Core Insights - The company reported better-than-expected performance for FY26Q1, with a revenue growth of 6.1% year-on-year, surpassing the previous guidance of 2%-5% [1] - The company anticipates a revenue growth of 9%-12% for FY26Q2 and maintains an annual growth target of 5%-10% [1] - The out-of-country business showed unexpected improvement, with a 1% growth in exam preparation and a 2% growth in study abroad consulting, indicating a recovery from previous pessimistic forecasts [1] Revenue and Growth Indicators - Deferred revenue increased by 10% year-on-year, and the renewal rate improved across all segments, suggesting robust growth [1] - The K12 business is expected to accelerate significantly in FY26Q2, with K9 growth around 20% and high school showing double-digit growth, validating the strategy of prioritizing product quality [2] - The active paid users in the OMO business reached 452,000, indicating potential for user retention and scalability [2] Shareholder Returns and Financial Health - The company announced a $190 million dividend and a $300 million buyback plan, totaling approximately $490 million, which represents over 130% of FY25 net profit [3] - Cash and cash equivalents stood at $5.03 billion as of FY26Q1, allowing for shareholder returns while maintaining strategic investments [3] - The combination of regular dividends and ongoing buybacks reflects a mature approach to shareholder returns, with a commitment to high payout ratios [3] Profitability and Cost Management - The Non-GAAP operating profit margin improved to 22.0%, driven by better resource utilization, operational leverage, and effective cost control [4] - The company expects further margin expansion in FY26Q2, with a focus on improving profitability in the core business [4] - The shift in the out-of-country business from being a drag on profits to reducing losses is a positive development [4] Earnings Forecast - The company maintains its Non-GAAP net profit forecasts for FY2026-2028 at $580 million, $630 million, and $690 million, respectively [4] - The current stock price corresponds to a PE ratio of 17, 15, and 14 for FY2026-2028, indicating a favorable valuation [4]

Investment Rating - The report maintains a "Buy" rating for New Oriental-S (09901.HK) [1] Core Insights - The company reported better-than-expected revenue growth in FY26Q1, with a year-on-year increase of 6.1%, surpassing previous guidance of 2%-5% [7] - The overseas business showed significant improvement, with a 25% revenue growth in the low-age study abroad segment, indicating a shift in demand rather than a decline [7] - K12 business is expected to accelerate, with anticipated growth rates of approximately 20% for K9 and double-digit growth for high school, validating the strategy of prioritizing product quality [7] - The company announced a shareholder return plan totaling approximately $490 million, which is over 130% of FY25 net profit, indicating strong profit visibility and cash flow [7] - Non-GAAP operating profit margin improved to 22.0%, with expectations for further expansion in Q2, driven by better resource utilization and cost control [7] Financial Projections - Total revenue is projected to grow from $4.9 billion in FY2025 to $6.3 billion in FY2028, with year-on-year growth rates of 13.6%, 9.96%, 10.00%, and 7.02% respectively [1][9] - Net profit attributable to shareholders is expected to increase from $371.72 million in FY2025 to $591.14 million in FY2028, with growth rates of 20.07%, 32.32%, 10.40%, and 8.87% respectively [1][9] - The current stock price corresponds to a PE ratio of 17, 15, and 14 times for FY2026, FY2027, and FY2028 respectively based on Non-GAAP metrics [1][9]