Goldman Sachs published a Research Report indicating that after a relatively disappointing stock price performance last year, there is an optimistic outlook for the two major leaders in China's Education Industry, NEW ORIENTAL-S (09901.HK)(EDU.US) and TAL Education (TAL.US), describing their valuations as more reasonable, with strong growth prospects remaining.

Goldman Sachs stated that the two leading educational enterprises represent a market that remains very fragmented under a stable regulatory environment, with resilient domestic Consumer demand; benefiting from the maturity of learning centers and operational leverage, the profit margin expansion trajectory is clear, and for TAL Education, the revenue recognition from deferred revenue of content solutions increases, driving the two companies' earnings per share forecast compound annual growth rate from 2024 to 2027 to reach 31% and 58% respectively. Additionally, the forecast PE for New Oriental and TAL Education's core education services in 2025 is 18 times, which may represent a mispricing relative to the growth prospects of China's internet covered by the bank.

Goldman Sachs mentioned that key themes to watch in the education industry this year include K-12 learning services, K-12 learning content solutions, and overseas study. The bank expects that in the third quarter of FY2025, New Oriental's core revenue growth measured in RMB will accelerate to a year-on-year growth of 28%, but due to unfavorable Forex factors, the growth measured in USD will slow down to a year-on-year growth of 25%.

Goldman Sachs lowered the Target Price for New Oriental's H Shares from HKD 68 to HKD 65; the Target Price for US shares from USD 87 to USD 83, maintaining a 'Buy' rating. At the same time, it lowered the Target Price for TAL Education's US shares to USD 15, giving it a 'Buy' rating.