The company released FY25Q1 financial report

Revenue for the quarter (2024.6.1-2024.8.31) was 1.44 billion US dollars, an increase of 31%; excluding Dongfang Select's proprietary products and the live e-commerce business, the same increase was 34%;

In addition, overseas exam preparation and overseas consulting revenue increased by 19% and 21%, respectively, and revenue from domestic exam preparation services for adults and college students also increased 30%;

Revenue from the new education business also increased by 50%. Among them, non-subject tutoring was carried out in nearly 60 cities, and the number of quarterly financial reports was about 0.484 million. Intelligent learning systems and devices were also used in about 60 cities, and active paying users this season was about 0.323 million. With rich educational resources, the company will continue to strive to achieve a long-term vision, strive for growth while balancing stability and sustainability, and improve profitability by improving service quality and operational efficiency.

The company's operating profit of $0.29 billion increased 43%; non-GAAP operating profit of $0.3 billion increased 23%; net profit to mother of $0.25 billion increased 48%; and non-GAAP net profit of $0.26 billion increased 40%.

As of FY25Q1, the total number of schools and learning centers was 1,089, an increase of 64 compared with the 1025 up to FY24; compared with 793 up to FY24Q1, an increase of 296. As of August 31, 2024, the total number of schools was 80.

The company is continuously working to improve the OMO system and apply new technology to enhance the user experience with educational courses. At the same time, driven by a focus on “cost-effective” and multi-channel strategies, Dongfang Selection, a subsidiary of the company, expanded its own brand products in just two years and established 488 SKUs in different categories. Across online platforms, live streaming, and through cooperation with schools and other parties under the New Oriental brand, the company strategically expands to offline channels, shares a common vision, and reaches out to a wider range of consumers to pursue sustainable growth.

Furthermore, it is encouraging that the cultural tourism business has increased significantly this fiscal quarter. The company conducts high-quality overseas study tours and domestic study camps for K-12 and university students. In addition, it is also organizing a number of top cultural tourism projects for all age groups (including middle-aged and elderly people) in 30 characteristic provinces in China and internationally. The company believes this new business will provide a meaningful revenue contribution starting this fiscal year.

Education core business OPM also increased by 3.7 PCT

In order to better reflect New Oriental's core education business, the following operating profit data for this season does not include the financial results of Oriental Select's own products and live e-commerce business. In line with expectations for the previous quarter, the company increased the operating profit margin of its core education business year-on-year in the current fiscal quarter.

The company's GAAP operating margin (OPM, excluding Oriental Select's proprietary products and live e-commerce business) for the quarter was 23.7%, an increase of 370 basis points.

Non-GAAP OPM (excluding Oriental Select's proprietary products and live e-commerce business) for the quarter was 24.4%, an increase of 220 basis points.

The company obtained a net operating cash flow of 0.1832 billion US dollars this quarter;

The total amount of the company's cash and cash equivalents, time deposits and short-term investments at the end of the quarter was approximately $4.9 billion.

Maintain profit forecasts and maintain “buy” ratings

We expect FY25-27's revenue to be 5.2, 6.4, and 7.5 billion US dollars, respectively, the net profit after FY25-27 adjustment is 0.56, 0.77, and 1.06 billion US dollars, respectively, and the corresponding PE for FY25-27 is 18X, 13X, and 9X, respectively.

Risk warning: loss of core executives, increased competition, downgraded consumption