Morgan Stanley Starts TAL International (TAL) at Overweight, 'we see faster ramp-up of its new businesses'

Morgan Stanley analyst Eddy Wang initiates coverage on TAL International (NYSE: TAL) with a Overweight rating and a price target of $10.50.

The analyst comments "For TAL, our price target is US$10.5, implying 26.3x F2026 non-GAAP ex-cash P/E. TAL recorded 40% YoY revenue growth and 14.3% non-GAAP net margin in F2Q24, suggesting its new business initiatives are on track for fast development. We expect TAL to reach US $56mn non-GAAP net profit in F2024, implying non-GAAP net margin of 4.1% (vs Bloomberg consensus estimates of US$36mn non-GAAP net profit and 2.6% non-GAAP net margin), as we see faster ramp-up of its new businesses. We expect the company's ongoing share buyback program and sizable net cash position (US$3.5bn net cash in F2024e, 60%+ of its current market cap) to limit any share price downside. Our price target-implied F2026 P/E multiple for TAL is higher than that for EDU, as we believe TAL's margin level is still in the ramp-up stage (i.e., NPM of 6.8% for TAL vs 14.2% for EDU in F2026, based on our estimates), but we expect both companies will have similar margin profiles in the long term."

For an analyst ratings summary and ratings history on TAL International click here. For more ratings news on TAL International click here.

Shares of TAL International closed at $9.10 yesterday.

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