Investment Rating - The report maintains a "Buy" rating for the company, with a target price of $5.20, indicating a potential upside of 113.1% from the current price of $2.44 [2][5][9]. Core Insights - The company is expected to achieve a revenue growth rate of 35% in 2025 and 20% in 2026, driven by its strong online education services and improving operational efficiency in offline business [3][4]. - The adjusted operating loss for 2025 is projected to be approximately 510 million RMB, with a turnaround expected in 2026 [3][4]. - The report highlights the importance of enhancing the efficiency of offline operations while leveraging the existing advantages in online education [3][4]. Financial Forecasts - Revenue projections for 2025 are set at 6,132 million RMB, reflecting a 34.7% growth compared to previous estimates [4]. - The gross profit for 2025 is expected to be 4,160 million RMB, with a gross margin of 67.8% [4]. - Adjusted net profit is forecasted to be a loss of 344 million RMB in 2025, improving to a profit of 194 million RMB in 2026 [4][14]. Stock Performance - The stock has shown a year-to-date increase of 11.42%, with a 52-week high of $4.04 and a low of $1.88 [7][9]. - The average trading volume is reported at 0.74 million shares per day [7]. Market Context - The report emphasizes the long-term growth potential of the K12 education sector, supported by demographic changes and the company's established online education capabilities [3][4].

Group 1: New Oriental Education Technology - The company reported a revenue increase of 6% year-on-year to $1.523 billion for Q1 FY2026, exceeding expectations by 1% [1] - Adjusted operating profit was approximately $336 million, with an operating margin of 22%, expanding by 1 percentage point year-on-year [1] - The management maintained the revenue guidance for FY2026, expecting a growth rate of 5-10%, with Q2 revenue growth projected between 9-12% [1][2] - The company announced a cash dividend of $190 million and a share buyback plan of $300 million, which is better than previous expectations [1] Group 2: Howie Group - Howie Group achieved a record high quarterly performance in Q3 2025, with revenue of 7.83 billion yuan, a year-on-year increase of 14.8%, and a net profit of 1.18 billion yuan, up 17.3% [3] - The gross margin for Q3 was 30.3%, reflecting a 0.3 percentage point increase quarter-on-quarter [3] - The growth in the automotive CIS segment is expected to drive revenue growth, with increasing demand in smart driving applications [4] Group 3: Valuation and Market Outlook - The valuation outlook for New Oriental's K12 education business remains positive due to steady revenue growth and potential for margin optimization [2] - The target price for New Oriental has been raised to HKD 55.00, reflecting a potential upside of 19.9% [1][2] - Howie Group's target price is maintained at 180 yuan, corresponding to a 35 times P/E ratio for 2026 [4]