Investment Rating - The report maintains a positive outlook on New Oriental, aligning with the views of CITIC Lyon Research, indicating an upward trend in the company's performance [4]. Core Insights - New Oriental's total revenue for Q2 of FY2026 reached $1.191 billion, representing a year-on-year growth of 14.7%, exceeding both the company's guidance and market expectations [5]. - The management has raised the full-year revenue growth guidance, attributing this to robust growth in K9 business, accelerated growth in high school business, and improved retention rates in elementary business and smart learning hardware [6]. - Continuous cost control measures are expected to support ongoing margin expansion, with the education business margin improving by 3 percentage points year-on-year [7]. - New educational initiatives, such as non-subject training and learning machine subscriptions, are anticipated to drive further growth, with utilization rates showing potential for improvement [8]. Summary by Sections Company Overview - New Oriental, established in 1993, is a leading private education service provider in China, offering services in overseas exam preparation, adult and university student education, and high school tutoring [11]. Financial Performance - For Q2 FY2026, New Oriental's revenue grew by 14.7% year-on-year to $1.191 billion, surpassing guidance by 2% and market consensus by 3% [5]. - The non-GAAP operating margin improved by 4.7 percentage points to 7.5%, exceeding the guidance of a 2.0 percentage point increase [5]. Business Strategy - The company is focusing on efficiency improvements rather than expanding learning centers, which is expected to reduce costs and enhance profitability [7]. - The merger of overseas consulting and exam preparation departments is anticipated to eliminate redundant costs [7]. Market Position - New Oriental's revenue is primarily derived from educational services and exam preparation courses (63.0%), proprietary products and live e-commerce (20.9%), and overseas study consulting services (10.2%) [11].

Core Viewpoint - The education sector is experiencing a rebound, driven by favorable policies and a recovery in performance among various companies [1][3][7]. Group 1: Market Performance - On August 28, several education stocks saw significant gains, with Zhonggong Education reaching a limit up of +10.30%, and Dou Shen Education and *ST Kaiyuan increasing by over 4% [1][2]. - The overall market sentiment is positive, as indicated by the performance of various education companies, suggesting a potential growth cycle in the sector [6][7]. Group 2: Policy Support - The Central Committee and the State Council have issued opinions to enhance the quality of the teaching workforce, emphasizing the integration of digital tools in teacher development by 2035 [1][5]. - The State Council's recent guidelines aim to stimulate service consumption in education, focusing on vocational education and non-academic training, which aligns with the current transformation direction of education companies [4][7]. Group 3: Company Performance - New Oriental reported a net revenue of $1.137 billion for Q4 of FY2024, a year-on-year increase of 32.1%, while TAL Education's Q1 FY2025 net income reached $414 million, up 50.4% year-on-year [7]. - China Oriental Education achieved a revenue of 1.983 billion yuan in the first half of 2024, reflecting a 1.6% year-on-year growth, with adjusted net profit increasing by 57.9% [7]. Group 4: Investment Opportunities - CITIC Securities highlights the continued support for vocational education and non-academic training, suggesting that new fiscal measures may boost demand in these areas [7]. - Zhongtai Securities identifies four main investment opportunities in the education sector, including post-pandemic participation rates, school operations, technology talent in education, and AI in education [8].