The Zhitong Finance App learned that BOC International released a research report stating that it maintained the New Oriental-S (09901) “buy” rating and raised revenue by 8%/10% and profit expectations for the 2024/25 fiscal year by 6%/8%. Considering the steady growth of the learning machine business and better-than-expected profit margins, the target price was raised from HK$70 to HK$75.

According to the report, the company's revenue for the 2nd quarter of FY24 increased 36% year-on-year to US$870 million, exceeding the bank/institution's unanimous expectations of 6%/7%, driven by the growth of teaching services and the entire Oriental Selection business line. The adjusted operating profit was 51 million US dollars, and the operating profit margin was 5.9%; the adjusted net profit was 50 million US dollars, compared with the bank's forecast of 57 million US dollars and the agency's unanimous expectation of 45 million US dollars, corresponding to a net interest rate of 5.8%, compared with 2.8% in the same period last year, thanks to increased operating leverage due to revenue growth.

Looking ahead, New Oriental's management revenue guidance for the next quarter (up 42-45% year over year) exceeded previous market expectations by about 15%, and raised the 2024 revenue guide, from 30-35% to 35-40%. Traditional education services and innovative businesses continued to be driven by demand and supply concentration trends. Oriental Selection accelerated growth in the second half of the year, driven by the new “Walk with Hui” account and the company's strategic layout of multiple accounts, multiple channels and proprietary products. In terms of operating profit, Oriental Choice's profit margin may be on a downward trend during the expansion process, but the profit margin of the education service-related business continues to be optimized. It is expected that the operating profit margin for the 3rd quarter of FY2024 will increase by 1 percentage point to 12.7% year on year, and 4 percentage points to 13% year on year for the full year of fiscal year 2024.