JL Warren Capital

JL Warren Capital LLC is a leading independent equity research firm focused on Chinese companies and listed multinationals in China. We employ a bottom-up research approach that takes great care to avoid the acquisition of material non-public information. Through investigative due diligence including channel surveys and interviews, our research helps clients to pinpoint the dislocations in the market.

Investment Advisors

China's After-School Tutoring Continues to Benefit from Secure Growth Trend

TAL Education: Policy Headwind and Restructuring Risks

TAL Education (TAL US) - Chaos in Junior High School Application in Shanghai

Investment Advisors, JL Warren Capital

Junheng Li

Thematic (Sector/Industry)

China Consumer services / Thematic (Sector/Industry)

In this note, we present our long investment thesis on the leading provider of China’s K12 tutoring service, <a href="https://www.smartkarma.com/entities/1124" target="_blank" data-smartkarma-citation="entities:1124:1" rel="noopener">Tal Education (TAL US)</a> with a top-down approach, deviating from our usual bottom-up stock picks. While short term catalysts are stronger-than- expected enrollment for both spring and summer terms, long-term thesis is driven by strong structural factors which will enable TAL to withstand periodic policy interventions by the government. 
For the time being, we view their online business as a call option, with no expectation of profit contribution.  We believe that the re-acceleration of offline enrollment, and consequent margin stabilization to slight expansion, in FY 2020/2019 should drive share price appreciation over the next 12-months. 
Parents’ spending on K12 tutoring services stands as one of the best Chinese consumption stories and will be the case for many years to come, due to an enormous shortage in the supply of public high schools and consequentially the ever-intensifying demand for the limited and highly regulated resources.

In this note, we present our long investment thesis on the leading provider of China’s K12 tutoring service, Tal Education (TAL US) with a top-down approach, deviating from our usual bottom-up stock picks. While short term catalysts are stronger-than- expected enrollment for both spring and summer terms, long-term thesis is driven by strong structural factors which will enable TAL to withstand periodic policy interventions by the government. 
For the time being, we view their online business as a call option, with no expectation of profit contribution.  We believe that the re-acceleration of offline enrollment, and consequent margin stabilization to slight expansion, in FY 2020/2019 should drive share price appreciation over the next 12-months. 
Parents’ spending on K12 tutoring services stands as one of the best Chinese consumption stories and will be the case for many years to come, due to an enormous shortage in the supply of public high schools and consequentially the ever-intensifying demand for the limited and highly regulated resources.

K12 After-School Tutoring Services:  China’s Best Consumption Story