Results for the 3rd quarter of FY2024: Revenue of US$1.2 billion, up 60% year over year, compared with our agreed expectations of 44%/47% growth, mainly driven by the growth of new education businesses and Oriental Select's own businesses. The adjusted operating profit was US$140 million, and the operating profit margin was 12%, the same as the previous year; the adjusted net profit of US$105 million was lower than our and Bloomberg's agreed expectations of US$120 million. The net interest rate was 8.7%, compared with 13% in the same period last year, mainly hampered by Oriental Selection Expansion, supply chain construction, and discounts on proprietary products.

Performance highlights: 1) Traditional business: Study abroad examination/consultation revenue increased 53%/26% year over year, with strong demand, contributing 22% in total revenue; income of adults and college students increased 53%, contributing about 3% of revenue. 2) New business: Driven by the peak winter vacation season, the revenue growth rate was 73%, and revenue contributed about 20%, an increase of 3 percentage points over the same period last year. Quarterly enrollment for non-subject training increased 63% year over year to 355,000, accounting for 50% + of new business revenue. 3) The expansion of teaching sites accelerated. As of February 29, the number reached 911, an increase of 199/68 compared to the same period last month (+28%/8%), and management raised the 2024 expansion forecast to 30% + (original 20%). 4) Oriental Selection: After the launch of the broadcast with Hui, GMV increased. Self-operated products continued to expand and increase promotion efforts. The estimated revenue contribution was about 30%, but the adjusted profit margin may drop to a low single digit.

5) We estimate that the gross margin/operating profit margin of the education business increased by 2.8/8 percentage points over the same period last year.

Financial forecasts and estimates: We expect revenue to increase 38% to US$1.18 billion in the fourth quarter (management guidance 28%-31%), and operating profit margin may drop 3 percentage points to 6% year over year, mainly affected by increased investment in Oriental Selection and the low season in the education business and cultural tourism investment. Driven by Oriental Selection and the volume of cultural tourism revenue, revenue for the 2024/25 fiscal year increased by 4%/24%. The stock price closed down 14% after the results were announced, mainly affected by short-term pressure on profit margins. The current price corresponds to 20 times the price-earnings ratio of the education business. We believe that education and training demand and the company's business performance are still steady. Education revenue is expected to increase by 30% in FY2025, and profit margins will continue to be optimized. Due to increased investment in Oriental Selection, the Group's operating profit margin was lowered to 12.8% (previously estimated 14%). Corresponding to the price-earnings ratio of the education business of 25 times, the target price for the next 12 months was lowered to HK$89/$116 (EDU US) for the next 12 months, corresponding to the price-earnings ratio of 33/27 times FY2024/25 and 48% profit growth in FY2025, maintaining purchases.