New Oriental Earnings: Pent-Up Demand Drives Exceptional Revenue Growth and Margin Expansion

New Oriental's fiscal 2024 first-quarter (ending August 2023) result was exceptionally strong, with revenue up 47.7% year on year, 9.4% higher than the upper end of management guidance. Besides, the operating profit margin jumped to 18.6% from 10.5% in the first quarter of fiscal 2023, driven primarily by positive operating leverage as general and administrative expense ratio fell to 28.9% from 34.4%. After factoring in the better-than-expected first-quarter figures, we raise our 2024 revenue forecast to USD 3.8 billion from USD 3.7 billion, and our net income forecast to USD 328 million, from USD 285 million. In addition, we lower our cost of capital assumption to 13% from 15.5% to reflect lower exposure to regulatory risk as its business diversifies away from academic tutoring.