Chinese TAL Education Group: Upside Potential to FY2Q17 Outlook and Full Year Driven by Capacity Expansion; Maintain BUY
XRS reported strong FY1Q17 revenue results that beat consensus while the bottom line came in slightly below the Street. The FY2Q17 guidance was also solid, better than the Street expectation. For FY2017, the company is maintaining a rapid expansion plan. While the rapid growth in capacity may put pressure on margins, we believe it can be near term and the positives to both top line and margin growth can be long term. We see upside potential to FY2Q17 as well as for the full year based on our proprietary data. Therefore, we maintain our BUY rating and our PT of $68.00.