New Oriental's First-Quarter Results Beat Expectations; Fair Value Estimate Raised to USD 32.50

We've raised our fair value estimate for New Oriental Education to USD 32.50/HKD 25.50 from USD 31.50/HKD 24.50 after fiscal 2023 first-quarter results beat company guidance and our expectation. The core businesses recorded steady growth year on year while new business initiatives gained decent momentum sequentially. In addition, we estimate online education subsidiary Koolearn delivered exponential revenue growth and impressive profitability in the quarter. We think New Oriental is on track to meet our USD 2.6 billion full-year revenue forecast despite the foreign-exchange headwind. After fine-tuning our model, we've raised our fiscal 2023 net income forecast to USD 121 million from USD 52 million. This translates to a 4.6% net income margin, up from 2% in our original forecast. After a 28.3% share price gain overnight, the shares closed at about 17% below our fair value estimate. We consider the shares to be fairly valued, given our suggested risk buffer.