Investment Rating - Maintains a **Buy** rating with a revised target price of **$95.0** (previously $102.5) [2][3] Core Views - New Oriental's core education business continues to show strong momentum, with FY24 revenue growing 44% YoY to $4.314 billion and non-GAAP net income up 47% YoY to $381.1 million [2] - The company's overseas test preparation and study consulting revenues grew 17.7% and 17.3% YoY, respectively, contributing approximately 11% and 15% of total revenue in 4QFY24 [2] - Domestic test preparation revenue increased 16.4% YoY, accounting for about 4% of total revenue in 4QFY24 [2] - New education initiatives grew 50.3% YoY, contributing approximately 20% of total revenue in 4QFY24 [2] - East Buy's revenue is expected to decline 20% YoY in FY25E to $741 million due to business adjustments [2] Business Performance and Outlook - For 1QFY25E, management guides total revenue growth of 31-34% YoY, reaching $1.255-1.284 billion, with OPM improving by 200 bps YoY [2] - The company expects overseas test preparation, overseas consulting, new education, and high school tutoring revenues to grow 25%, 15%, 50%, and 30% YoY, respectively, in FY25E [2] - Non-GAAP operating margin declined 5.9 percentage points YoY to 3.2% in 4QFY24, primarily due to capacity expansion and increased investments in live-streaming e-commerce [2] - The total number of schools and learning centers increased 37% YoY to 1,025 by the end of 4QFY24 [2] - Management expects capacity to grow 20-25% YoY in FY25E, with most new openings in cities with better unit economics [2] Financial Projections - FY25E revenue is projected at $5.267 billion, with non-GAAP net income of $571.7 million [3] - FY26E revenue is expected to reach $6.258 billion, with non-GAAP net income of $791.4 million [3] - Non-GAAP EPS for FY25E and FY26E is forecasted at $3.45 and $4.78, respectively [3] - Gross margin is expected to improve to 53.6% in FY25E and 54.8% in FY26E [6] - Operating margin is projected to increase to 11.1% in FY25E and 13.3% in FY26E [6] Valuation - The SOTP valuation method is used, with a 10% holdco discount, resulting in a target price of $95.0 per ADS [7] - Education and consulting business is valued at $89.9 (95% of total valuation), based on 30x FY25E PE [7] - East Buy is valued at $1.7 (2% of total valuation), based on 7x FY25E PE [7] - Travel and other businesses are valued at $3.3 (4% of total valuation), based on 15x FY25E PE [7] Industry Comparison - New Oriental's FY25E PE of 24.6x is higher than the education industry average of 22.4x, reflecting its strong leadership in China's education services market [7][9] - The company's FY25E PS of 2.2x is in line with the education industry average [9]

Investment Rating - The report maintains a BUY rating for New Oriental with a target price of US$95.00, down from the previous target of US$102.50, indicating a potential upside of 37.2% from the current price of US$69.25 [2][3]. Core Insights - New Oriental's core educational business has shown strong momentum, with a 32% year-over-year increase in net revenue for 4QFY24, reaching US$1,137 million, aligning with estimates [2]. - Non-GAAP net income for 4QFY24 declined by 41% year-over-year to US$36.9 million, primarily due to accelerated capacity expansion and increased investment in live streaming e-commerce [2]. - For FY24, total revenue and non-GAAP net income grew by 44% and 47% year-over-year, reaching US$4,314 million and US$381 million, respectively [2]. - Management expects total revenue for 1QFY25E to grow by 31-34% year-over-year, projecting a range of US$1,255-1,284 million [2]. Financial Performance Summary - FY23A revenue was US$2,998 million, increasing to US$4,314 million in FY24A, with projections of US$5,267 million for FY25E and US$6,258 million for FY26E [3][11]. - Adjusted net profit rose from US$258.9 million in FY23A to US$381.1 million in FY24A, with forecasts of US$571.7 million for FY25E and US$791.4 million for FY26E [3][11]. - The adjusted EPS is projected to increase from US$2.30 in FY24A to US$3.45 in FY25E and US$4.78 in FY26E [3][11]. Business Segments - The educational business has shown steady recovery, with overseas test prep and study consulting revenues growing by 17.7% and 17.3% year-over-year, respectively, in 4QFY24 [2]. - New educational initiatives reported a revenue increase of 50.3% year-over-year in 4QFY24, contributing approximately 20% to total revenue [2]. - East Buy is undergoing business adjustments, with revenue expected to decline by 20% year-over-year to US$741 million in FY25E due to management changes [2]. Valuation Methodology - The report employs a sum-of-the-parts (SOTP) valuation, estimating the educational and consulting business at US$89.9 per share based on a 30x FY25E PE, reflecting New Oriental's strong market position [8]. - East Buy is valued at US$1.7 per share based on a 7x FY25E PE, while the tourism segment is valued at US$3.3 per share based on a 15x FY25E PE [8].

Financial Data and Key Metrics Changes - The company achieved a solid topline growth of 32.1% for the fiscal quarter, with operating margin and non-GAAP operating margin reaching 0.9% and 3.2% respectively [8][9] - Operating income decreased by 78.1% year-over-year to $10.5 million, while non-GAAP income from operations fell by 53.8% to $36.3 million [18] - Net income attributable to New Oriental was $27 million, a 6.9% decrease year-over-year, with basic and diluted net income per ADS at $0.16 [18][19] - Cash and cash equivalents, term deposits, and short-term investments totaled approximately $4.9 billion [15] Business Line Data and Key Metrics Changes - The overseas test-prep business recorded a revenue increase of 18% in dollar terms, or 23% in RMB terms year-over-year [10] - The overseas study consulting business saw a revenue increase of about 17% in dollar terms, or 23% in RMB terms year-over-year [10] - The adults and university students' business recorded a revenue increase of 16% in dollar terms, or 21% in RMB terms year-over-year [10] - New educational business initiatives reported a revenue increase of 50% in dollar terms, or 57% in RMB terms year-over-year [12] Market Data and Key Metrics Changes - Deferred revenue at the end of the fourth quarter was $1,780.1 million, an increase of 33.1% compared to the previous year [20] - The company plans to increase capacity by around 20% to 25% for fiscal year 2025, focusing on cities with better topline and bottom line performance [22] Company Strategy and Development Direction - The company is pivoting to expand its multi-pronged presence and will leverage East Buy for knowledge sharing and product dissemination [7] - A strategic focus on enhancing the OMO (Online-Merge-Offline) system is underway, with a total investment of $30.5 million in the teaching platform [14] - The company aims to integrate new technologies such as AI and ChatGPT into educational offerings to improve growth and efficiency [23] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving margin expansion for the educational business in the first quarter of 2025, excluding East Buy [21] - The company anticipates strong demand for its educational services and expects to achieve revenue growth of 31% to 34% in the first quarter of fiscal year 2025 [22] - Management noted that the regulatory environment is expected to stabilize, allowing for more predictable operations moving forward [55] Other Important Information - The company completed the acquisition of East Buy's online education business for RMB1.5 billion, which will now be recorded under educational services [16] - A share repurchase program was approved, allowing for the repurchase of up to $400 million of the company's ADS or common shares [15] Q&A Session Summary Question: Growth strategy and room for growth in existing locations - Management plans to increase capacity by 20% to 25% in existing cities, focusing on areas with better performance [27] Question: Margin decline analysis - The margin decline was attributed to accelerated learning center expansion, new tourism business investments, and additional incentives for management and staff [30] Question: Margin expansion expectations - Management expects margin expansion in Q1 and throughout the year, driven by operating leverage and strong market demand [36] Question: Enrollment growth versus capacity expansion - The difference in growth rates is partly due to timing, with expectations for revenue growth to cover incremental costs [39] Question: Revenue outlook for different segments - Revenue growth expectations include 20% to 25% for overseas test-prep, 15% for consulting, and 45% to 50% for new business initiatives [44] Question: Competitive landscape and summer enrollment growth - Competition has intensified, but management believes they will capture more market share due to strong demand and less competition compared to previous years [47] Question: Shareholder return and potential for increased buyback - Management is open to discussing further capital allocation to shareholders after completing the current buyback program [49] Question: Revenue contribution from tourism business - Expected revenue for the tourism business in fiscal year 2025 is around RMB1.2 billion, with anticipated losses in the first year of operation [52]

Core Viewpoint - New Oriental Education & Technology Group Inc. reported strong revenue growth for the fourth fiscal quarter and fiscal year ended May 31, 2024, despite a significant decline in operating income and net income due to increased operating costs and expenses. Financial Highlights - Total net revenues for the fourth fiscal quarter increased by 32.1% year over year to US$1,136.7 million [2][8] - Operating income decreased by 78.1% year over year to US$10.5 million [2][11] - Net income attributable to New Oriental decreased by 6.9% year over year to US$27.0 million [2][12] - For the fiscal year 2024, net revenues reached US$4,313.6 million, a 43.9% increase year over year [16][36] - Operating income for the fiscal year was US$350.4 million, an 84.4% increase year over year [16][36] Operating Highlights - The total number of schools and learning centers increased to 1,025 as of May 31, 2024, up from 911 as of February 29, 2024 [4] - The overseas test preparation and overseas study consulting businesses grew by approximately 17.7% and 17.3% year over year, respectively [5] - New educational business initiatives recorded a revenue growth of 50.3% year over year [5] Cost and Expenses - Operating costs and expenses for the fourth quarter were US$1,126.2 million, a 38.6% increase year over year [9][10] - Cost of revenues increased by 38.5% year over year to US$542.4 million [10] - Selling and marketing expenses rose by 40.9% year over year to US$208.2 million [10] Cash Flow and Balance Sheet - Net operating cash inflow for the fourth fiscal quarter was approximately US$376.8 million [14] - As of May 31, 2024, cash and cash equivalents totaled US$1,389.4 million [15] - Deferred revenue increased by 33.1% year over year to US$1,780.1 million [15] Recent Developments - The company completed the acquisition of East Buy's online education business for RMB1.5 billion [6] - A share repurchase program was extended to May 31, 2025, with approximately 7.3 million ADSs repurchased for about US$296.1 million as of July 30, 2024 [7] Outlook - New Oriental expects total net revenues for the first quarter of fiscal year 2025 to be in the range of US$1,254.7 million to US$1,283.5 million, representing a year-over-year increase of 31% to 34% [18]

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]

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 maintains a "Buy" rating for New Oriental [1][2][3] Core Views - New Oriental's revenue for Q3 FY24 reached USD 1.207 billion, a year-on-year increase of 60.1%, driven primarily by the growth in non-academic after-school tutoring and overseas test preparation services [1][3] - The company is experiencing strong enrollment growth in non-academic AST, with a projected increase in revenue to USD 241 million for Q3 FY24, representing a 72.7% year-on-year growth [1][3] - The expansion of learning centers is accelerating, with the number of centers increasing to 911, a 27.9% year-on-year growth, and the company aims for a 30% annual growth rate in learning centers [1][3] - The overseas test preparation and consulting business is recovering rapidly, contributing an estimated USD 254 million in revenue for Q3 FY24, a 40.1% year-on-year increase [1][3] - The report projects significant growth potential for non-academic AST, estimating over 2 million enrollments in FY24, with a potential market share of only 6% even at a scale of 12 million enrollments [1][3] Financial Summary - Revenue projections for FY24, FY25, and FY26 are raised to USD 4.213 billion, USD 5.422 billion, and USD 7.044 billion respectively, compared to previous estimates of USD 4 billion, USD 5.22 billion, and USD 6.72 billion [2][3] - Non-GAAP net profit forecasts for FY24, FY25, and FY26 remain at USD 482 million, USD 664 million, and USD 869 million respectively [2][3] - The target price under SOTP valuation is set at USD 110.81, indicating a potential upside of 43.8% from the current price [1][3]

Investment Rating - The report maintains a BUY rating for New Oriental with a target price of US$102.50, revised from the previous target of US$104.50, indicating a potential upside of 33.0% from the current price of US$77.08 [2][3]. Core Insights - New Oriental's total net revenue for 3QFY24 increased by 60.1% year-over-year (YoY) to US$1,207 million, surpassing the consensus estimate of US$1,098 million by 10% [2]. - Non-GAAP net income rose by 9.8% YoY to US$105 million, although it fell short of the consensus estimate of US$132 million due to investments in East Buy and rapid capacity expansion affecting margin growth [2]. - The company expects total revenue for 4QFY24 to grow by 28-31% YoY, projecting revenue between US$1,102 million and US$1,127 million, compared to the consensus estimate of US$1,096 million [2]. Financial Performance Summary - For FY24E, total revenue is forecasted at US$4,293 million, with adjusted net profit expected to reach US$456.1 million [6]. - The revenue growth forecast for FY25E and FY26E has been increased by 8-10%, while earnings forecasts for the same periods have been trimmed by 3-6% due to the impact of capacity expansion on margins [2][6]. - The educational business segment showed strong momentum, with overseas test prep and study consulting revenue growing by 52.6% and 25.7% YoY, respectively, contributing approximately 21% to total revenue [2]. Capacity Expansion and Strategic Initiatives - New Oriental's capacity expansion accelerated, with the number of schools and learning centers increasing by 28% YoY to 911 as of the end of 3QFY24 [2]. - The company has raised its capacity expansion plan for FY24, now expecting a 30% YoY increase, up from the previous estimate of 20% [2]. - Investments in East Buy are aimed at enhancing private label product development and supply chain management, which is expected to drive customer base expansion and user engagement [2]. Valuation Methodology - The report employs a sum-of-the-parts (SOTP) valuation, attributing US$91.6 million to the educational and consulting business, US$6.8 million to East Buy, and US$4.2 million to the tourism business, reflecting their respective growth prospects and market positions [7][8].

New Oriental Education & Technology Group Inc. (NYSE:EDU) Q3 2024 Earnings Conference Call April 24, 2024 8:00 AM ET Company Participants Sisi Zhao - IR Stephen Yang - Executive President and CFO Conference Call Participants Felix Liu - UBS Yiwen Zhang - China Renaissance Lucy Yu - Bank of America Tian Hou - T.H. Capital Timothy Zhao - Goldman Sachs Chongguang - CITIC DS Kim - JPMorgan Operator Good evening and thank you for standing-by for New Oriental's FY 2024 Third Quarter Results Earnings Conference Ca ...