Highlights

• TAL's 2QFY27 revenue grew 15% yoy to US$995m, 7% and 8% below our and consensus estimates. Non-GAAP operating profit more than doubled to US$248m, with operating margin expanding 12.4ppt yoy to 25% as S&M expenses fell 15% yoy. Non-GAAP net profit fell short of expectations and came in at losses of US$36m vs street’s estimate of US$200m due to fair-value loss on investments and tax charges.
   
• Maintain BUY with a lower target price of US$15.00.
   

Analysis

• Revenue growth moderates; below expectations. TAL Education Group's (TAL) revenue grew 15% yoy to US$995m in 2QFY27, decelerating from 32% yoy in 1QFY27 and 7% and 8% below our and consensus estimates. Growth was weighed down by weaker learning-device performance amid market contraction and intense competition, alongside moderating online enrichment growth, partly offset by healthy double-digit growth in Peiyou offline programmes, driven by enrolment gains. Management expects learning devices to remain a key drag on group revenue growth. Deferred revenue stood at US$930.4m at end-2QFY27, up 5.5% from end-FY26, supporting revenue visibility into 2HFY27.
   
• Better-than-expected margin expansion. Gross profit rose 21% yoy to US$595m in 2QFY27, with gross margin expanding 3ppt yoy to 60%. Non-GAAP operating margin widened 12ppt yoy to 25%, supported by higher gross margin and lower S&M expenses, partly offset by higher G&A expenses. S&M expenses declined 15% yoy to US$226m, bringing the expense ratio down 8ppt yoy to 23%, while G&A expenses rose 4% yoy to US$132m. non-GAAP operating profit reached US$248m, more than double the US$108m recorded in 2QFY26 and 42% above our estimate.