1. Scorecard
Verdict: BUY — STANDARD.
Actionable now: Yes — accumulate at ≤ HK$1.82 (price HK$0.715 as of 20 October 2026).
Position: Long 2,000 shares, about 0.19% of portfolio NAV (20 October 2026).
2. Argument
The short version
Tianli operates private, fee-paying senior-high schools across mainland China. The core students are in grades 10 to 12, preparing for the Gaokao university-entrance exam. Senior high sits outside China's nine compulsory school years, so for-profit private operation is permitted at this level. At HK$0.715 on 20 October 2026, the shares sit at roughly 0.39 times filing tangible book even though revenue and profit reached multi-year highs in the latest half. The bargain is real.
So is the reason for it. Shareholders own the listed company, but the listed company does not own ordinary equity in the mainland schools that generate most of its earnings. Contracts give the group control and the right to the economics. Chinese regulation already broke the same arrangement for 30 compulsory-education schools in 2021. The board has since suspended the interim dividend while profit rose, kept financing links to the removed schools, and continued buying construction services from the chairman's company. This is a growing school operator with a fragile legal wrapper. That is why the fresh-money verdict is Standard, not Big.
The history since listing shows the collapse that created the valuation. It does not by itself show whether the regulatory discount is excessive.
What shareholders actually control
In a normal subsidiary, the parent owns shares in the operating company. Those shares carry voting rights and a legal claim on the business. Tianli's mainland schools work differently. Chinese entities hold the school sponsorship rights and licenses. A web of agreements gives Tianli's group companies the power to manage those schools, receive their economic benefits, and consolidate their results in the listed group's accounts.
The practical shorthand is: Tianli has the operating keys, but not the deed. Accounting consolidation says Tianli controls the schools for financial-reporting purposes. It does not mean the listed company owns the school equity in the ordinary way.
That distinction matters because the contracts exist inside a regulatory permission structure. When the rules changed in 2021, 30 compulsory-education schools could no longer remain in the listed group. Tianli stopped consolidating them and recorded a RMB1,085.2 million impairment. That was an accounting charge rather than a same-day cash payment, but it reflected a real loss of control and asset value.
Solid lines show ownership. Dashed lines show contractual control. The 2021 break removed 30 schools from the accounts but did not remove Tianli's financial exposure to them.
The business underneath the wrapper is working
Tianli reported 58 schools across 36 cities at the last annual reporting date. It taught roughly 54,000 high-school students during the year and about 60,000 at the start of the autumn 2025 term. In the six months to 28 February 2026, revenue rose 14.2% to RMB2,142.8 million and profit rose 21.0% to RMB471.4 million.
That growth is not perfectly clean. Product sales grew 45.6% while the core educational-services line grew 3.4%, and gross margin fell 2.4 percentage points to 35.2%. Still, this is not a melting-ice-cube thesis. The operating business is expanding while the stock has been priced as though the legal structure will eventually fail.
The balance sheet can support the business, but it is not a liquidation floor. Filing tangible book was RMB1.5608 per share, yet right-of-use assets represented 74.2% of tangible book. Those are mostly land-use and lease rights tied to the school network. They are useful while the network operates; they are not cash sitting in a vault.
Bank borrowings were RMB2,535.8 million and interest coverage was 10.1 times EBITDA. The near-term squeeze is more relevant: RMB878.1 million of bank debt was due within 12 months, cash was RMB449.3 million, and the current ratio was 0.416. Tianli also reported RMB1,432.7 million of undrawn committed facilities, so the issue is refinancing discipline rather than an obvious inability to pay.
Why the stock is cheap
The 2021 schools did not simply disappear. The deconsolidated business owed Tianli RMB873.3 million, interest-free and unsecured. Tianli had also guaranteed RMB254.0 million of its bank facilities without receiving consideration. In plain English, shareholders lost the earnings perimeter but retained a large receivable and credit exposure. If either amount proves unrecoverable, tangible book falls directly.
Capital allocation adds to the distrust. The board paid no interim dividend for the latest half, versus RMB5.78 cents per share a year earlier, despite the 21.0% rise in profit. Across FY2025 and the latest half, Tianli repurchased 30.1 million shares for about HK$99.0 million at an average near HK$3.29. The same number of shares would cost about HK$21.5 million at the current HK$0.715 price. Repurchasing shares was not inherently wrong, but the timing was poor and the company paid 4.6 times today's market price.
Related-party construction also deserves a permanent line in the thesis. The chairman and chief executive controls 46.13% of Tianli and indirectly owns the contractor that builds and renovates its schools. The arrangement is disclosed and capped, but it pays actual cost plus 9% to 11%. First-half fees rose to RMB50.1 million from RMB7.3 million. A cost-plus contract with the controller's own company weakens the incentive to hold costs down even when the formal approvals are in place.
Reported earnings require one more adjustment. Tianli reversed RMB100.0 million of old impairments in FY2025 and another RMB81.9 million in the latest half. The commonly quoted 4.4 times normalized P/E also excludes FY2021, an eight-month transition period dominated by the deconsolidation. Include that period and the multiple becomes 29.6 times. Excluding it is defensible because it is not a comparable year, but the sensitivity is too large to hide. Tangible book, not the 4.4 times earnings figure, is the sturdier valuation anchor.
How a minority holder gets paid
There are two routes. The first is a restored dividend. The second is a re-rating if the senior-high contracts keep operating, the removed-school exposure runs down, and the market stops treating the structure as terminal.
The operative Buy-Below is HK$1.82, equal to one times filing tangible book. The working Sell Range is HK$4.67 to HK$7.91, derived from 29 observations of Tianli's own price-to-tangible-book history. I would put more weight on the low end. The upper end comes from a valuation regime that private-education stocks may not receive again, while the low end only asks the market to recognize a functioning business at a less distressed multiple.
The chairman's 46.13% stake is useful alignment, and his vehicle added 37.6 million shares in the six months to February 2026 while the price was falling. It is not protection against regulation or poor capital allocation. The post-February insider record has not been verified.
What would change the view
The FY2026 final dividend will show whether the interim suspension was temporary or a new distribution policy.
The RMB873.3 million receivable needs to stop growing, be repaid, or receive an appropriate allowance. The RMB254.0 million of guarantees should keep falling.
A rule that weakens contractual control of the senior-high network would break the thesis, just as the 2021 rule broke the compulsory-school perimeter.
Debt maturities need to be refinanced without exhausting cash or committed facilities, and the current ratio should recover.
Related-party construction fees, product mix, gross margin, and impairment reversals should normalize rather than become the engine of reported growth.
Sources and gaps
The core figures come from Tianli's FY2025 annual report and interim report for the six months ended 28 February 2026. Both were read in full, including the debt, related-party, guarantees, regulatory, and subsequent-events notes. The June to September 2026 exchange-announcement window and the disclosure-of-interests record after February 2026 were not verified directly. No primary-source explanation for the later share-price collapse was found, so I am not assigning it a company-specific cause.
3. Numbers that matter
Price: HK$0.715 on 20 October 2026.
Filing tangible book: RMB1.5608 per share at 28 February 2026; current P/TBV about 0.39 times after currency conversion.
Buy-Below: HK$1.82, the one-times-tangible-book cap.
Sell Range: HK$4.67 to HK$7.91; the low end is the more credible exit.
Latest half: RMB2,142.8 million revenue, up 14.2%; RMB471.4 million profit, up 21.0%.
Funding: RMB2,535.8 million bank borrowings; RMB449.3 million cash; RMB1,432.7 million undrawn committed facilities.
Removed-school exposure: RMB873.3 million receivable plus RMB254.0 million of guarantees.
Control: chairman and chief executive owns 46.13%; listed group controls the mainland schools by contract, not ordinary school equity.
Research only, not investment advice.