Date: October 24, 2024
Broker: UOB Kay Hian
Company Overview
New Oriental Education & Technology Group offers educational services including foreign language training, test preparation courses, K-12 after school tutoring services, and online courses in China.
Stock Data
- Share Price: US$62.15
- Target Price: US$85.00
- Upside: +36.8% (Previous Target Price: US$90.00)
- GICS Sector: Consumer Discretionary
- Bloomberg Ticker: EDU US
- Shares Issued: 165.5 million
- Market Cap: US$10,069.1 million
- 3-Month Avg Daily Turnover: US$160.3 million
- 52-Week High/Low: US$97.23 / US$58.32
Major Shareholders
- Yu Minhong: 12.0%
- Norges Bank: 5.0%
- Vanguard Group: 3.7%
Financial Performance (1QFY25)
- Revenue: US$1,435 million (30% YoY growth)
- Net Profit: US$265 million (40% YoY growth)
- Net Margin: 18% (up 1ppt YoY)
Yearly Financial Overview
- 1QFY24: Revenue of US$1,100 million
- 4QFY24: Revenue of US$1,137 million
- 1QFY25: Revenue of US$1,435 million
- Non-GAAP Net Profit:
- 1QFY24: US$189 million
- 4QFY24: US$37 million
- 1QFY25: US$265 million
Key Financial Metrics
- Gross Profit (1QFY25): US$852 million (29% YoY growth)
- Gross Margin: 59% (down 1ppt YoY)
- Operating Profit (1QFY25): US$293 million (43% YoY growth)
- Non-GAAP Operating Profit (1QFY25): US$300 million (23% YoY growth)
Growth Drivers
- Resilient overseas test preparation and study consulting revenue grew by 18.8% and 20.7% YoY respectively.
- Revenue from domestic test preparation targeting adults and university students grew by 30.4% YoY.
- Educational business initiatives revenue surged by 49.8% YoY.
- Non-academic tutoring courses offered in around 60 cities attracted 484,000 student enrollments in 1QFY25.
Outlook
- 2QFY25 Guidance: Revenue (excluding East Buy) is expected to rise by 25-28% YoY to between US$851.4 million and US$871.8 million.
- Anticipated challenges include weak seasonality impacting premium services and subdued momentum in overseas test preparation and consulting.
- Strategic adjustments are being made to address these challenges.
Share Repurchase Program
As of October 22, 2024, New Oriental Education & Technology Group has repurchased an aggregate of 9.8 million American Depository Shares (ADS) for US$457.9 million, representing 4.2% of total market cap. The company has extended the Share Repurchase Program to May 31, 2025, increasing the aggregate value of shares authorized for repurchase from US$400 million to US$700 million.
Conclusion
New Oriental Education & Technology Group is maintaining a “BUY” recommendation with a revised target price of US$85.00, suggesting significant upside potential despite facing growth challenges in a competitive educational landscape.
