We have adjusted New Oriental's profit forecast and valuation based on the disclosed business data for the 1st quarter of FY2025. We believe that the company's short-term overall performance growth will still be affected by the uncertainty of Oriental Selection's business, but the education and cultural tourism business is still steady. Although Oriental Selection's profit contribution is still uncertain, the contribution to New Oriental's overall profit/loss is small. We have given the company a price-earnings ratio of 25 times (12 months profit, up to February 2026), corresponding to a target price of 75 HKD/105 US (EDU US). The current price corresponds to 18/14 times the price-earnings ratio for the 2025/26 fiscal year, corresponding to a 45%/33% profit growth rate, maintaining the purchase rating .

The revenue and profit contribution forecast for Oriental Selection was adjusted, and the revenue contribution to New Oriental FY2025 was reduced to 12%. According to Mama Cicada's data, we adjusted Oriental's revenue forecast for the 2025/26 fiscal year to 0.623 billion/0.71 billion US dollars, reducing the contribution to New Oriental's revenue to 12% (originally 15%). It is expected that as the share of revenue from proprietary products returns to normal, there will be a positive impact on New Oriental's overall gross margin. At the same time, considering that Oriental Selection will continue to invest more in marketing expenses in the future, which may affect New Oriental's overall net profit for the 2026/2027 fiscal year, which is lower than previously anticipated.

New Oriental's education and cultural tourism business remains steady. We still maintain our revenue growth forecast of 31% for FY2025, and the adjusted operating margin was optimized 1 percentage point year over year to 13%, or about 0.58 billion US dollars.

2QFY25 revenue is expected to be 0.87 billion US dollars, up 28% year on year (management guidance 25-28%), study abroad consulting +20% /college students +20% /high school +20% /new business +45%. The operating profit margin for this section is expected to be 2%, down 0.9 percentage points year on year, mainly affected by fixed cost expenses during the off-season of the cultural tourism business. It is expected that the operating margin optimization margin in the second half of fiscal year 2025 will be better than in the first half of fiscal year 2025, achieving the annual operating rate optimization target.