Performance Overview: As of May 31, '24, the company's FY24Q4 was +32.1% YoY to $1.137 billion, slightly higher than the previous company's performance guideline ($1.102-1.127 billion). Net operating profit of $10.53 million, -78.1% year over year; non-GAAP operating profit of $36.32 million, or -53.8% year over year; profit to mother of $26.97 million, -6.9% year over year. Non-GAAP net profit was $36.93 million, or -40.5% YoY.
The education business continued to grow, and the number of teaching sites expanded at an accelerated pace: by the end of FY24Q4, the number of company schools and learning centers was 1,025, an increase of 114 over the previous quarter (68 in the previous quarter), of which the number of schools was 81. The FY24Q4 overseas exam preparation and overseas consulting business increased 17.7% and 17.3% year over year (in US dollars, same below); the college student and adult exam business increased 16.4% year over year; in terms of new business, overall Q4 revenue increased 50.3% year over year, including 0.875 million registrants for non-subject tutoring services, up 39.1% year over year. The number of active paying users of intelligent learning systems and devices in Q1 reached 0.188 million, an increase of 89.9% over the previous year.
Profit margin declined due to increased investment: FY24Q4's gross profit margin was 52.3%, -2.2 pct; sales/management expense ratio was 18.3%/33.0%, year-on-year +1.1 pct; operating profit margin 0.9%, year-on-year -4.7 pct; non-GAAP operating margin after excluding equity incentive expenses was 3.2%, -5.9% year over year; mainly due to the effects of accelerated expansion of outlets, investment in cultural tourism business/increased employee compensation, etc. Furthermore, the company expects total net revenue for FY25Q1 (June 1, 2024 to August 31, 2024) to be between $1.25 billion and $1.28 billion (excluding Oriental Select's live e-commerce business), an increase of 31% to 34% year over year. The company's deferred revenue balance was $1.78 billion, up 33.1% month-on-month, in line with FY25Q1 revenue growth expectations.
The target price is $90.0/HK$70.4, 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 in the context of improving margins of policy, although the company was still affected by events related to Liehui's publication and experienced short-term fluctuations, the company's core education business continued to grow steadily, and the long-term logic did not change. The company currently has a total of 4.94 billion dollars in cash/short-term investments/term deposits, and its financial strength is strong. Based on DCF, wacc is 12%, a sustainable growth of 2%, and adjusted the company's target price to 90.0 USD/70.4 HK$70.4 to maintain the purchase rating.