BOCOM International issued a research report stating that it has raised the target price for New Oriental-S (09901) HK shares by 19.6%, from HKD 46 to HKD 55, and also increased its target price for the company’s US shares, maintaining a “Buy” rating. The firm remains optimistic about the demand and growth prospects of the company’s K-12 tutoring-related businesses, considering the relatively dispersed age coverage, steady revenue growth, and room for margin optimization. In addition, shareholder returns reflect long-term growth certainty and strong cash flow. Overseas study-related businesses have been affected recently but still lead the industry.
New Oriental's fiscal year 2026 Q1 revenue increased by 6% year-on-year to USD 1.523 billion, surpassing the bank’s expectations by 1%. Adjusted operating profit amounted to approximately USD 336 million, with an operating margin of 22%, expanding by one percentage point compared to the same period last year. Adjusted net profit attributable to shareholders was USD 258 million, corresponding to a net margin of 17%. Overseas study-related business performance exceeded expectations, with test preparation/consultation revenues growing by 1%/2% year-on-year respectively, compared to prior expectations of a 5% decline. The university student/adult segment maintained robust growth, with revenue increasing by 14% year-on-year. Revenue from new K-9 businesses grew by 15% year-on-year, and learning machines outperformed non-academic products. The company announced a cash dividend of USD 190 million and a share repurchase plan of RMB 300 million, better than previous expectations.
Management maintained its revenue guidance for fiscal year 2026, expecting annual revenue growth of 5-10%, and projected Q2 revenue growth to be in the range of 9-12%, compared to VA’s prior expectation of 9%. Compared to earlier market concerns about business growth, improvements in K-12 business renewal rates and product quality are expected to drive revenue back into a steady growth range. Ongoing efficiency enhancements will also support achieving stable or slightly improved operating margin targets. Overseas study-related business may remain under pressure but will benefit from the growth in youth-related language training revenue (expected to exceed 25% year-on-year) and the expansion of advisory services for studying in non-English-speaking countries, gradually making revenue impacts more manageable. The bank expects the company’s overall revenue growth rate for fiscal years 2026/2027/2028 to still exceed 10%, with the trend of margin expansion remaining unchanged.
