The company’s new business model after a government crackdown centers on providing education services to schools, with a growing use of AI
image credit: Bamboo Works
Key Takeaways:
- Tianli International’s net profit rose 21% in the first half of its fiscal year through February, while its revenue increased by 14.2%
- The company’s gross margins are roughly twice as high as they were before a government crackdown in 2021, after it dropped its tutoring business to focus on school operation
Tianli International Holdings Ltd. (1773.HK) is among a handful of edtech companies that have not only survived but thrived in the market five years after China banned for-profit tutoring services for K-12 students in core curriculum areas. Unfortunately for Tianli, investors who were badly burned in the crackdown don’t seem willing to give the company a second chance.
That’s too bad for Tianli, whose turnaround is a story of renewal in a field that still holds out huge potential due to the strong value Chinese culture places on education. In its latest results, announced last week, Tianli reported its revenue grew by 14% year-on-year to 2.1 billion yuan ($314 million) in the six months to February, the first half of its fiscal year, while its profit rose 21% to 471.3 million yuan.
The reversal of an 81.8 million yuan impairment loss was responsible for most of the profit gain, after Tianli was able to obtain operating licenses for art training that it previously wrote off after the crackdown. That loss was just a tiny part of the more than 1 billion yuan in impairments that Tianli took in 2021 related to the crackdown. Without the reversal, Tianli’s profit would have been flat year-on-year.
The flat profit, despite the double-digit revenue growth, was partly the result of margin pressure, as the company’s gross margin fell 2.4 percentage points to 35.2% in the latest six-month period. But notably, the latest figure was twice as high as the year before the regulatory crackdown, when Tianli’s gross margin was just 17.2%.
Tianli is in the same boat with peers like Gaotu Techedu (NYSE:GOTU), TAL Education (NYSE:TAL) and New Oriental (NYSE:EDU) ( 9901.HK), which have all survived by pivoting …
This post was originally published here
