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新东方(9901.HK):收入持续超预期 多因素影响利润率

New Oriental (9901.HK): Revenue continues to exceed expectations, multiple factors affect profit margins

第一上海 ·  May 2

Performance Overview: As of February 29, '24, the company's FY24Q3 was +60.1% year-on-year to US$1.27 billion, higher than the previous company's performance guidelines (US$1,071-US$1,094 million). Net operating profit of USD 113 million, +70.6% year over year; non-GAAP operating profit of USD 141 million, +60.3% year over year; profit to mother of USD 87 million, +6.8% year over year. Non-GAAP net profit was $105 million, +9.8% YoY.

The new business continues to grow rapidly, and the expansion of teaching space is accelerating: By the end of FY24Q2, the number of company schools and learning centers was 911, an increase of 68 over the previous month, of which the number of schools was 81. It is expected that by the end of the fiscal year, the company's teaching space will expand by 30%. The FY24Q1 overseas exam preparation business increased 52.6% year on year (in US dollars, same below), and the study abroad consulting business increased 25.7% year on year; the college student and adult examination business increased 53.2% year on year; in terms of new business, overall Q3 revenue increased 72.7% year over year. Among them, there were 355,000 registrants for non-subject tutoring services, an increase of 62.8% year on year. The number of active Q1 paying users of intelligent learning systems and devices reached 88,000, an increase of 74.1% over the previous year.

Profit margins fluctuate in the short term due to multiple factors, and FY24Q4 revenue is expected to increase by about 30% year over year:

FY24Q3's gross profit margin was 46.9%, 4.4pct year on year; sales/management expense ratio 13.4%/23.8%, -0.2pct year on year; operating profit margin 9.4%, +0.6pct year on year; non-GAAP operating profit margin after excluding equity incentive expenses was 11.7%, unchanged year on year; due to the influence of Oriental Selection business drag down and equity method investment losses, etc., its profit margin declined. Furthermore, the company expects total net revenue for FY24Q4 (March 1, 2024 to May 31, 2024) to be between $1.1 billion and $1.13 billion, up between 28% and 31% year over year. The company's deferred revenue balance was $1.52 billion, up 30.8% year over year, in line with Q4 revenue growth expectations.

The target price is $111.2/HK$87.1, maintaining the purchase rating: We maintain our optimism about the long-term development prospects of the industry. After the “double reduction”, the supply of high-quality education services was drastically reduced, and new businesses (non-subject training/smart learning machine business) quickly filled the market gap; leading companies in the study abroad business/university and adult business will gradually increase their market share and achieve rapid growth after the industry clears up; the high school business will maintain a good operating margin and contribute to the company's development; New Oriental is the fastest and most successful company to transform “after double reduction” We have been optimistic about the company's development for a long time. The company currently has a total of US$4.76 billion in cash/short-term investments/term deposits, and its financial strength is strong. We use DCF estimates that wacc is 11%, a sustainable growth of 3%, and adjusted the company's target price to $111.2/HK$87.1 to maintain the purchase rating.

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