand, and by the time of its listing in Hong Kong in 2018, the company had 24 schools and 11 training centers, mainly distributed in Sichuan and surrounding provinces in the southwest.
After the regulatory overhaul, TIANLI &#34;delisted&#34; 30 schools, effectively separating them from its listed company business. Currently, the company primarily generates revenue by providing diversified services to its existing self-operated and franchised school network, including educational services, management services, logistics services, and product sales
As the company's largest source of revenue, comprehensive educational services grew by only 3.4% year-on-year to approximately 1 billion yuan in the latest half-year; product sales recorded faster growth, rising 45.5% year-on-year to 691 million yuan; logistics service revenue fell by 1.7% to 327 million yuan. Management and franchise fees increased by 38.7%, but the scale remains small, at only 78.1 million yuan.
This relatively robust performance continues the growth trend of the previous fiscal year. For the fiscal year ending last August, the company's revenue grew by 8.1% to 3.58 billion yuan, and net profit increased by 16.5% to 648 million yuan.
In the latest research report, Huatai Securities raised Tianli's profit forecast for the current fiscal year by 15% to 773 million yuan and maintained a &#34;Buy&#34; rating; Guosen Securities also maintained an &#34;Outperform&#34; rating but pointed out that the market still discounts related stocks due to declining birth rates and low liquidity in the education sector.
Despite the overall positive signals from the latest performance, investor reactions remain cautious. Since the earnings announcement last Friday, the stock price has fallen by more than 10%, still about 80% lower than the high before regulatory tightening.
<h4>Embracing AI</h4>
Tianli and its peers are increasing their investments in artificial intelligence, which is almost a natural choice for education companies, and this may not yet be fully reflected in the stock price by investors.
Gaotu has adopted China's leading AI company DeepSeek as the core of its AI tools and implemented an &#34;All with AI&#34; business strategy; TAL Education has developed a large model focused on mathematics called Math GPT and collaborated with Beijing Normal University to create the &#34;Shicheng Wanxiang&#34; educational model; New Oriental has launched AI-based one-on-one personalized tutoring camps and its &#34;Yidian Yikan&#34; application, built on a personalized teaching system.
Tianli is also actively laying out AI, having launched the &#34;Tianli Qiming AI Companion&#34; in June last year, claiming it to be China's first large model to complete filing and be widely used in classrooms. Founder Luo Shi told China Daily that the application combines large-scale resources with personalized growth. &#34;The large model allows students to redefine their learning paths, making quality educational resources more accessible, thus turning personalized education into reality.&#34;
Although the detailed differences of these products still require professionals for in-depth comparison, Zhang Shaogang, director of the China Educational Technology Association, pointed out that Tianli's large model is trained based on the teaching experiences of over 100 schools and 250,000 students.
According to Tianli executive Luo Yongqiang, as of July 2025, this model has been implemented in 107 schools nationwide. In March of this year, Tianli signed a strategic agreement with Tencent to jointly develop a &#34;subject brain&#34; with &#34;cognitive-level intelligence.&#34; The company stated that this system will generate dedicated intelligent agents for different subjects, covering the entire process of research, teaching, learning, practice, testing, and evaluation.
The AI business appears to be growing rapidly. As of the end of February, Tianli's 26th AI college entrance examination sprint camp has enrolled 2,331 students, an increase of over 130% year-on-year. However, the company has not disclosed specific financial data for the AI business, which is included in the comprehensive educational services segment, indicating that its current contribution to revenue may still be limited
In terms of cost control, TIANLI has also performed well. The latest half-year sales, administrative, and financial expenses as a percentage of revenue decreased by 0.5 percentage points to 10.7%. Huatai Securities pointed out that the company has &#34;achieved a good balance between growth and efficiency.&#34;
Whether TIANLI's transformation can change investors' existing impressions remains to be seen, as many investors are still digesting the losses brought about by regulatory adjustments. However, at least the company has re-proven its ability to operate sustainably. Currently, its price-to-earnings ratio is about 6.5 times, far lower than the approximately 24 times level of TAL Education and New Oriental. As the transformation gradually progresses, it may be worth investors' reconsideration

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TIANLI INT HLDG has transformed into a provider of educational services to schools after the regulatory overhaul in education, with a net profit growth of 21% and a revenue increase of 14.2%. Although the gross profit margin has doubled compared to before the regulatory adjustments, investors remain cautious about its transformation. The company's latest performance shows revenue rising to 2.1 billion yuan (314 million USD), but profits have remained largely flat, partly due to pressure on profit margins. TIANLI's situation is similar to that of other education technology companies, which have survived by shifting to compliant educational services

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