The company released its 2023 annual report
Revenue in '23 was $3,979 million, +4.2% year on year; net profit of 273 million yuan, -25.8% year on year; adjusted net profit of 281 million yuan, +5.4% year on year.
The total number of schools and centers reached 245, and the number of new trainees and new customer registrations in '23 was 153,000, +13.8% over the same period last year.
By brand: New Oriental's revenue was 1,865 billion yuan (accounting for 46.9%, -2.7 pct year on year), -1.4% year on year; Omiqi's revenue was 330 million yuan (8.3%, +0.6 pct year on year), +12.4% year on year; Delicious Academy revenue was 49 million yuan (1.2%, -0.2 pct year on year), -12.8% year on year; Xinhua Computer's revenue was 740 million yuan (18.7%, -0.7 pct year on year), +0.3% year on year; Huaxin Smart's original revenue was 0.33 million yuan (0.8% year on year), year on year -0.2pct), -16.6% YoY; Wantong's revenue was 847 million yuan (21.3%, +2.5pct year over year), +17.8% YoY.
As of the end of 2023, the number of Oriental education schools and centers in China was 245, +1 year on year. Specifically, the number of schools and centers in the Cooking Technology Division was 140, including 76 New Oriental cooking education schools, 1 year on year, 46 Omeki Western Food Education schools, and 18 Delicious Academy, 2 compared to the previous year.
The number of schools and centers in the Information Technology and Internet Technology Division was 59, including 39 for Xinhua Computer Education, +1 compared to the previous year, and 20 for Huaxin Zhiyuan DT Talent Training Base, 1 compared to the previous year.
The number of car service (i.e. Wantong Auto Education) schools and centers was 41, +2 compared to the previous year.
The number of fashion and beauty (i.e. fashion and beauty education in Omandie) schools and centers was 5, +2 compared to the same period.
Number of new trainers/number of customer registrations, and by brand:
New Oriental had 58,400 new students, +13.9%; Omiqi had 14,400 new students, +23.2%; Delicious Academy had 10,000 new enrollment, +9.8%; Xinhua Computer had 27,000 new enrollment, +1.5%; Huaxin Zhiyuan had 2,763 new students, -8.7%; Wantong had 36,800 new students, +18.5%; Omandy had 3,406 new students, +125.7% year over year.
By course classification, the average number of long-term courses was 131,000, +0.4% (including 0.76 million for courses of 1 year to 2 years, +8.9%; 23,600 for courses of at least 2 years and under, -36.9%; 100,000 for three-year courses, +15.8%; and for short-term courses, an average of 16,000 trainings, +29.4% over the same period.
By brand: New Oriental's average number of trainers/customer registrations was 58,500, -2.8%; Omiqi's average number of trainers/customer registrations was 0.48,000, +7.0%; the average number of trainers/customer registrations at Delicious Academy was 859, -11.6%; the average number of trainers/customer registrations of Xinhua Computer was 4.1 million, -2.1%; Huaxin Zhiyuan's average number of trainers/customer registrations was 496, +15.1% year over year; Wantong average number of training/customer registrations 3.9 10,000 visitors, +15.6% year over year; the average number of training/customer registrations in Omandy was 1,955, +128.7% year over year.
The average number of trainees and average number of customer registrations in China Oriental Education in '23 was 147,000, +2.9% over the same period last year.
During the start of a new school, the costs associated with it affect the company's gross profit. The company's gross profit margin in '23 was 48.0%, -1.5pct year on year; the decrease in gross margin was mainly due to a sharp increase in faculty and staff salaries and benefits under revenue costs.
Among them, New Oriental's gross profit margin was 49.9%, -3.9 pct year on year;
Omega's gross profit margin was 48.0%, +13.0pct year over year;
Delicious Academy's gross profit margin was 46.4%, +8.4pct year over year;
The gross profit margin of Xinhua Computer was 49.3%, -3.1 pct year on year;
Huaxin Zhiyuan's gross profit margin was 48.0%, -7.7pct year on year;
Yantong's gross profit margin was 49.8%, +1.1 pct year over year.
Expense side: Sales/ Administrative/ Finance expense rates were 26.1%/13.3%/3.5%, respectively, +1.3/-0.1/-0.6pct compared to the previous year. The change in sales expenses was mainly due to the increase in business activities such as travel and meetings during the year, when the company hired professional consultants to design a new image of “Chef Panda” for New Oriental to show a more dynamic and youthful image to the public, and the company invested more advertising resources for student enrollment; the increase in administrative expenses was mainly due to an increase in business activities such as travel and meetings during the year.
Adjust profit forecasts to maintain “buy” ratings
As a pioneer in providing vocational skills education in China, China Oriental Education has targeted courses to meet unmet needs in the field of vocational skills education, reduce the supply and demand gap between employers and students, focus on three major industries, and have a nationwide campus network.
Based on this annual report, we adjusted FY24-26 profit forecasts and lowered revenue and net profit expectations, mainly due to factors such as a decrease in gross margin in 2023 or continuing to affect FY24-26 performance; we expect FY24-26 revenue to be 4.4 billion yuan, 4.9 billion yuan, and 5.5 billion yuan respectively (the original value of FY24-25 was 47.0 billion yuan and 5.27 billion yuan, respectively), and the net profit from FY24-26 was 3.4, 4.0, and 4.7 billion yuan, respectively (previous values of FY24-25 were 5.1 and 6.1, respectively) RMB 100 million). Net profit after the FY24-FY26 adjustment was RMB 380 million, RMB 460 million, and RMB 550 million respectively; EPS was RMB 0.15, 0.18, and RMB 0.22 per share, respectively; PE was 14, 12, and 10X, respectively.
Risk warning: There are risks such as falling short of expectations in enrollment, loss of core executives, and intense market competition.