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New Oriental Education & Technology Group Inc ADR EDU Stock Quote

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New Oriental's First-Quarter Results Beat Expectations; Fair Value Estimate Raised to USD 32.50

Analyst Note

| Cheng Wang, CFA, FRM, CAIA |

We've raised our fair value estimate for New Oriental Education to USD 32.50/HKD 25.50 from USD 31.50/HKD 24.50 after fiscal 2023 first-quarter results beat company guidance and our expectation. The core businesses recorded steady growth year on year while new business initiatives gained decent momentum sequentially. In addition, we estimate online education subsidiary Koolearn delivered exponential revenue growth and impressive profitability in the quarter. We think New Oriental is on track to meet our USD 2.6 billion full-year revenue forecast despite the foreign-exchange headwind. After fine-tuning our model, we've raised our fiscal 2023 net income forecast to USD 121 million from USD 52 million. This translates to a 4.6% net income margin, up from 2% in our original forecast. After a 28.3% share price gain overnight, the shares closed at about 17% below our fair value estimate. We consider the shares to be fairly valued, given our suggested risk buffer.

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Company Profile EDU

Business Description

New Oriental is a leading private education provider in China. K-9 academic after-school tutoring used to account for 50%-60% of New Oriental’s revenue before the regulatory crackdown in 2021. After terminating its K-9 academic after-school tutoring business, New Oriental has identified a few new initiatives such as nonacademic tutoring, intelligent learning systems and devices, and study tours and research camps, and so on.

No. 6 Hai Dian Zhong Street, Haidian District
Beijing, 100080, China, People's Republic of
T +86 1060908000
Industry Education & Training Services
Most Recent Earnings Aug 31, 2022
Fiscal Year End May 31, 2023
Employees 46,653

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