Core Viewpoint - The company reported a mixed performance in FY2025Q4, with non-selective business growth exceeding management guidance, but overall profitability impacted by a one-time goodwill impairment in the kindergarten segment [1][2][3] Group 1: Financial Performance - FY2025Q4 revenue reached $1.243 billion, a 9.4% increase year-over-year, with non-selective revenue at $1.089 billion, growing 18.7%, surpassing the previous guidance of 10-13% [1] - Operating profit showed a loss of $8.67 million, primarily due to a one-time goodwill impairment of $60.3 million in the kindergarten business; excluding this, the non-GAAP operating profit margin for non-selective business was 6.5%, up 4.1 percentage points [1] - Net profit attributable to shareholders was $7.1 million, down 73.7%; however, excluding one-time factors, the non-GAAP net profit was $98.08 million, reflecting a 59.4% increase [1] Group 2: Business Segment Growth - K9 education new business grew by 32.5%, maintaining rapid growth; high school training revenue increased by 24%, supported by resilient supply-demand dynamics [2] - Study abroad training and consulting revenues grew by 14.6% and 8.2%, respectively, although consumer spending pressure and tightening study abroad environments in some countries remain challenges [2] - E-commerce revenue declined approximately 10% year-over-year due to the divestment of "With Huixing," though the quarter-on-quarter decline has improved [2] Group 3: Operational Efficiency - The company achieved a gross margin of 54.2%, up 1.9 percentage points; management expense ratio remained stable at 33.0%, while sales expense ratio decreased by 1.3 percentage points to 17.0%, indicating ongoing operational efficiency improvements [2] Group 4: Future Outlook - For FY2026Q1, the company expects revenue growth of 2-5%, which is below previous expectations due to a slowdown in study abroad business growth and other educational training segments [3] - A three-year shareholder return plan was announced, aiming to return 50% of the previous fiscal year's net profit to shareholders through dividends or buybacks [3] - Adjusted net profit forecasts for FY2026-2027 have been lowered to $430 million and $480 million, respectively, reflecting a downward adjustment of 24% and 29% [3]

Investment Rating - The report downgrades the investment rating to "Accumulate" with an expected price increase of 5% to 15% over the next 6-12 months [5]. Core Views - The company reported Q4 FY2025 revenue of $1.243 billion, a year-over-year increase of 9.4%, with the education segment revenue reaching $1.089 billion, up 18.7%, exceeding guidance [2]. - The company announced a three-year shareholder return plan, committing to return at least 50% of the previous fiscal year's net profit to shareholders through dividends and buybacks, estimating a total return of no less than $186 million for FY2025 [4]. - The education business is expected to experience a slowdown in revenue growth due to economic conditions and increased competition, with Q1 FY2026 international exam preparation and study abroad consulting revenues projected to decline by 5% year-over-year [3]. Summary by Sections Performance Review - FY2025 Q4 revenue was $1.243 billion, with a 9.4% year-over-year increase. The education business revenue was $1.089 billion, up 18.7%, surpassing guidance. Non-GAAP operating profit margin improved to 6.5%, a 4.1 percentage point increase year-over-year [2]. Operational Analysis - The education business revenue growth is expected to slow in FY2026 due to economic and international factors. Q1 FY2026 international business is projected to decline by 5%, while K9 business is expected to grow by 15-16% [3]. - Profit pressure is anticipated from the slowdown in education revenue, but cost reduction and efficiency improvements are expected to positively impact profit margins by 1-1.5 percentage points [3]. Profit Forecast, Valuation, and Rating - The company is projected to achieve total revenues of $5.276 billion, $5.719 billion, and $6.228 billion for FY2026, FY2027, and FY2028, respectively, with a three-year compound growth rate of 8% [5]. - Non-GAAP net profit estimates are $560 million, $598 million, and $641 million for FY2026, FY2027, and FY2028, respectively, with adjusted PE ratios of 14, 13, and 12 times [5].

Investment Rating - The investment rating for the company is "Outperform the Market" [5] Core Views - The company's education business showed strong growth in FY2025Q4, with non-selective business revenue increasing by 18.7%, surpassing management's guidance [1][8] - For FY2026Q1, the company expects revenue growth of 2-5%, which is below previous expectations due to a slowdown in study abroad business growth and other educational services [3][18] - The company has announced a three-year shareholder return plan, intending to return 50% of the previous fiscal year's net profit to shareholders through dividends or buybacks [3][19] Summary by Sections Financial Performance - In FY2025Q4, the company reported total revenue of $1.243 billion, a year-on-year increase of 9.4%, with non-selective revenue at $1.089 billion, up 18.7% [1][8] - The operating profit was a loss of $8.67 million, primarily due to a one-time goodwill impairment of $60.3 million in the kindergarten business [1][8] - The deferred revenue at the end of the period was $1.954 billion, reflecting a year-on-year increase of 9.8% [1][8] Business Segments - K9 education new business grew by 32.5%, while high school training revenue increased by 24% [2][9] - The study abroad training and consulting revenue grew by 14.6% and 8.2%, respectively, but faced challenges due to declining consumer spending and tightening study abroad environments in some countries [2][9] - E-commerce revenue decreased by approximately 10% due to the divestment of a specific business, although the decline has improved on a quarter-on-quarter basis [2][9] Operational Efficiency - The company's gross margin for FY2025Q4 was 54.2%, an increase of 1.9 percentage points year-on-year [2][16] - The management expense ratio remained stable at 33.0%, while the sales expense ratio decreased by 1.3 percentage points to 17.0% [2][16] Future Outlook - The company anticipates a cautious revenue outlook for FY2026, with expected growth of 5-10% for the fiscal year [3][18] - Adjusted net profit forecasts for 2026-2027 have been lowered to $430 million and $483 million, respectively, reflecting a downward adjustment of 24% and 29% [3][19] - The company plans to continue improving operational efficiency and profitability while enhancing investor preference through the new shareholder return plan [3][19]

Investment Rating - The investment rating for the company is "Outperform the Market" [5] Core Views - The company's education business showed strong growth in FY2025Q4, with non-selective business revenue increasing by 18.7%, surpassing management's guidance [1][8] - For FY2026Q1, the company expects a cautious revenue growth of 2-5%, primarily due to a slowdown in study abroad business growth and other educational training services [3][18] - The company has announced a three-year shareholder return plan, intending to return 50% of the previous fiscal year's net profit to shareholders through dividends or buybacks [3][19] Summary by Sections Financial Performance - In FY2025Q4, the company reported total revenue of $1.243 billion, a year-on-year increase of 9.4%, with non-selective revenue at $1.089 billion, up 18.7% [1][8] - The operating profit was a loss of $8.67 million, primarily due to a one-time goodwill impairment of $60.3 million in the kindergarten business [1][8] - The deferred revenue at the end of the period was $1.954 billion, reflecting a year-on-year increase of 9.8% [1][8] Business Segments - K9 education new business grew by 32.5%, while high school training revenue increased by 24% [2][9] - The study abroad training and consulting revenue grew by 14.6% and 8.2%, respectively, although consumer spending power is declining [2][9] - The e-commerce revenue decreased by approximately 10% due to the divestment of a specific business, but the decline has improved on a quarter-on-quarter basis [2][9] Operational Efficiency - The gross margin for FY2025Q4 was 54.2%, an increase of 1.9 percentage points year-on-year [2][16] - The management expense ratio remained stable at 33.0%, while the sales expense ratio decreased by 1.3 percentage points to 17.0% [2][16] Future Outlook - The company anticipates a revenue growth of 5-10% for FY2026, with a focus on improving operational efficiency and profitability [3][19] - Adjusted net profit forecasts for 2026-2027 have been lowered to $430 million and $483 million, respectively, reflecting a downward adjustment of 24% and 29% [3][19] - The company plans to increase its network of schools and learning centers by 10-15% in FY2026 [2][9]

Transaction Overview - The company announced a change in the acquisition plan for a minority stake in Shanghai Yulun Education Technology Development Co., Ltd, with its wholly-owned subsidiary, Shanghai New Nanyang Education Technology Co., Ltd, set to acquire 20% of Yulun Education for RMB 13.36 million [1][2] - The acquisition will be executed in two phases, with the first phase involving the purchase of 29% of Yulun Education for RMB 49.3 million, and the second phase involving a maximum payment of RMB 34 million based on actual net profit calculations [4][5] Company Background - Yulun Education was established on June 7, 2004, with a registered capital of RMB 1 million, and operates in the field of educational technology, providing services such as study abroad consulting and international curriculum support [2][3] - The company has a well-structured internal governance and has appointed professional management to ensure that the recent passing of its previous owner does not significantly impact its operations [2] Financial Performance - As of the end of 2024, Yulun Education reported total assets of approximately RMB 60.29 million and total liabilities of about RMB 31.42 million, resulting in a net asset value of approximately RMB 28.87 million [4] - The company's revenue for the first quarter of 2025 was approximately RMB 4.61 million, with a net profit of around RMB 1.02 million [4] Impact of the Acquisition - The acquisition is expected to enhance the company's management efficiency and increase its market share in the international and basic education sectors [6] - Following the acquisition, the company's net assets are projected to increase by approximately RMB 25 million, and its ownership of Yulun Education will rise from 80% to 100%, making Yulun a wholly-owned subsidiary [6] Authorization and Approval - The acquisition plan was approved by the company's board of directors, which has authorized the management team to handle all related matters, including signing agreements and processing registration changes [6]

Group 1: Market Overview - The EdTech sector has experienced a significant decline in investment, with a year-on-year drop of 35% this quarter, indicating a cooling market overall [1][2] - Despite the overall decrease, investor interest remains strong in specific areas such as AI-driven solutions, international student mobility, and scalable models in emerging markets [1][2] Group 2: Investment Trends - The average investment amount has increased to $7.8 million, as investors concentrate funds on fewer, stronger projects, with three companies receiving nearly half of the total funding [2][5] - The trend of "fewer deals but larger investments" suggests a shift towards quality over quantity in the EdTech investment landscape, indicating a more mature and consolidated market [5][6] Group 3: Regional Insights - North America leads in EdTech VC funding, followed by Europe and Central Asia, while regions like the Middle East and Latin America receive comparatively less investment [10][11] - China and the U.S. remain the largest investment regions, with cumulative investments of $29.7 billion and $28.2 billion respectively from 2010 to Q1 2025 [4][5] Group 4: M&A Activity - M&A activity in the EdTech sector has decreased by 32% year-on-year, reflecting the tightening investment environment, yet workforce learning institutions remain active, accounting for nearly one-third of all transactions [12][13] - Notable acquisitions include TLG Learning and Clover Learning, highlighting the ongoing demand for employee skill enhancement and retraining [12][13] Group 5: Focus Areas - Key focus areas for investment and M&A include scalable technology-driven solutions, AI infrastructure for educational institutions, and innovations in STEM education content [12][13]

Investment Rating - The report maintains a "Buy" rating for New Oriental Education Technology (9901 HK) with a target price adjusted to HKD 46.00, indicating a potential upside of 24.7% from the current price of HKD 36.90 [1][4][10]. Core Insights - The report highlights that the study company is experiencing pressure in its study abroad business while maintaining stable performance in K12 education. The revenue for non-selective business is expected to grow by 22% year-on-year, with an adjusted operating profit margin declining by approximately 2.5 percentage points due to slower growth in study abroad-related services and investments in cultural tourism [2][8]. - The company plans to allocate more resources to youth study abroad services, and with cost reduction and efficiency improvement measures taking effect, there is still potential for long-term profit margin improvement [2][8]. Financial Forecast Adjustments - Revenue projections for FY25E have been slightly adjusted to USD 4,902 million, a decrease of 0.9% from previous estimates. For FY26E and FY27E, revenue is projected at USD 5,670 million and USD 6,420 million, reflecting decreases of 2.2% and 3.9% respectively [3][13]. - The adjusted operating profit for FY25E is forecasted at USD 503 million, with an operating profit margin of 10.3%. For FY26E and FY27E, the adjusted operating profit is expected to be USD 656 million and USD 771 million, with margins of 11.6% and 12.0% respectively [3][13]. - The adjusted net profit for FY25E is projected at USD 474 million, with a net profit margin of 9.7%. For FY26E and FY27E, net profit is expected to be USD 519 million and USD 620 million, with margins of 9.2% and 9.7% respectively [3][13]. Revenue Breakdown - The report provides a detailed breakdown of revenue sources, indicating that the study abroad consulting and preparation services are expected to generate USD 1,182 million in FY25E, while high school education is projected at USD 1,295 million. New business segments are expected to contribute USD 1,268 million [3][8][13].