The Zhitong Finance App learned that Huaan Securities released a research report saying that although Oriental Selection (01797) FY24Q3 opened a new live broadcast room with Hui, considering that FY24Q4 is expected to divest the education business, the company's revenue for FY24-26 is expected to be 62.5/69.7/78 billion yuan, net profit to mother is 62.5/9.8/1,198 billion yuan, and adjusted net profit to mother is 12.11/1,298/1,398 billion yuan, maintaining the “buy” rating. The company announced FY24H1 results. Total revenue of FY24H1 reached 2.8 billion yuan, an increase of 34.4% year on year; realized net profit to mother of RMB 249 million, a decrease of 57.4% year on year; achieved adjusted net profit of 509 million yuan, a decrease of 15.5% year on year.

The main views of Huaan Securities are as follows:

Self-operated products and live e-commerce business: join the Douyin account matrix with Hui and launch the Brand Day event simultaneously with the Douyin account and self-managed app

The total revenue of FY24H1's self-operated products and live streaming e-commerce business was $2.41 billion, of which total revenue for proprietary products was about 1.9 billion yuan; gross profit of proprietary products and live e-commerce was 794 million yuan, with a gross margin of 32.9%.

The company continues to expand its product range. The number of self-operated products is 264, and FY24H1 has achieved GMV of 5.7 billion yuan; at the same time, the company is actively exploring overseas routes. In January 2024, the company announced jobs such as TikTok overseas store operation, which is expected to open up room for long-term growth.

1) Douyin account: The total number of paid orders for third-party products and proprietary products on FY24H1 Douyin is 59.6 million. On January 9, '24, the new account “Walking with Hui” was officially launched. According to Sanyancha Pro data, the GMV of “Walking with Hui” reached 133 million on the day it was launched, and the total GMV reached 889 million in January, ranking first on the Douyin delivery list in January '24, accounting for 45% + of the total GMV of Douyin selected by Dongfang in January '24.

2) Own app: On December 10, '23, the Oriental Select App launched cultural tourism products; on December 17, a membership plan was launched. Paid members can enjoy 88% off on 100 self-operated products, 12 membership vouchers a year, 66 yuan voucher package, etc. According to the company's performance meeting data, the number of paid members of the self-operated app is close to 200,000. The monthly consumption per capita of paid members is about 800 yuan, and the number of registrants is increasing at a rate of 5,000 to 8,000 people per day.

3) Taobao account: On August 29, '23, Dongfang Selection Taobao's debut “Oriental Pan Taobao Club” officially launched, with a total GMV of 175 million; as of February 2, 2024, the number of Dongfang Taobao store fans reached 5.479 million.

University education and institutional customer business: divesting the education business and focusing on the main e-commerce business

FY24H1 university education revenue was 365.7 million yuan, up 23.9% year on year, gross margin was 77.6%; FY24H1 corporate customer revenue was 2 million yuan, down 49.6% year on year, and gross margin was 88.8%.

On November 22, 2023, the company announced that it plans to sell its education business to the controlling shareholder New Oriental for 1.5 billion yuan. The business mainly includes online education for college students and institutional business. The sale was approved at the special shareholders' meeting on January 18, 2024, but it is still in progress and has not yet been completed. After the sale is completed, Dongfang Selection will no longer operate the online education business. It will become a pure self-operated and live e-commerce operator. The parent company will focus on the operation of online and offline integrated education. After the sale of the education business, Dongfang Selection's cash hand will be further enriched, providing a solid financial guarantee for the continued growth of the company's e-commerce business.

The subscription for Oriental Select shares was terminated, and the parent company and chairman promised to increase their shares on the Stock Exchange

On November 24, '23, the company issued an announcement that it plans to allocate shares to the parent company, with a net raise of 1.63 billion yuan. After completion, the parent company's shareholding ratio will increase to 54.91% to 57.08%.

On January 31, '24, New Oriental-S announced the termination of the subscription for Oriental Selected Shares under special authorization. Meanwhile, since New Oriental and Oriental Selection CEO Yu Minhong still have confidence in Oriental Selection's prospects and business potential, they each promised to purchase a total of 700 million yuan worth of Oriental Selection shares on the Stock Exchange at market prices. The share purchase will be carried out gradually over a period of 6 to 12 months from now.

Risk warning

The progress of self-construction of the agricultural product supply chain fell short of expectations; the development of Taobao accounts and self-operated apps fell short of expectations; the popularity of the live broadcast room fell short of expectations; and policy supervision risks.