Incident: FY24Q2, the company achieved revenue of 870 million US dollars, a year-on-year increase of 36.3%, achieved net profit to mother of 0.3 billion US dollars, a year-on-year increase of 4007.4%, and achieved adjusted net profit of 50 million US dollars, an increase of 182.6%.

Comment:

Revenue exceeded guidelines, and new education businesses grew rapidly. Despite the traditional low season, revenue growth was still high. FY24Q2 achieved revenue of US$870 million, an increase of 36.3%, exceeding the performance guidelines of US$79-80 million. Among them, overseas examination training and overseas consulting services increased by 46.5% and 31.7% respectively; domestic examination and training services for adults and college students increased by 42.7% year-on-year. Benefiting from strong demand for non-subject tutoring and learning machines, new education-related businesses increased 68.3% year-on-year. FY24Q3's revenue guidance was US$107-1.09 billion, up 42.0~ 45.0% year-on-year.

The expansion of offline outlets is accelerating. As of the end of November 23, the number of the company's schools and learning centers nationwide was 843, a net increase of 50 compared with the end of August 23, and a net increase of 135 compared to the end of November '22.

There was a high increase in the number of non-subject tutoring registrations. Non-subject tutoring was carried out in nearly 60 cities, and the number of FY24Q2 applicants was 786,000, an increase of 64.8%.

Profitability has picked up significantly. FY24Q2's gross profit margin was 51.4%, up 4.1 pct year on year; non-GAAP operating margin reached 5.9%, up 3.3 pct year on year.

Investment advice: New Oriental's performance has exceeded expectations, high growth in non-subject mentoring, and accelerated expansion of offline outlets. It can be seen that demand is strong, and the investment logic of education and training is once again verifying the investment logic of education and training, that is, clear supply and increase concentration. While focusing on New Oriental, it is also recommended to focus on university education and code education, where A-shares are on the same track.

Risk factors: the risk of enrollment growth and tuition fee increases falling short of expectations; risk of increased refund rates; policy risks in the education industry.