Introduction to this report:
The performance exceeded expectations, supply recovery flexibility in the industry was limited, the leading pattern continued to improve, and the performance of all business lines achieved high growth.
Summary:
Investment advice: The short-term recovery of industry supply is limited, and compliance leaders continue to benefit. The company's FY2024-2026 non-GAAP net profit was raised to US$5.18 (+3%) /6.94 (+1%)/US$8.54 (+1%), respectively, and EPS was $0.23/0.34/0.43, increasing its holdings.
Performance summary: FY2024Q2 achieved revenue of US$870 million/yoy +36.3%, achieved adjusted operating profit of US$51 million/yoy +212.2%, adjusted operating margin of 5.9% /yoy+3.3pct, and adjusted net profit of 50 million yuan/yoy +182.6%.
The performance exceeded expectations, and the education business performed strongly. FY2024Q2's performance exceeded market expectations, mainly driven by new education-related businesses and Oriental's selection of proprietary products and live e-commerce businesses.
Split business: ① Revenue from overseas exam preparation/overseas consulting business increased 46.5%/31.7% year on year, respectively; ② domestic exam preparation business revenue for adults and college students increased 42.7% year on year; ③ New education business revenue increased 68.3% year on year, of which: non-subject tutoring services were carried out in nearly 60 cities, with 786,000 quarterly registrants; 180,000 active paying users of intelligent learning systems and equipment, and continuous improvement in customer retention rates drove performance growth. By the end of the FY24Q2 quarter, the total number of schools and learning centers had an added value of 843, a net increase of 50 compared to the end of FY24Q1. The number of teaching sites is expected to increase 20% year-on-year for the whole year.
Benefit from the supply clearance and optimization of the competitive pattern, and the increase in scale drives the release of operating leverage. FY2024Q2 achieved gross profit of US$447 million, gross profit margin of 51.4% /yoy+4.09pct, achieved adjusted operating profit of US$51 million, and adjusted operating margin of 5.9% /yoy+3.3pct, mainly due to the release of operating leverage due to the increase in revenue scale. Considering the gradual arrival of the peak season for winter vacation education and training, the company continues to benefit from clear supply in the industry and the optimization of the competitive landscape. FY2024Q3 is expected to achieve revenue of US$1,071 billion to US$1,094 million, corresponding to a 42-45% year-on-year increase. As the utilization rate of the campus increases due to the scale effect and further increases in the word-of-mouth retention rate of high-quality brands, it is expected that the profit margin of the education business will be further increased and released, which is worth looking forward to.
Risk warning: policy risk, accelerated supply recovery, anchor regulation risk.