According to the Wise Finance App, Guolian Securities released a research report stating that with the leading companies in the US stock education sector releasing their spring performance this year, the extracurricular training industry has gone through about a year of performance transformation and post-epidemic recovery, officially entering a new operating cycle. Performance in the summer of 2025 will be even more anticipated. Observing the performance of leading companies for the past four consecutive quarters, the revenue growth in each quarter is gradually approaching the company's previous guidance and market expectations, indicating that the form of educational services is gradually being determined, the expansion plans of business lines are becoming clearer, and the impact of non-educational business is diminishing. Although there was a significant disturbance in profit due to temporary expansion investments, the mid-term profit margin is entering a recovery phase due to a stable operating environment.

Sector Overview: A stable operating environment enhances performance certainty.

With the leading companies in the US stock education sector, New Oriental and TAL Education, releasing their spring operating performance on July 31 and August 1 Beijing time respectively, the extracurricular training industry has undergone about a year of performance transformation and post-epidemic recovery, officially entering a new operating cycle. The performance in the summer of 2025 will be even more anticipated.

Observing the performance of leading companies for the past four consecutive quarters, the revenue growth in each quarter is gradually approaching the company's previous guidance and market expectations, indicating that the form of educational services is gradually being determined, the expansion plans of business lines are becoming clearer, and the impact of non-educational business is diminishing. Although there was a significant disturbance in profit due to temporary expansion investments, the mid-term profit margin is entering a recovery phase due to a stable operating environment.

New Oriental: Diversified development, revenue scale has reached a new high.

New Oriental's revenue scale has actually surpassed the peak before the 'double reduction', with a projected $4.31 billion for FY2024, which is equivalent to 101% of FY2021. Assessing the capacity recovery, as of May 31, 2024, New Oriental had approximately 1,025 urban schools and teaching points nationwide, about 61% of that in 2021. In terms of business lines, the study abroad preparation and consulting for high school students have become the company's cash cows, with revenue scale growing compared to 2021; new businesses like East Buy and cultural tourism have started to contribute, with new educational business showing high double-digit growth throughout the year.

TAL Education: Technology-driven, offline supply accelerating repair

The company's revenue scale still has a large gap compared to before the dual reduction, achieving $1.49 billion in FY2024, equivalent to 33% of FY2021; the company is currently growing at a relatively fast pace, with a year-on-year growth rate of about 50% in US dollars and about 57% in RMB. From the perspective of business lines, K9 non-academic training business is the current focus of the company's development; in addition, the company has strategically invested in AI education large models and the consumer electronics field (smart learning machines), with relatively novel product forms; high school, overseas business, and SaaS solutions maintain steady growth.

Bullish on the innovative high-quality growth of leading education in the new school year

Currently, the management and supervision policies of extracurricular training outside of schools have been advancing towards legalization, and the industry is developing in an orderly manner in a normalized regulatory environment; under the grand background of the strategy to strengthen the country through education, new types of education services and new intelligent products continue to emerge and are expected to tap into and create family and social needs for nurturing individuals. Leading companies, by leveraging years of business model exploration experience and accumulated technological product development, are expected to achieve steady and impressive high-quality growth during the new opportunities period. We are bullish on the prospects of the extracurricular training industry and recommend paying attention to the nationally leading New Oriental (EDU.US) with diversified growth, the technology-driven educational services of TAL Education (TAL.US), GOTECH's active customer acquisition growth, and Youdao's AI digital content empowerment (DAO.US).

Risk warning: policy risk in the extracurricular training industry; risks of enterprise strategic transformation landing; lower-than-expected income and profit growth; negative public opinion and damage to brand reputation.