Company Overview - New Oriental Education & Technology Group operates a wide range of private education services in China, including K-12 after-school tutoring, test preparation, language training, and online education programs [5][8] - The company reported a market capitalization of $9.17 billion and a revenue of $4.99 billion for the trailing twelve months (TTM) [4] - Net income for the TTM was $367 million, indicating a slight year-over-year decline of 2% [4][10] Financial Performance - For the fiscal first quarter, revenue increased by 6.1% year-over-year to $1.52 billion, while operating income rose to $310.8 million [9] - Non-GAAP operating income grew by 11.3% to $335.5 million, supported by improved cost discipline and a 100-basis-point expansion in non-GAAP operating margin [9] - The company generated nearly $192 million in operating cash flow for the quarter and maintained over $1.28 billion in cash on its balance sheet [9] Investment Activity - First Beijing Investment Ltd increased its stake in New Oriental by 2.23 million shares, bringing its total position to 9.35 million shares valued at $496.02 million as of September 30 [2][6] - New Oriental now represents 19.15% of First Beijing Investment's U.S. equity portfolio, indicating a significant commitment to the education sector [2][6] Market Context - As of the latest data, New Oriental shares were priced at $55.03, reflecting a 13% decline over the past year, contrasting with the S&P 500's increase of approximately 16% [3] - The investor's decision to increase its stake in New Oriental suggests a belief that the market is undervaluing the company's resilience despite the challenges faced by the education sector in recent years [6][10]

Core Viewpoint - The recent management changes at Dongfang Zhenxuan indicate a shift in leadership, with Yu Minhong taking over as the legal representative and manager, following the departure of Sun Dongxu due to personal reasons [2][3]. Group 1: Company Changes - Dongfang Zhenxuan (Zhuhai) Tourism Culture Co., Ltd. has undergone a business change, with Sun Dongxu resigning as the legal representative and executive director, and Yu Minhong assuming these roles [2]. - The company was established in October 2023 with a registered capital of 10 million RMB, focusing on tourism development project planning, ticketing agency services, and passenger ticketing agency [2]. - Sun Dongxu has also resigned from several other positions in related companies, indicating a broader shift in his involvement with the organization [2]. Group 2: Leadership Transition - Yu Minhong confirmed Sun Dongxu's departure from Dongfang Zhenxuan, stating that Sun made the decision after careful consideration and for personal reasons [3]. - Yu expressed hope that Sun would return to a management position in the future, highlighting the collaborative founding relationship they share [3].

Investment Rating - The report maintains a "Buy" rating for the overseas education sector, particularly highlighting New Oriental as a key player [10]. Core Insights - The overseas education sector is experiencing improved operational efficiency and accelerated profit margin expansion, with New Oriental expected to report a revenue of $1.165 billion for Q2 FY26, representing a year-on-year growth of 12.2% [5][10]. - The report anticipates a significant increase in non-GAAP net profit for New Oriental, projected at $63 million, which is a 77.8% increase year-on-year, with a non-GAAP net profit margin of 5.4%, expanding by 2 percentage points [5][10]. Summary by Sections 1. Overseas Education - **Market Review**: The education index rose by 2.8% in the week of December 19-25, outperforming the Hang Seng Index by 1.8 percentage points, with a year-to-date increase of 13.1% [4]. - **Company Update**: New Oriental's revenue is expected to reach $1.165 billion, with the education business (including cultural tourism) contributing $957 million, a growth of 11% year-on-year [5][10]. - **Study Abroad Business**: The revenue from study abroad exam training and consulting is projected to decline by 3% to $242 million, reflecting a slowdown in growth due to high base effects from the previous year [2][5]. - **New Business Growth**: New business segments, including K9 competency training and learning machine services, are expected to grow by 21% to $364 million, driven by differentiated offerings for primary and secondary education [3][6]. - **Operating Profit Margin Improvement**: Despite a slowdown in high-margin study abroad business, the increase in competency business margins is expected to offset this. The non-GAAP operating profit margin is projected to expand by approximately 2 percentage points to 4.7% [6][10]. 2. Overseas Pharmaceuticals - **Market Review**: The Hang Seng Healthcare Index saw a slight increase of 0.02%, underperforming the Hang Seng Index by 1.24 percentage points [12]. - **Key Events**: Notable transactions include Sanofi's $2.2 billion acquisition of vaccine company Dynavax, which has a marketed hepatitis B vaccine and a promising shingles vaccine candidate [14]. - **Investment Recommendations**: The report suggests focusing on innovative drug companies with active business development opportunities and clinical progress in key pipelines, including companies like BeiGene and Innovent Biologics [15]. 3. Overseas Social Services - **Ctrip's Q3 Performance**: Ctrip reported a 16% year-on-year revenue increase to $18.4 billion, with strong performance across various business segments, particularly in international OTA platforms [17]. - **Tongcheng Travel's Q3 Performance**: Tongcheng Travel's revenue grew by 10% to $5.5 billion, with a notable increase in accommodation and core OTA business revenues [18]. - **Key Focus**: The report highlights potential growth in the outbound travel sector and the importance of hotel management services as additional growth drivers [19].

Investment Rating - The report maintains a positive outlook on the overseas education sector, particularly on New Oriental, with an investment rating of "Buy" [12]. Core Insights - New Oriental is expected to achieve revenue of $1.165 billion in 2QFY26, representing a year-on-year growth of 12.2%. The education business (including cultural tourism) is projected to generate $957 million, up 11% year-on-year, while other businesses (mainly Dongfang Zhenxuan) are expected to reach $208 million, growing 18% year-on-year. The Non-GAAP net profit attributable to the parent company is anticipated to be $63 million, reflecting a significant year-on-year increase of 77.8% [6][12]. - The report highlights a slowdown in the growth of the study abroad business, with expected revenue of $242 million in 2QFY26, down 3% year-on-year. This slowdown is attributed to high-end consumption challenges in the one-on-one exam preparation segment. The company is adapting by shifting from one-on-one to one-to-many class formats to lower per-class costs and expanding services to younger students [2][6]. - New business segments, including K9 competency training and learning machine services, are projected to grow by 21% year-on-year to $364 million in 2QFY26. The company aims to enhance operational efficiency and profit margins through improved utilization of existing teaching resources [3][7]. Summary by Sections Market Review - The education index increased by 2.8% during the week, outperforming the Hang Seng Index by 1.8 percentage points. Year-to-date, the education index has risen by 13.1%, lagging behind the Hang Seng Index by 9.18 percentage points [5]. Company Updates - New Oriental's revenue forecast for 2QFY26 is $1.165 billion, with a Non-GAAP net profit of $63 million and a Non-GAAP net profit margin of 5.4%, expanding by 2 percentage points year-on-year [6][12]. - The report notes a significant decline in the growth rate of the study abroad business, with a projected revenue decrease of 3% year-on-year [2][6]. - The new business segment is expected to maintain strong growth, with a projected revenue increase of 21% year-on-year [3][7]. Investment Analysis - The report recommends focusing on Hong Kong vocational education companies, particularly China Oriental Education, due to a rebound in vocational training demand and the company's proactive operational adjustments. It also suggests monitoring higher education companies as profitability is expected to improve [12].

Core Viewpoint - The company is expected to see a revenue increase of 12.2% year-on-year in Q2 FY26, driven by strong performance in its education and new business segments, despite challenges in its study abroad services [1][2]. Group 1: Financial Performance - Q2 FY26 revenue is projected at $1.165 billion, with education business (including cultural tourism) contributing $957 million, a growth of 11% year-on-year [1]. - Non-GAAP net profit is expected to reach $63 million, reflecting a significant year-on-year increase of 77.8%, with a Non-GAAP net profit margin of 5.4%, expanding by 2 percentage points [1]. - New business revenue (K9 competency training and learning machine) is anticipated to grow by 21% year-on-year to $364 million, indicating sustained high growth in non-academic sectors [2]. Group 2: Business Segments - The study abroad training and consulting business is expected to generate $242 million in revenue, a decline of 3% year-on-year, with a slowdown in growth rate compared to the previous year [1]. - The company is adapting its high-end one-on-one study abroad training model to a one-to-many format to lower costs and is expanding its youth study abroad training services to enhance growth resilience [1]. - The number of teaching locations is projected to increase to 1,368, a 20% year-on-year growth, although the growth rate has slowed by 3.7 percentage points compared to Q1 FY26 [2]. Group 3: Profitability and Efficiency - Despite the slowdown in high-margin study abroad business, the profitability of competency training is expected to offset this decline, leading to an improvement in overall operating profit margins [2]. - Non-GAAP operating profit margin is projected to expand by approximately 2 percentage points to 4.7% in Q2 FY26, indicating a trend of accelerating margin expansion [2]. - The education business's Non-GAAP operating profit margin is expected to reach 4.1%, with an increase of 0.9 percentage points year-on-year, while other businesses (mainly Dongfang Zhenxuan) are expected to achieve a Non-GAAP operating profit margin of 8%, up by 8.5 percentage points [2]. Group 4: Future Outlook - The company maintains revenue forecasts for FY26-FY28 at $5.38 billion, $5.98 billion, and $6.73 billion, respectively, with expectations of a recovery in profit margins as the study abroad business stabilizes [3]. - The target price is set at $69.9, corresponding to HKD 54.9 per share, with an upgrade to a buy rating reflecting confidence in the company's growth trajectory [3].

Core Insights - The appointment of Sun Jin as the new CEO of Dongfang Zhenxuan marks a significant leadership change as the company faces performance challenges and seeks sustainable growth strategies [2][3][4] - Dongfang Zhenxuan's financial performance has declined, with total revenue for the fiscal year 2025 at 4.4 billion RMB, a decrease of 32.7% from the previous year, and GMV dropping by 39.2% to 8.7 billion RMB [2][10] - The company is shifting its strategic focus towards self-operated products and offline retail expansion to reduce reliance on top streamers and enhance long-term growth potential [6][8][9] Leadership Transition - Sun Jin, a long-time employee of New Oriental, has been appointed as the CEO, succeeding Sun Dongxu, who was removed following internal management issues [3][4] - The leadership change comes after the departure of key figures who contributed to the company's previous success, raising expectations for stability and strategic execution under Sun Jin's guidance [3][5] Financial Performance - Dongfang Zhenxuan's fiscal year 2025 report indicates a significant drop in both revenue and GMV, highlighting the urgent need for a turnaround strategy [2][10] - The company has launched 732 self-operated products, increasing the proportion of self-operated products in total GMV to 43.8%, indicating a shift in business strategy [9][11] Strategic Focus - The company is exploring two main growth avenues: expanding into offline retail and enhancing its self-operated product offerings [6][8] - Dongfang Zhenxuan is actively recruiting for a flagship store manager with extensive retail experience, signaling a commitment to establishing a physical retail presence [7] Product Development - The strategic pivot towards self-operated products aims to build brand trust and reduce dependency on individual streamers, with a focus on quality control and customer service [9][11] - The company has seen growth in its independent app, with GMV from the app rising to 15.7% of total sales and paid membership numbers exceeding 260,000 [10][11]

Core Viewpoint - New Oriental Public Welfare Foundation was awarded the "2025 Education Public Welfare Model" at the 2025 International Online Education Conference for its long-term commitment and significant achievements in the field of educational philanthropy [1] Group 1: Foundation's Mission and Achievements - Since its establishment in 2015, the foundation has focused on promoting balanced development in Chinese education through technological innovation, with a particular emphasis on rural education and youth development [1] - In 2025, the foundation invested over 20 million yuan in various targeted and sustainable public welfare projects aimed at improving the educational ecosystem in rural areas [1] Group 2: Support for Student Growth - The foundation collaborated with the Qingshi Yuanshan Public Welfare Foundation to conduct the "Yuanshan Bole Course" project, offering 16 live-streamed courses to over 660,000 teachers and students across 736 schools in 31 provinces [2] - The New Oriental-Blueprint Marine Research Public Welfare Project organized 48 students from western regions to participate in practical research activities in coastal cities, broadening their horizons and stimulating their potential [2] - The foundation continued its support for the "Chinese College Students Self-Reliance Star" initiative, encouraging youth to strive for excellence and take on responsibilities [2] Group 3: Teacher Development Initiatives - The foundation, in partnership with the Central Committee of the Democratic League, has conducted the "Candlelight Action - New Oriental Teacher Social Responsibility" program for 18 consecutive years, selecting 51 volunteer teachers in 2025 to engage with over 3,000 rural teachers across eight provinces [4] - To enhance the psychological health education capabilities of grassroots teachers, the foundation launched the "Robin Support Plan" in collaboration with other organizations, recognizing outstanding teachers in youth mental health education [4] - The foundation also implemented the "Candlelight Action - New Oriental Children's Mental Health Care Project" in Bijie City, Guizhou, focusing on a three-pronged empowerment model involving teachers, parents, and students [4] Group 4: Response to Social Needs - The foundation activated emergency mechanisms to provide financial and material support to disaster-affected areas, fulfilling its corporate social responsibility [6] - It has been involved in various initiatives, including book donations, learning equipment support, and public welfare classes, to assist under-resourced educational areas [6] - The foundation is exploring cross-sectoral integration in philanthropy, supporting projects in rural youth sports education, ecological protection, and healthcare, thereby expanding the "education + public welfare" model [6] Group 5: Future Commitment - The recognition as the "2025 Education Public Welfare Model" reflects the foundation's dedication to educational philanthropy and its commitment to social contribution [6] - The foundation aims to continue its mission by leveraging resources in education and collaborating with more partners to promote educational equity and social progress [6]

Core Insights - New Oriental Bilingual has won two prestigious awards for its excellence in international education and innovative practices integrating AI technology, highlighting the influence of Chinese brands in education [1][5]. Group 1: Achievements and Recognition - New Oriental Bilingual was recognized as a "High-Quality Development Case" in online education at the 16th Xinhua Net Education Forum for its contributions to international Chinese education [2]. - The company received the title of "2025 International Education Renowned Brand" at the 2025 International Online Education Conference, reflecting its deep commitment to the "Technology + Education" model [5]. Group 2: Educational Approach and Innovations - The company has developed a "language + culture + application" curriculum system based on 32 years of educational research, serving over 160,000 users across 138 countries [2]. - New Oriental Bilingual launched the Sure Chinese app, which features a tiered curriculum system catering to different user needs, and includes a core function of a "personal Chinese speaking AI teacher" [2][3]. Group 3: Future Directions and Philosophy - The CEO emphasized the importance of AI in lowering the barriers to quality Chinese education and enhancing cultural dissemination, aiming to make Chinese language learning more accessible globally [3][6]. - The company aims to foster curiosity, critical thinking, and language skills in children, viewing technology as a tool to ignite potential [6]. Group 4: Commitment to Cultural Exchange - Since its establishment in 2017, New Oriental Bilingual has evolved from foreign teacher services to a focus on global Chinese learning, offering courses for children, adults, and teacher training [7]. - The company is dedicated to being a cultural disseminator, using high-quality courses to tell Chinese stories in an accessible manner, enhancing understanding and resonance with global audiences [7][9].

Core Viewpoint - The report from Shenwan Hongyuan maintains revenue projections for New Oriental-S (09901) for FY26-FY28 at $5.38 billion, $5.98 billion, and $6.73 billion, respectively, with expectations of profit margin pressure easing as the overseas study business stabilizes [1] Revenue Projections - Shenwan Hongyuan forecasts New Oriental's 2QFY26 revenue to be $1.165 billion, representing a year-on-year growth of 12.2% [2] - The education business (including cultural tourism) is expected to generate $957 million, up 11% year-on-year, while other businesses (mainly Dongfang Zhenxuan) are projected to earn $208 million, reflecting an 18% increase [2] Overseas Study Business - The overseas examination training and consulting business is anticipated to generate $242 million in 2QFY26, a decline of 3% year-on-year, with a slowdown of 33.3 percentage points compared to the same period last year [3] - The company is adjusting its high-end one-on-one training model to a one-to-many format to lower class prices and is expanding its youth overseas examination training services to enhance growth resilience [3] New Business Growth - New business revenue (K9 competency training + learning machine business) is expected to grow by 21% year-on-year to $364 million in 2QFY26, driven by high growth in non-subject competency services [4] - The number of teaching centers is projected to increase to 1,368, a 20% year-on-year growth, with a slight slowdown of 3.7 percentage points compared to 1QFY26 [4] Operating Profit Margin Improvement - Despite the slowdown in high-margin overseas study business, the increase in competency business margins is expected to offset this [5] - Shenwan Hongyuan anticipates a year-on-year expansion of approximately 2 percentage points in Non-GAAP operating profit margin to 4.7% for 2QFY26, with the education business margin at 4.1%, up 0.9 percentage points year-on-year [5]

Core Viewpoint - The report from Shenwan Hongyuan maintains revenue projections for New Oriental-S (09901) for FY26-FY28 at $5.38 billion, $5.98 billion, and $6.73 billion, respectively, with expectations of profit margin pressure easing as the overseas study business stabilizes [1] Group 1: Financial Performance - Shenwan Hongyuan expects New Oriental's revenue for 2QFY26 to reach $1.165 billion, representing a year-on-year growth of 12.2% [2] - The education business (including cultural tourism) is projected to generate $957 million in revenue, up 11% year-on-year, while other businesses (mainly Dongfang Zhenxuan) are expected to achieve $208 million, growing 18% year-on-year [2] - The estimated Non-GAAP net profit attributable to the parent company for 2QFY26 is $63 million, reflecting a significant year-on-year increase of 77.8% [2] Group 2: Overseas Study Business - The overseas examination training and consulting business is expected to generate $242 million in revenue for 2QFY26, a decline of 3% year-on-year, with a slowdown in growth of 33.3 percentage points compared to the same period last year [3] - The high-end one-on-one overseas examination training business faces challenges due to its premium pricing, prompting the company to adjust its model to one-to-many classes to lower costs and expand its service offerings [3] - The growth rate of the overseas study training and consulting business is anticipated to bottom out in 2QFY26 [3] Group 3: New Business Growth - New business revenue, including K9 competency training and learning machine services, is projected to grow by 21% year-on-year to $364 million in 2QFY26, driven by strong growth in non-academic competency services [4] - The company plans to enhance its product matrix by offering competency classes in elementary school and subscription services for learning machines in middle school to meet differentiated training needs [4] - The number of teaching sites is expected to increase to 1,368, a year-on-year growth of 20%, although the growth rate has slowed by 3.7 percentage points compared to 1QFY26 [4] Group 4: Operating Profit Margin - Despite the slowdown in high-margin overseas study business, the increase in competency business margins is expected to offset this impact [5] - The company is implementing measures such as workforce optimization and cost control, leading to an anticipated expansion of Non-GAAP operating profit margin by approximately 2 percentage points to 4.7% in 2QFY26 [5] - The Non-GAAP operating profit margin for the education business is projected to be 4.1%, reflecting a year-on-year increase of 0.9 percentage points, while the margin for other businesses (mainly Dongfang Zhenxuan) is expected to be 8%, up 8.5 percentage points year-on-year [5]