Company Reports

As one of the largest private education providers in China, New Oriental Education & Technology offers a comprehensive range of educational services, covering overseas test preparation, overseas study consulting, and after-school tutoring, among others. In addition, it is also a leading livestreaming e-commerce player.

New Oriental's fourth-quarter fiscal 2026 (ended May) revenue rose 23% year on year, while adjusted operating profit jumped 35%. The company guided for 14%-18% revenue growth in fiscal 2027.

New Oriental's fiscal third-quarter revenue rose 20% year over year and adjusted operating margin expanded 2.3 percentage points to 14.3%, supported by cost discipline.

New Oriental's second-quarter fiscal 2026 (ending May) revenue rose 15% year over year, with adjusted operating margin expanding to 7.5% from 2.8% a year ago. The company raised its full-year revenue growth guidance to 8%-12% from 5%-10% previously.

Four years following the regulatory crackdown on academic tutoring, New Oriental Education & Technology has reshaped its business, achieving record-high revenue in fiscal 2025. Besides the established businesses such as overseas test preparation, overseas study consulting, and high school tutoring, New Oriental has made significant strides in new business areas including nonacademic tutoring, intelligent learning systems and devices, and livestreaming e-commerce. We estimate these new initiatives contributed over 40% of revenue in fiscal 2025.

New Oriental's first-quarter fiscal 2026 (ending May) revenue grew 6% year over year, while adjusted operating profit increased by 11%. The company projects 9%-12% revenue growth in the second quarter of fiscal 2026 and reaffirmed its full-year guidance of 5%-10%.

New Oriental's revenue grew 9% year over year in the fiscal 2025 fourth quarter (ended May). Adjusted operating profit surged 116%. However, the company expects only 2%-5% revenue growth in the first quarter of fiscal 2026 and 5%-10% for the full year.

Four years following the regulatory crackdown on academic tutoring, New Oriental Education & Technology has reshaped its business, achieving record-high revenue in fiscal 2025. Besides the established businesses such as overseas test preparation, overseas study consulting, and high school tutoring, New Oriental has made significant strides in new business areas including nonacademic tutoring, intelligent learning systems and devices, and livestreaming e-commerce. We estimate these new initiatives contributed over 40% of revenue in fiscal 2025.

New Oriental's third-quarter fiscal 2025 (ending May) total revenue declined by 2% year on year. However, excluding Eastbuy, the livestreaming e-commerce subsidiary, revenue increased by 21% and met the firm's growth guidance of 18%-21%. Adjusted operating profit remained stable at USD 142 million.

New Oriental's second-quarter fiscal 2025 (ending May) results, excluding its subsidiary East Buy, outperformed previous guidance. However, management's outlook for the remaining fiscal quarters highlights deeper-than-expected challenges amid decreasing consumption. Consequently, we have reduced our earnings estimates by 16% to USD 423 million for fiscal 2025 and by 9%-12% for fiscal 2026-29, resulting in a 6% decrease in our fair value estimate to USD 58 (HKD 45.20). We think New Oriental is attractive now after a 24% decline in the share price following disappointing guidance.

In just three years following the regulatory crackdown on academic tutoring, New Oriental has successfully reshaped its business, achieving record-high revenue in fiscal 2024. Besides the established businesses such as overseas test preparation, overseas study consulting, and high school tutoring, New Oriental has made significant strides in new business areas including nonacademic tutoring, intelligent learning systems and devices, and livestreaming e-commerce. We estimate these new initiatives contributed over 40% of revenue in fiscal 2024.

While New Oriental’s fiscal 2025 first-quarter (ending August) results, excluding its livestreaming e-commerce subsidiary East Buy, were in line with prior guidance, shares fell more than 8% as the second-quarter guidance led to concerns about softening demand. However, we believe New Oriental will be able to achieve its fiscal 2025 revenue growth guidance of 30%, excluding East Buy, as its high school tutoring, domestic test preparation, and new education businesses are resilient to consumption downgrading since these offerings are more affordable and less discretionary. We maintain our revenue forecasts but have lowered our adjusted operating income by 9% for fiscal 2025 and by 3%-6% for fiscal 2026-29 due to our more bearish view on East Buy, which does not materially affect our fair value estimates of USD 62 and HKD 49 per share. We believe New Oriental’s shares are currently fairly valued.

New Oriental’s fiscal 2024 (ending May) fourth-quarter revenue was 1% above the upper end of management guidance, but its sharp margin contraction is disappointing. Non-GAAP operating margin fell by 5.9 percentage points year on year to 3.2% due to the opening of new learning centers, extra employee compensation, and higher expenses related to East Buy, the livestreaming e-commerce business. We leave our fiscal 2025-26 revenue estimates unchanged but reduce our gross margin assumptions by 50 basis points each, leading to a 4%-5% cut in our earnings estimates. We now project USD 433 million in earnings for fiscal 2025, up 40% year on year. We keep our longer-term estimates and maintain our fair value estimate at USD 62/HKD 49. The American depositary shares fell 9% overnight and closed 1% above our fair value estimate. We recommend investors wait for more attractive entry points.

We raise our fair value estimate for no-moat New Oriental to USD 62/HKD 49 per share after lifting our revenue growth assumptions. We think the market has been too optimistic about New Oriental’s growth and margin trajectory; the shares fell in reaction to slower growth and flat margin but still look expensive. Revenue in the company’s fiscal 2024 third quarter (ended February) beat the upper end of guidance by 10%, but management expects 28%-31% revenue growth in the fourth quarter, a meaningful deceleration from 36%-60% in the previous three quarters. In addition, non-GAAP operating margin was flat in the third quarter despite 60% revenue growth year on year, raising concerns about the margin trend.

After terminating its K-9 academic tutoring in 2021, New Oriental identified a few new business initiatives, such as nonacademic tutoring and intelligent learning systems and devices. We are positive on these initiatives given New Oriental’s expertise in after-school tutoring and curriculum development. The new businesses accounted for only about 17% of revenue in fiscal 2023 but growth is robust. We project a 27% revenue contribution by fiscal 2028.

New Oriental's fiscal 2024 second-quarter (ending November 2023) result beat our expectation. Revenue in the quarter increased by 36% year on year, 8% higher than the upper end of management guidance. In addition, management guided for revenue to grow 42%-45% year on year for the third quarter. After revising our revenue growth assumption to 35% from 27% for 2024, we raise our 2024 revenue forecast to USD 4.0 billion from USD 3.8 billion, and our net income forecast to USD 353 million, from USD 328 million. We also raise our net income estimates by 16%-19% for fiscal 2025 to 2028. As a result, we increase our fair value estimate to USD 51 from USD 47. New Oriental’s share price closed 49% above our new fair value estimate on Jan 24. We think investors are overly optimistic with its growth and margin outlook. To justify the share price, we think New Oriental’s revenue needs to grow at 25.0% CAGR from fiscal 2023 to 2028 while adjusted operating margin expands to 16.8% by 2028 compared with our forecast of 14.5% revenue CAGR and 13.8% adjusted operating margin.

After terminating its K-9 academic tutoring in 2021, New Oriental identified a few new business initiatives, such as nonacademic tutoring and intelligent learning systems and devices, etc. We are positive on these initiatives given New Oriental’s expertise in after-school tutoring and curriculum development. The new businesses accounted for only about 17% of revenue in fiscal 2023 but growth is robust. We project 30% revenue contribution by fiscal 2028.

After terminating its K-9 academic after-school tutoring in 2021, New Oriental identified five new business initiatives: 1) nonacademic tutoring; 2) intelligent learning systems and devices; 3) study tours and research camps; 4) educational materials and digitalized smart study solutions; and 5) exam preparation courses designed for students with junior college diplomas to obtain bachelor’s degrees. Among the five initiatives, we think the first two initiatives present decent opportunities, given New Oriental’s expertise in after-school tutoring and curriculum development. The new initiatives collectively accounted for only about 17% of revenue in fiscal 2023 but growth is robust. We expect these initiatives to contribute 32% of revenue by fiscal 2028.

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.

New Oriental’s fiscal 2023 fourth-quarter (ending May 2023) revenue beat management guidance but adjusted net income missed the Refinitiv consensus. We suspect there was a large hike in selling and marketing expense in East Buy (formerly Koolearn). Meanwhile, the new businesses are bearing fruit and are on track to hit mid-double-digit revenue growth in 2024. Demand for overseas-related business and high school tutoring also remained strong, and we think the trend will carry forward to fiscal 2024. As such, we raise our 2024 revenue forecast to USD 3.75 billion, from USD 3.56 billion, and our net income forecast to USD 285 million, from USD 244 million. Our fair value estimate remains USD 36/HKD 28. New Oriental’s share price gained more than 40% from its June 2023 low and is now 43% above our fair value estimate. We think investors are too optimistic about its growth and margin potential.