Items:
On April 20, the company announced unaudited financial results for the third quarter of fiscal 2021: net revenue for the third quarter of fiscal 2021 was HK $9.28 billion, up 29% from a year earlier. The net profit of homing was 1.177 billion Hong Kong dollars, an increase of 9.9% over the same period last year. The number of students enrolled in after-school tutoring courses and exam preparation courses in the third quarter of fiscal year 2021 was about 2296800, an increase of 43% over the same period last year. The company's revenue growth is mainly due to the increase in the number of students in Kmur12 extracurricular tutoring programs.
Comments:
The company achieved rapid revenue growth and a strong business recovery. Net revenue in the third quarter exceeded expectations, reaching HK $9.28 billion, up 29 per cent from a year earlier, while enrollment for after-school tutoring and exam prep courses rose 43 per cent from a year earlier. The company's net revenue growth is mainly driven by the increase in the number of students in Kmur12 extracurricular tutoring programs. The revenue of Kmur12 primary and secondary school after-school education business increased by 37% compared with the same period last year, of which the secondary school business increased by 35% year-on-year and the children's business increased by 40%.
The increase in costs and expenses brought about by the company's business expansion leads to a decrease in net profit. The company's operating costs and expenses in the third quarter were HK $8.483 billion, an increase of 35.1% over the same period last year. The revenue cost was HK $4.203 billion, up 35.3% from the same period last year, mainly due to the compensation for the increase in teachers' teaching time and the increase in rental costs caused by the increase in the number of schools and learning centers in operation. Sales and marketing expenses were HK $1.216 billion, an increase of 32.0% over the same period last year, mainly due to the increase of marketing staff in the implementation of the company's OMO strategy. General and administrative expenses were HK $3.065 billion, an increase of 36.1% over the same period last year, mainly due to the increase in the number of employees caused by the company's expansion, as well as the increase in R & D and labor costs related to the development of the OMO education ecosystem.
In the future, the company will continue to promote the OMO strategy, will serve more cities and students, and further occupy market share. As of February 28, 2021, the total number of schools and learning centers was 1625, an increase of 209 over the same period last year. Classroom space increased by about 17 per cent year-on-year, a net increase of 107compared with the previous quarter, and a 7 per cent increase in classroom area compared with the previous quarter. The company will continue to actively promote expansion plans and further occupy share in the future. At the same time, the company will continue to promote OMO strategy, seize market opportunities and expand service coverage to more cities and students.
Profit forecast, valuation and investment rating: we expect the company to achieve a homed net profit of HK $36.96 million in 21-23, corresponding to an EPS of HK $7.463 billion and a current price corresponding to PE57.2/39.0/28.3 times. As the leader of K12 teaching and training, the company is expected to further increase its market share under the current situation of strict educational supervision and further clearance of small and medium-sized institutions. Using the segment valuation method, 35 times PE is given to its offline business for 22 years, and 10 times PS is given to New Oriental Education & Technology Group's online portion, corresponding to the company's market capitalization of HK $241.358 billion, and the corresponding share price of HK $140.82, with a "recommended" rating for the first time.
Risk hint: the speed of campus expansion and new business expansion is not as fast as expected; policy supervision is stronger than expected.