Jinwu Financial News | SWHY's research report states that New Oriental (09901) is expected to have a revenue of $0.993 billion in the second quarter of fiscal year 2025 (2QFY25, 2024.9-2024.11), a year-on-year increase of 14.2%. Non-GAAP net income attributable to the parent company is expected to be $0.053 billion, a slight year-on-year increase of 4.7%. The significant revenue growth is driven by the continuous growth of the Education business. Profit growth is hindered by a year-on-year decline in e-commerce sales.

The bank indicates that it expects a year-on-year growth of 28% in education business revenue to $0.872 billion, driven by the rapid growth of quality education and training. It estimates that the annual training volume for non-subject quality education and training will reach approximately 3.82 million, which still has three times the room for growth compared to around 12 million training sessions in the pre-"double reduction" period. The bank believes that the high growth in non-subject quality education business results from the optimization of the supply-demand landscape in the education and training market after the "double reduction" policy. It is expected that the company will provide quality classes at the primary school level through a product matrix and launch subscription services for study devices at the junior high school level to meet the needs of students at different stages, thereby extending the customer lifecycle. The bank expects that new business revenue from quality education and training and study devices will be $0.303 billion, a year-on-year increase of 70%. The bank estimates that the Non-GAAP operating profit for the education business will be $0.031 billion, with a Non-GAAP operating profit margin of 3.5%, a year-on-year expansion of about 0.5 percentage points.

The bank continues to indicate that due to the separation of the 'With Hui' live broadcast room, it expects a revenue contribution of approximately $0.121 billion from EAST BUY in 2Q, a significant year-on-year decline of 35.8%. The Non-GAAP operating profit is $0.01 billion, with a Non-GAAP operating profit margin of 3.5%, a significant year-on-year contraction of approximately 9.2 percentage points. The net income attributable to EAST BUY is approximately $0.004 billion. The proportion of revenue and profit is 12% and 7.9%, respectively, with both revenue and profit contributions having decreased significantly by 9.5 and 23.6 percentage points compared to last year. The bank expects that the proportion of revenue and profit from e-commerce business in FY25 will be 11.5% and 4.6%, a significant decrease of 9.5 and 10.1 percentage points compared to FY24.

Given the relative weakness of the e-commerce business, the bank has reduced its revenue contribution and adjusted the company's revenue forecast for FY25 to FY27 to $5.27 billion / $6.71 billion / $8.61 billion (previous forecasts were $5.44 billion / $6.92 billion / $8.84 billion). Due to the continuous expansion of the profit margin in the education business, the bank maintains the adjusted net income attributable to the parent company at $0.493 billion / $0.672 billion / $0.891 billion for the years 2025 / 2026 / 2027. As the proportion of the company's e-commerce business continues to decrease, the disturbance to revenue and profit will be greatly reduced. The bank expects the market to focus on the education main business. Currently, the education business continues to grow significantly, and with the acceleration of capacity expansion, it will drive the company's valuation recovery. The bank maintains the SOTP valuation with a target price of $109.5 (or HKD 85.6, with each ADR equal to 10 shares of common stock; the Hong Kong stock is traded as common stock), corresponding to a 74.7% increase from the current price (with a 76.2% increase for Hong Kong stocks), maintaining a Buy rating.