Gaotu(US:GOTU) HTSC·2025-05-16 07:31Investment Rating - The report maintains a "Buy" rating for the company [6][4]. Core Insights - The company reported Q1 2025 revenue of approximately 1.5 billion RMB, a year-on-year increase of about 58%, significantly exceeding the upper guidance of 50.8% [1]. - The operating profit for Q1 2025 was approximately 34.8 million RMB, marking a return to profitability year-on-year [1]. - Non-GAAP net profit reached approximately 140 million RMB, significantly surpassing Bloomberg consensus expectations of 70 million RMB, driven by rapid growth in core business and improved operational efficiency through AI [1]. - The company announced a new share repurchase plan with a total amount of 100 million USD to enhance shareholder returns [1]. Revenue Growth and Business Segments - K12 business accounted for about 85% of total revenue in Q1, with a year-on-year growth rate exceeding 80%, while traditional learning services grew over 35% [2]. - The new quality education business has achieved triple-digit growth in revenue for four consecutive quarters [2]. - The company expects Q2 total revenue to grow year-on-year by 28.5% to 30.5%, with traditional learning services projected to see a slight increase of around 10% due to seasonal effects [2]. Operational Efficiency and Profitability - The company achieved a non-GAAP net profit margin of 9.2% in Q1 2025, indicating a significant improvement in operational efficiency [3]. - Key factors contributing to profitability include increased utilization of offline teaching locations and AI-enabled refined user flow management, leading to improved user conversion and operational efficiency [3]. - For the full year, the company anticipates a significant reduction in losses, projecting a non-GAAP operating loss of approximately 350 million RMB, which is expected to decrease by nearly 70% year-on-year [3]. Financial Projections - The revenue forecasts for 2025 to 2027 are maintained at 5.726 billion RMB, 7.244 billion RMB, and 8.589 billion RMB, respectively [4][11]. - Non-GAAP operating profit forecasts are projected at -350 million RMB for 2025, 58 million RMB for 2026, and 143 million RMB for 2027 [4][11]. - The target price is set at 4.84 USD, based on a price-to-sales ratio of 1.5x for 2025 [4][11].