Core Viewpoint - New Oriental Education & Technology Group Inc. (EDU) is expected to report better-than-expected Q4 FY 2024 financial results, leading to an upgrade in stock rating from Hold to Buy [1][6]. Financial Performance Expectations - Analysts project a 32% year-over-year revenue growth for EDU, reaching $1.14 billion in Q4 FY 2024, with normalized earnings per share (EPS) expected at $0.45 [2]. - The anticipated bottom line growth is expected to accelerate from 13% YoY in Q3 FY 2024 to 21% YoY in Q4 FY 2024 [2]. Predictions for Q4 Results - The company is likely to exceed its own guidance for learning center growth, with a potential increase of over 30% in capacity for FY 2024 [3]. - EDU's learning center network may have grown by 34% YoY, surpassing 1,000 centers by the end of May 2024, which would indicate a 10% quarter-over-quarter increase [4]. Operating Leverage and Marketing Costs - Positive operating leverage is expected to enhance profitability, with G&A costs increasing by 34% YoY in Q3 FY 2024, significantly lower than the 60% YoY surge in revenue [4]. - Marketing costs related to the livestreaming e-commerce business, East Buy, are anticipated to normalize in Q4 FY 2024, following a 57% YoY increase in Q3 FY 2024 [4]. Valuation Metrics - EDU's current Price-to-Earnings Growth (PEG) ratio is calculated at 0.74 times, indicating undervaluation compared to the fair valuation benchmark of 1 times [6].

Core Viewpoint - New Oriental Education and Technology Group Inc. will report its financial results for the fourth quarter ended May 31, 2024, on July 31, 2024, before the U.S. market opens [1] Group 1: Financial Reporting - The earnings conference call will take place at 8 AM U.S. Eastern Time on July 31, 2024, which corresponds to 8 PM Beijing/Hong Kong Time on the same day [1] - Participants can register in advance for the conference call using a provided link, which will give them access to dial-in numbers and a unique personal PIN [2] - A live and archived webcast of the conference call will be available for access on the company's investor relations website [2] Group 2: Company Overview - New Oriental is a provider of private educational services in China, offering a diverse range of educational programs, services, and products to a varied student population [4] - The company's offerings include educational services, test preparation courses, private label products, livestreaming e-commerce, and overseas study consulting services [4] - New Oriental is listed on both NYSE (NYSE: EDU) and SEHK (9901.SEHK), with its American Depositary Shares (ADSs) representing ten common shares [4]

Investment Rating - The report initiates coverage with a "Buy" rating for the company [5]. Core Views - The company is recognized as a leading player in the education and training sector, undergoing a successful transformation post the "double reduction" policy, with a strong recovery in traditional business and promising growth in new ventures [3][4]. Summary by Sections Company Overview - Founded in 1993, the company has evolved from a language training provider to a diversified education service platform, including educational services, lifestyle services, and cultural tourism [10]. - The company has a total share capital of 1,655 million shares and a market capitalization of 95.9 billion HKD [2]. Industry Analysis - The education and training regulatory environment is stabilizing, leading to improved competition dynamics as many smaller players have exited the market [4]. - Demand for quality education remains robust, with a projected market size for quality education exceeding 700 billion CNY by 2023, growing at a CAGR of approximately 30% from 2020 to 2023 [3][4]. Business Performance - The company reported a revenue of 1.2 billion USD in FY24Q3, reflecting a year-over-year increase of 60%, marking five consecutive quarters of double-digit growth [21]. - The traditional business segments, particularly study abroad and adult education, have shown strong recovery, with revenues increasing by 39% and 53% year-over-year, respectively [3][4]. Financial Projections - Revenue forecasts for FY24, FY25, and FY26 are projected at 4.305 billion USD, 5.329 billion USD, and 6.509 billion USD, respectively, with year-over-year growth rates of 44%, 24%, and 22% [5]. - Adjusted net profits are expected to reach 315 million USD, 441 million USD, and 656 million USD for the same periods, with growth rates of 77.8%, 39.8%, and 48.9% [5]. Valuation - The report employs a Sum-of-the-Parts (SOTP) valuation method, estimating a target market value of 145.6 billion HKD, which corresponds to a target price of 88 HKD per share [5].

Investment Rating - The report maintains a "Buy" rating for New Oriental Education Technology (9901 HK) with a target price of HKD 89.00, indicating a potential upside of 40.5% from the current price of HKD 63.35 [2][12]. Core Insights - The report projects a revenue of USD 1.128 billion for Q4 FY2024, representing a year-on-year growth of 31%, aligning with the company's guidance of 28-31% growth [1]. - The expansion of offline teaching points is on track, with a projected 10% quarter-on-quarter increase, contributing to a total annual target of 30% growth [1]. - The contribution from Dongfang Zhenxuan is expected to account for 20% of New Oriental's revenue, with a projected revenue increase of 58% year-on-year to RMB 1.59 billion (USD 220 million) in Q4 [1][2]. Financial Overview - For FY2024, the estimated revenue is USD 4.305 billion, with a projected operating profit margin of 14% for FY2025 and 16% for FY2026, indicating continuous margin improvement [2][13]. - The report forecasts a net profit of USD 770 million for Q4 FY2024, with an adjusted operating profit of USD 69 million, reflecting a decrease in operating profit margin by 3 percentage points year-on-year [1][13]. - The financial data shows a significant recovery from previous years, with net profit expected to rise to USD 421 million in FY2024 and USD 628 million in FY2025 [3][13]. Revenue Breakdown - The revenue from study abroad preparation is expected to grow by 21%, while high school education and non-subject skills training are also projected to grow by 21% and 59%, respectively [1]. - The report highlights that the offline teaching point expansion will have a minor negative impact on overall gross margin, estimated at approximately -0.4 percentage points [1]. Market Position - New Oriental's market position remains strong, with a focus on expanding its educational services and adapting to market demands, particularly in new first-tier cities and lower-tier cities [1][2].

Core Viewpoint - New Oriental Education & Technology Group Inc. has extended its share repurchase program, allowing for the repurchase of up to approximately US$153.7 million of its shares through May 31, 2025, following a previous repurchase of approximately US$246.3 million worth of its ADSs [1][2]. Group 1 - The board of directors has authorized the extension of the Share Repurchase Program, which was initially launched in 2022 and amended in 2023 [1]. - As of the announcement date, the company has repurchased approximately US$246.3 million worth of its American Depositary Shares (ADSs) under the program [1]. - There remains a balance of approximately US$153.7 million that has not yet been utilized under the Share Repurchase Program [1]. Group 2 - The repurchases may occur through various methods, including open market transactions, privately negotiated transactions, and block trades, depending on market conditions [2]. - The board will periodically review the Share Repurchase Program and may authorize adjustments to its terms and size [2]. Group 3 - New Oriental is a provider of private educational services in China, offering a wide range of educational programs, services, and products [3]. - The company's offerings include educational services, test preparation courses, overseas study consulting services, and educational materials [3]. - New Oriental is listed on both NYSE and SEHK, with its ADSs representing ten common shares [3].

Investment Rating - The report initiates coverage with a "Buy" rating for New Oriental Education & Technology Group (09901.HK) [4] Core Insights - The report addresses the comprehensive questions surrounding the market's focus on the leading education training company since its rebirth, emphasizing the changes in industry policies and regulatory execution, innovative business models supporting performance recovery, and the evolving market space for various educational services [2][8] Summary by Relevant Sections Industry Policy and Regulatory Changes - The "Double Reduction" policy remains unchanged since its announcement in July 2021, focusing on reducing student burdens while gradually standardizing execution across various aspects such as funding regulation, training content supervision, advertising, operating hours, and pricing guidance [16][22] - The number of offline academic training institutions has drastically decreased from 124,000 to 4,932, a reduction rate of 96%, while online institutions dropped from 263 to 34, a reduction rate of 87% [16][17] Business Operations and Structural Changes - New Oriental has successfully transitioned its business model post-"Double Reduction," focusing on quality education and innovative products like rental learning machines, which have gained acceptance from students and parents [2][8] - The company has optimized its operational efficiency, achieving quarterly revenue of 8.6 billion RMB (approximately 1.2 billion USD) in FY24Q3, surpassing pre-"Double Reduction" levels [2][9] Market Space for Educational Services - The non-academic training market is expected to grow significantly, with projections indicating a market size expansion to 951.9 billion RMB by 2025, driven by increasing participation rates and higher spending per customer [2][9] - The study predicts a compound annual growth rate (CAGR) of 13% for the study abroad training market from 2023 to 2025, alongside a 7% CAGR for high school training and a 10% CAGR for graduate exam training during the same period [2][9] Financial Forecast and Valuation - Revenue projections for New Oriental are estimated at 4.3 billion USD, 5.7 billion USD, and 7.1 billion USD for FY2024, FY2025, and FY2026, respectively, with GAAP net profits expected to reach 382 million USD, 614 million USD, and 827 million USD in the same years [3][9] - The report assigns a target market capitalization of 165.2 billion HKD and a target price of 99.84 HKD for FY2025, based on a comprehensive valuation approach [4][9]

Investment Rating - The report maintains a "Buy" rating for New Oriental with a target price of $111.2 [1][2] Core Views - The company has shown strong revenue growth, with FY24Q3 revenue increasing by 60.1% year-over-year to $1.207 billion, surpassing previous guidance [1] - New Oriental is successfully expanding its new business segments, with a projected 30% increase in teaching area by the end of the fiscal year [1][2] - The company is expected to see a revenue increase of approximately 28% to 31% in FY24Q4, with deferred revenue growing by 30.8% [2] Financial Performance Summary - FY24Q3 operating net profit reached $113 million, up 70.6% year-over-year, while Non-GAAP operating profit was $141 million, also up 60.3% [1] - The gross margin for FY24Q3 was 46.9%, a decrease of 4.4 percentage points year-over-year, influenced by various factors including losses from equity investments [2] - The company reported a deferred revenue balance of $1.52 billion, aligning with revenue growth expectations for Q4 [2] Business Growth and Expansion - As of FY24Q2, the number of schools and learning centers increased to 911, with a net addition of 68 centers [1] - The overseas exam preparation business grew by 52.6% year-over-year, while the study abroad consulting business increased by 25.7% [1] - Non-academic tutoring business saw a 72.7% revenue growth in Q3, with enrollment in non-subject tutoring reaching 355,000, a 62.8% increase [1] Market Position and Future Outlook - The report expresses optimism about the long-term prospects of the education industry, particularly after the "double reduction" policy, which has reduced the supply of quality educational services [2] - New Oriental is positioned as one of the fastest and most successful companies in adapting to changes in the education sector, with strong cash reserves totaling $4.76 billion [2]

Investment Rating - The report maintains a "Buy" rating for New Oriental-S (09901.HK) [1] Core Insights - The company reported FY24Q3 revenue of $1.21 billion, a year-over-year increase of 60.1%, exceeding previous guidance [11] - All business lines showed growth, with significant expansion in the number of outlets and teaching spaces [3] - The company expects FY24Q4 revenue to be between $1.10 billion and $1.13 billion, representing a year-over-year growth of 28% to 31% [11] Revenue Growth - FY24Q3 revenue breakdown includes: - Overseas exam preparation revenue up 52.6% - Overseas consulting revenue up 25.7% - Domestic exam preparation revenue up 53.2% - New educational business revenue up 72.7% [11] - Deferred revenue as of February 29, 2024, increased by 30.8% to $1.52 billion [11] Outlet Expansion and Profit Growth - As of February 29, 2024, the total number of schools and learning centers reached 911, an increase of 199 year-over-year [3] - FY24Q3 operating profit grew by 70.6% to $110 million, with Non-GAAP operating profit up 60.3% to $140 million [3][19] - Non-GAAP operating profit margin remained stable at 11.7% [19] New Business Growth - New educational business revenue grew by 73% in FY24Q3, with non-subject tutoring enrollment up 62.8% to 355,000 [22] - The company benefits from clearer policies regarding non-subject training, allowing for greater market opportunities [22] Financial Forecast and Investment Rating - Revenue forecasts for FY2024-2026 have been revised upward to $4.3 billion, $5.5 billion, and $6.5 billion respectively [31] - Non-GAAP net profit estimates for FY2024-2026 are maintained at $410 million, $520 million, and $630 million respectively [31] - Current stock price corresponds to P/E ratios of 35, 28, and 23 for FY2024, FY2025, and FY2026 respectively [31]

Investment Rating - The report maintains a "Buy" rating for the company with a target price set at 68.65 HKD [5][10]. Core Insights - The company reported a significant revenue increase of 60% year-on-year for FY24Q3, reaching 1.2 billion USD, with operating profit (OP) growing by 71% to 110 million USD [1]. - Non-GAAP operating profit for FY24Q3 was 140 million USD, also reflecting a 60% increase [1]. - The company has shown strong growth in its overseas exam preparation and consulting services, with increases of approximately 52.6% and 25.7% respectively [1]. - The total number of schools and learning centers increased to 911 as of February 29, 2024, up from 843 in November 2023 [1]. Summary by Sections Financial Performance - For FY24Q1-3, the company achieved a revenue of 3.2 billion USD, a 49% increase year-on-year, with operating profit reaching 340 million USD, up 139% [1]. - The net profit attributable to shareholders for FY24Q1-3 was 280 million USD, marking a 91% increase [1]. - The company recorded a Non-GAAP operating profit margin (OPM) of 13.7% for FY24Q1-3, compared to 9.4% in the previous year [1]. Business Expansion - The company is expanding its teaching space in cities with growth potential and higher facility utilization rates, which is expected to enhance profitability [2]. - The new business segment in education saw a revenue increase of 72.7%, with non-academic tutoring reaching 355,000 enrollments in nearly 60 cities [1][2]. - The company is committed to improving teaching quality and enhancing student experiences, which has led to increased customer retention [1]. Future Outlook - The company anticipates a net revenue growth of 34%-37% in FY2024Q4, indicating continued positive momentum [3]. - Adjustments to earnings forecasts have been made, with projected revenues for FY24, FY25, and FY26 set at 4.5 billion USD, 5.7 billion USD, and 7.3 billion USD respectively [3]. - Non-GAAP net profits for FY24, FY25, and FY26 are expected to be 420 million USD, 610 million USD, and 880 million USD respectively [3].

Investment Rating - The investment rating for the company is "Buy" [1] Core Insights - The report indicates that revenue exceeded expectations primarily due to accelerated expansion of educational outlets and the launch of the "With Huizhong" initiative, while profit margins fell short of expectations mainly due to increased selection subsidies. However, the profitability of the core education business continues to improve [4] - The company has adjusted its FY2024-2026 Non-GAAP net profit estimates to $415 million (-20%), $591 million (-15%), and $783 million (-8%) respectively, with EPS projected at $0.19, $0.29, and $0.40 [4] - For FY24Q3, the company achieved revenue of $1.207 billion (+60%), surpassing consensus expectations of $1.098 billion, with a gross profit of $563 million (+46%) and a gross margin of 46.59%, down 4 percentage points year-on-year [4] Revenue Summary - The revenue growth was driven by significant increases in overseas examination preparation and consulting services, which grew by 52.6% and 25.7% year-on-year respectively. Domestic exam preparation business grew by 53.2%, and new business revenue increased by 72.7% [4] - The number of educational outlets increased from 843 to 911, with a year-on-year growth rate rising from 19% to 28% [4] - The "With Huizhong" platform has significantly boosted GMV, contributing to revenue growth [4] Profitability Summary - The gross profit for the quarter was $563 million (+46%), with a gross margin of 46.59% (-4 percentage points). Marketing and management expense ratios were 13% and 24% respectively, showing a decrease of 0.25 and 4.73 percentage points year-on-year [4] - The overall profit margin was impacted by a slight loss from the "Dongfang Zhenxuan" initiative, increased discount subsidies, and higher tax expenses from the acquisition of "Dongfang Zhenxuan" [4] - Excluding the impact of "Dongfang Zhenxuan," the profitability of the core education business improved by 3 percentage points year-on-year, indicating effective cost management despite rapid expansion [4]