Source: Times Weekly Author: Xu Xiaoqian
After the release of the latest quarterly earnings report, New Oriental's stock price took a big dive.
US stocks closed on April 25, Beijing time, and the New Oriental (EDU.NYSE) stock price fell nearly 14%. After the opening of the Hong Kong stock market on the same day, the intraday stock price of New Oriental-S (9901.HK) once fell by more than 16%. At the beginning of March, its US stock price once reached 98.2 US dollars/share, a record high since the “double decline”. Since then, it has been in a state of constant decline.
According to the news, financial reports show that as of February 29, 2024, the Group's net revenue for the quarter rose 60.1% year on year to US$1,257 million; operating profit rose 70.6% year on year to US$113 million; net profit attributable to shareholders rose 6.8% year on year to US$87 million; and adjusted net profit to mother was US$105 million, lower than the agency's previous forecast of US$120 million.
Overall, New Oriental handed over a rather conflicting financial report. Its revenue and profits have maintained a high growth trend, but costs are still rising at a high level. This poses new challenges to the diversified development of New Oriental.
Regarding New Oriental's stock price fluctuations, the Times Weekly reporter telephoned relevant New Oriental personnel. The other party said it was not convenient to respond.
Oriental selection drags down New Oriental
The increase in revenue and profit did not allow the capital market to pay for it. What is New Oriental's problem?
According to financial reports, net profit attributable to New Oriental shareholders was US$87.2 million, an increase of only 6.8% over the previous year, falling into a situation where revenue growth did not increase profits.
In terms of costs, operating costs for the third quarter were US$640 million, a year-on-year increase of 74.5%, which exceeded revenue. The increase in costs naturally affected New Oriental's gross profit margin in the current quarter. The increase in costs naturally affected New Oriental's gross profit margin in the third quarter. It was 46.6% in the third quarter, compared to 51% in the same period last year.
Expenses also rose sharply. Among them, sales expenses in the third quarter were US$160 million, up 57% year on year, and management expenses were US$288 million, up 33.6% year on year.
The reason for the sharp increase in costs and expenses was due to the increase in costs and expenses related to Oriental's selection of proprietary products and live e-commerce business. Of these, total share-based remuneration expenses were US$27.5 million, an increase of 28.3% over the previous year.
The Oriental Selection, which originally led New Oriental through the darkest hour, one day became a sweet burden for New Oriental, and its own products were caught up in the quality crisis many times. “Making your own products itself is an asset-heavy business. The cycle is long, the investment is huge, and it takes time to return. New Oriental will definitely take a lot of effort to enter the market from an outsider.” An MCN operator told the Times Weekly reporter.
In addition to this, Dongfang Selection and Dong Yuhui still have a strong relationship, which often leaves Dongfang Selection's live streaming business in an uncertain situation. Two months ago, Dong Yuhui's stock price dropped 5% on the same day due to deleting public opinion updates on Weibo.
After the essay storm, Dong Yuhui returned by opening a personal account “Walk with Hui,” but this seemingly peaceful “solo flight operation” stole the limelight of Dongfang's selection of the main character.
According to the celebrity collection data, in the past 30 days, the average number of viewers of Dongfang Selection was 5.6871 million, with an average sales of 7.8064 million; while the average number of viewers with Hui was 4.772 million, with an average sales of 7.255,700 per game. As can be seen, less than half a year after establishment, the two sides are already comparable in strength.
According to New Oriental's expectations, its total revenue for the fourth quarter of fiscal year 2024 will be between US$1,102 billion and US$1,127 million, up 28% to 31% year on year, and the growth rate is also declining sharply.
The New Oriental Needs a New Story
In 2022, New Oriental officially emerged from the pain of the education and training industry. Dong Yuhui's golden sign gradually developed into the top of the live streaming e-commerce industry. At the same time, New Oriental quickly adapted to changes through business sector adjustments. Its business map already covers the three major fields of education services, lifestyle services, and cultural tourism services; it is no longer a single educational institution.
At the beginning of April, Oriental Selection officially launched instant delivery, which had been in the works for a long time. First, it tested the waters in Beijing. A matching Douyin “Oriental Selection Hour Delivery” account was also launched. The cumulative sales volume of the first live broadcast was 50,000 to 75,000 yuan. According to information, Dongfang's hourly delivery business has now established cooperation with 17 front-end warehouses to sell about 50 self-operated products, including many explosives.
“Getting involved in diversified businesses is beneficial to getting rid of the risks posed by leading live e-commerce anchors and can bring room for business growth for the company, but it is difficult to see high returns in the short term. It requires a large amount of investment in the early stages, and this cost pressure should continue for some time.” The operator mentioned above told the Times Weekly reporter.
In terms of e-commerce channel construction, in addition to Taobao and its own platforms, Oriental Selection also joined Pinduoduo in early March. The official store has accumulated 10,000 fans in the past month.
Furthermore, the cultural tourism business is also a racetrack where New Oriental invests heavily.
On February 29, the “New Oriental Cultural Tourism” brand was officially launched at the first New Oriental Cultural Tourism Ecological Industry Development Conference. According to information, New Oriental Cultural Tourism has now set up provincial cultural tourism companies in more than 20 provinces across the country, and has also set up about 30 municipal cultural tourism companies.
It is worth noting that New Oriental's education business brought a surprise. Revenue from the new education business surged 72.7% year on year, including non-subject tutoring services and intelligent learning system equipment.
Among them, non-subject tutoring services were launched in nearly 60 cities this fiscal season, and the number of registrants was 355,000; the number of active paying users of the intelligent learning system reached 188,000 during the fiscal season.
Its traditional education business also showed a good growth trend. The overseas exam preparation and overseas consulting business increased by about 52.6% and 25.7%, respectively, over the same period last year. At the same time, the domestic exam preparation business for adults and college students recorded a year-on-year increase of about 53.2%.
“Whether the stock price performed well or not for a while does not reflect the development of a company. Overall, New Oriental's recent performance has exceeded overall expectations. Coupled with the increase in demand for study abroad, it is also beneficial for New Oriental in the long term.” Internet industry analyst Ding Daoshi told the Times Weekly reporter.