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].

Investment Rating - The report maintains a "Buy" rating for the overseas education sector, particularly highlighting New Oriental's revenue growth acceleration driven by its strong reputation [4]. Core Insights - The overseas education business has reached a bottom in growth, with New Oriental's revenue for Q1 FY26 at $1.523 billion, a year-on-year increase of 6.1%. The education segment (including cultural tourism) generated $1.366 billion, up 8.5% year-on-year [9][10]. - New Oriental's Non-GAAP operating profit was $336 million, reflecting an 11.3% increase, with an operating margin of 22%, expanding by 1.1 percentage points year-on-year [9][11]. - The report anticipates a recovery in the overseas examination training and consulting business, projecting growth to resume in the remaining quarters of FY26 [10]. Summary by Sections Overseas Education - The overseas education sector is showing signs of recovery, with New Oriental's Q1 FY26 revenue growth driven by adjustments in service offerings and a focus on high-quality education [9][10]. - The company has adapted its one-on-one tutoring model to a group format to lower costs and has expanded its youth examination training services, which has contributed to resilience in growth [10]. - New business segments, including K9 non-academic training and learning devices, have maintained high growth, with Q1 revenue increasing by 15% to $403 million [10]. Financial Performance - Despite a slowdown in high-margin study abroad services, improvements in the profitability of other segments have offset this decline. Sales and administrative expenses grew at a slower rate than revenue, indicating effective cost control [11]. - The report highlights a shareholder return plan, including a cash dividend of $190 million and a stock buyback of up to $300 million [9]. Market Trends - The education index has underperformed compared to the Hang Seng Index, with a year-to-date increase of 19.3%, lagging behind the index by 8.9 percentage points [8]. - The report suggests a positive outlook for the sector, particularly for companies with strong brand recognition and quality offerings, such as New Oriental and others in the Chinese education sector [14].