Investment Rating - The report maintains a "Buy" rating for New Oriental [1][2][3] Core Views - New Oriental's revenue for Q3 FY24 reached USD 1.207 billion, a year-on-year increase of 60.1%, driven primarily by the growth in non-academic after-school tutoring and overseas test preparation services [1][3] - The company is experiencing strong enrollment growth in non-academic AST, with a projected increase in revenue to USD 241 million for Q3 FY24, representing a 72.7% year-on-year growth [1][3] - The expansion of learning centers is accelerating, with the number of centers increasing to 911, a 27.9% year-on-year growth, and the company aims for a 30% annual growth rate in learning centers [1][3] - The overseas test preparation and consulting business is recovering rapidly, contributing an estimated USD 254 million in revenue for Q3 FY24, a 40.1% year-on-year increase [1][3] - The report projects significant growth potential for non-academic AST, estimating over 2 million enrollments in FY24, with a potential market share of only 6% even at a scale of 12 million enrollments [1][3] Financial Summary - Revenue projections for FY24, FY25, and FY26 are raised to USD 4.213 billion, USD 5.422 billion, and USD 7.044 billion respectively, compared to previous estimates of USD 4 billion, USD 5.22 billion, and USD 6.72 billion [2][3] - Non-GAAP net profit forecasts for FY24, FY25, and FY26 remain at USD 482 million, USD 664 million, and USD 869 million respectively [2][3] - The target price under SOTP valuation is set at USD 110.81, indicating a potential upside of 43.8% from the current price [1][3]

Investment Rating - The report maintains a BUY rating for New Oriental with a target price of US$102.50, revised from the previous target of US$104.50, indicating a potential upside of 33.0% from the current price of US$77.08 [2][3]. Core Insights - New Oriental's total net revenue for 3QFY24 increased by 60.1% year-over-year (YoY) to US$1,207 million, surpassing the consensus estimate of US$1,098 million by 10% [2]. - Non-GAAP net income rose by 9.8% YoY to US$105 million, although it fell short of the consensus estimate of US$132 million due to investments in East Buy and rapid capacity expansion affecting margin growth [2]. - The company expects total revenue for 4QFY24 to grow by 28-31% YoY, projecting revenue between US$1,102 million and US$1,127 million, compared to the consensus estimate of US$1,096 million [2]. Financial Performance Summary - For FY24E, total revenue is forecasted at US$4,293 million, with adjusted net profit expected to reach US$456.1 million [6]. - The revenue growth forecast for FY25E and FY26E has been increased by 8-10%, while earnings forecasts for the same periods have been trimmed by 3-6% due to the impact of capacity expansion on margins [2][6]. - The educational business segment showed strong momentum, with overseas test prep and study consulting revenue growing by 52.6% and 25.7% YoY, respectively, contributing approximately 21% to total revenue [2]. Capacity Expansion and Strategic Initiatives - New Oriental's capacity expansion accelerated, with the number of schools and learning centers increasing by 28% YoY to 911 as of the end of 3QFY24 [2]. - The company has raised its capacity expansion plan for FY24, now expecting a 30% YoY increase, up from the previous estimate of 20% [2]. - Investments in East Buy are aimed at enhancing private label product development and supply chain management, which is expected to drive customer base expansion and user engagement [2]. Valuation Methodology - The report employs a sum-of-the-parts (SOTP) valuation, attributing US$91.6 million to the educational and consulting business, US$6.8 million to East Buy, and US$4.2 million to the tourism business, reflecting their respective growth prospects and market positions [7][8].

New Oriental Education & Technology Group Inc. (NYSE:EDU) Q3 2024 Earnings Conference Call April 24, 2024 8:00 AM ET Company Participants Sisi Zhao - IR Stephen Yang - Executive President and CFO Conference Call Participants Felix Liu - UBS Yiwen Zhang - China Renaissance Lucy Yu - Bank of America Tian Hou - T.H. Capital Timothy Zhao - Goldman Sachs Chongguang - CITIC DS Kim - JPMorgan Operator Good evening and thank you for standing-by for New Oriental's FY 2024 Third Quarter Results Earnings Conference Ca ...

Core Viewpoint - The article emphasizes the importance of confirming the sustainability of stock trends for profitable short-term investing, highlighting the utility of a "Recent Price Strength" screen to identify stocks with strong fundamentals and upward momentum [1]. Group 1: Stock Performance - New Oriental Education (EDU) has shown a solid price increase of 17% over the past 12 weeks, indicating investor confidence in its potential upside [2]. - The stock has maintained a price increase of 1% over the last four weeks, suggesting that the upward trend is still intact [2]. - EDU is currently trading at 86.2% of its 52-week High-Low Range, indicating it may be on the verge of a breakout [2]. Group 2: Fundamental Strength - EDU carries a Zacks Rank 2 (Buy), placing it in the top 20% of over 4,000 ranked stocks based on earnings estimate revisions and EPS surprises, which are critical for near-term price movements [3]. - The Zacks Rank system has a strong track record, with Zacks Rank 1 stocks averaging an annual return of +25% since 1988 [3]. - The Average Broker Recommendation for EDU is 1 (Strong Buy), reflecting high optimism from the brokerage community regarding its near-term price performance [3]. Group 3: Investment Strategy - The article suggests that investors should consider other stocks that pass the "Recent Price Strength" screen, indicating a broader strategy for identifying potential winning stocks [4]. - The Zacks Premium Screens offer over 45 strategically created options to help investors find stocks that could outperform the market [4].

Financial Performance - Total net revenues for the third fiscal quarter of 2024 increased by 60.1% year over year to US$1,207.3 million[2] - Operating income rose by 70.6% year over year to US$113.4 million, with a GAAP operating margin of 9.4%[10] - Net income attributable to New Oriental increased by 6.8% year over year to US$87.2 million, with diluted net income per ADS of US$0.52[11] - New Oriental reported net revenues of $1,207,286 for the three months ended February 29, 2024, representing an increase of 60% compared to $754,153 for the same period in 2023[29] - Operating income for the same period was $113,432, up from $66,491, indicating a significant improvement in operational efficiency[29] - The company’s net income attributable to shareholders was $87,167, compared to $81,648 in the prior year, reflecting a year-over-year increase of 6.2%[29] - For the three months ended February 29, 2024, net income attributable to New Oriental was $87,167, an increase of 6.3% from $81,648 for the same period in 2023[31] - Non-GAAP net income attributable to New Oriental for the three months ended February 29, 2024, was $104,716, compared to $95,362 for the same period in 2023, reflecting a growth of 9.8%[31] - For the nine months ended February 29, 2024, net revenues were $3,176,907, a significant increase of 48.7% from $2,137,189 in the same period of 2023[37] - Operating income for the nine months ended February 29, 2024, was $339,898, compared to $141,992 for the same period in 2023, marking an increase of 139.5%[37] - Non-GAAP operating income for the nine months ended February 29, 2024, was $436,559, up from $201,242 in the same period of 2023, reflecting a growth of 116.7%[39] Cash and Assets - Cash and cash equivalents, term deposits, and short-term investments totaled approximately US$4.8 billion by the end of the quarter[5] - Cash and cash equivalents increased to $2,013,627 as of February 29, 2024, from $1,662,982 as of May 31, 2023, showing a growth of 21%[27] - Total current assets rose to $5,127,095, up from $4,413,887, marking an increase of 16%[27] - Cash, cash equivalents, and restricted cash at the end of the period on February 29, 2024, were $2,189,074, compared to $1,431,001 at the end of the same period in 2023[35] - The company’s total assets reached $7,189,543, an increase from $6,392,458, representing a growth of 12.5%[27] Liabilities and Expenses - Operating costs and expenses increased by 59.1% year over year to US$1,093.9 million, driven by growth in East Buy private label products[8] - The company’s operating cost and expenses totaled $1,093,854, compared to $687,662 in the previous year, reflecting a 59% increase[29] - Total liabilities increased to $3,039,460 from $2,577,670, which is a rise of 17.9%[27] - Total operating costs and expenses for the three months ended February 29, 2024, were $1,093,854, up 59% from $687,662 in the same period of 2023[31] Deferred Revenue and Enrollment - Deferred revenue increased by 30.8% year over year to US$1,521.7 million, reflecting cash collected upfront from customers[14] - New educational business initiatives achieved 72.7% revenue growth year over year, with approximately 355,000 student enrollments in non-academic tutoring courses[5] - The total number of schools and learning centers reached 911, an increase of 199 compared to the previous year[4] Future Outlook - The company expects total net revenues for the fourth quarter of fiscal year 2024 to be in the range of US$1,101.5 million to US$1,127.3 million, representing a year-over-year increase of 28% to 31%[17]

Core Viewpoint - New Oriental Education & Technology Group Inc. reported strong financial results for the third fiscal quarter of 2024, with significant year-over-year growth in revenues and operating income, driven by its educational initiatives and e-commerce business [1][2][10]. Financial Highlights - Total net revenues for the third fiscal quarter reached US$1,207.3 million, a 60.1% increase year over year [2][10]. - Operating income increased by 70.6% year over year to US$113.4 million [2][13]. - Net income attributable to New Oriental rose by 6.8% year over year to US$87.2 million [2][14]. Key Financial Results - Non-GAAP operating income for the quarter was US$140.9 million, reflecting a 60.3% increase year over year [3][13]. - Non-GAAP net income attributable to New Oriental was US$104.7 million, a 9.8% increase year over year [15]. - Basic and diluted net income per ADS were US$0.53 and US$0.52, respectively, marking increases of 7.7% and 8.6% year over year [14][15]. Operating Highlights - The total number of schools and learning centers increased to 911, up from 843 in the previous quarter and 712 a year ago [6]. - New educational business initiatives achieved 72.7% revenue growth year over year, with non-academic tutoring courses attracting approximately 355,000 student enrollments [7]. Business Growth - The overseas test preparation and study consulting businesses grew by approximately 52.6% and 25.7% year over year, respectively [7]. - The domestic test preparation business targeting adults and university students recorded a growth of approximately 53.2% year over year [7]. Cash Flow and Balance Sheet - The company reported a positive operating cash flow of US$109.4 million for the quarter, with cash and cash equivalents totaling approximately US$4.8 billion by the end of the quarter [7][16]. - Deferred revenue increased by 30.8% year over year to US$1,521.7 million, indicating strong demand for future services [18]. Share Repurchase Program - As of April 23, 2024, the company repurchased approximately 6.0 million ADSs for about US$195.3 million under its share repurchase program [8][9]. Outlook - New Oriental expects total net revenues for the fourth quarter of fiscal year 2024 to be in the range of US$1,101.5 million to US$1,127.3 million, representing a year-over-year increase of 28% to 31% [21].

Core Viewpoint - New Oriental Education and Technology Group Inc. will report its financial results for the third quarter ended February 29, 2024, on April 24, 2024, before the U.S. market opens [1] Group 1: Financial Reporting - The earnings conference call will take place at 8 AM U.S. Eastern Time on April 24, 2024, which corresponds to 8 PM Beijing/Hong Kong Time on the same day [1] - Participants can register for the conference call in advance and will receive dial-in numbers and a unique personal PIN upon registration [3] - A live and archived webcast of the conference call will be available for access [3][4] Group 2: Company Overview - New Oriental is a provider of private educational services in China, offering a variety of educational programs, services, and products [5] - The company's offerings include educational services, test preparation courses, private label products, livestreaming e-commerce, and overseas study consulting services [5] - New Oriental is listed on both NYSE (NYSE: EDU) and SEHK (9901.SEHK), with its American Depositary Shares (ADSs) representing ten common shares [5]

Financial Data and Key Metrics Changes - New Oriental reported a significant increase in net income attributable to the company, reaching $30.1 million, which represents a 4007.4% increase year-over-year [15] - Non-GAAP operating margin improved to 5.9%, while operating income was $21.3 million compared to a loss of $2.5 million in the same period last year [15][16] - Total cash and cash equivalents, term deposits, and short-term investments amounted to approximately $4.8 billion [12] Business Line Data and Key Metrics Changes - The overseas test prep business saw a revenue increase of 47% in dollar terms or 50% in RMB terms year-over-year [6] - The overseas study consulting business recorded a revenue increase of about 32% in dollar terms or 35% in RMB terms year-over-year [6] - The adults and university students business experienced a revenue increase of 43% in dollar terms or 46% in RMB terms year-over-year [6] - New educational business initiatives reported a revenue increase of about 68% in dollar terms or 72% in RMB terms year-over-year [8] Market Data and Key Metrics Changes - The top 10 cities in China contributed over 60% of the revenue from non-academic tutoring courses [7] - The intelligent learning system and devices business reported approximately 181,000 active paid users [8] - The cultural tourism business, which includes study tours and research camps, conducted activities in over 50 cities, with the top 10 cities contributing over 55% of revenue [9] Company Strategy and Development Direction - The company plans to moderately increase learning center capacity by about 20% year-over-year, focusing on cities with better performance [19] - New Oriental aims to integrate AI and ChatGPT technologies into its educational offerings to enhance growth and operational efficiency [20] - The company is committed to maintaining a healthy market share growth and creating sustainable value for customers and shareholders in the long term [5] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the strong demand in the education sector and the reduced competition due to market consolidation during COVID [24][53] - The company expects total net revenue for the next quarter to be in the range of $1,070.9 million to $1,093.5 million, representing a year-over-year increase of 42% to 45% [19] - Management highlighted the importance of balancing top-line growth with margin expansion, indicating a cautious approach to rapid expansion [32] Other Important Information - Operating costs and expenses for the quarter increased by 32.4% year-over-year, primarily due to growth in East Buy's private-label products and live-streaming e-commerce business [14] - The company has authorized a share repurchase program of up to $500 million, extending it through May 31, 2024 [13] Q&A Session Summary Question: What is driving the strong growth in the third quarter guidance? - Management indicated strong demand in the education sector and less competition due to market consolidation as key drivers for the expected revenue growth of 42% to 45% [24] Question: What considerations are there for the learning center expansion? - Management noted that the expansion will be moderate, focusing on cities with better performance, and will monitor the pace of new openings based on operational results [28] Question: What are the bottlenecks for faster expansion? - Management mentioned that the OMO model allows for better utilization of existing resources, balancing growth with margin expansion [32] Question: Can you provide insights on margin expansion? - Management highlighted that the non-GAAP operating margin expanded due to improved utilization rates and higher margins from new business initiatives [37] Question: How is the cultural tourism business conducted? - Management explained that the tourism business includes study tours and research camps, with revenue recorded separately from educational services [42] Question: What are the long-term margin expectations for new education businesses? - Management expects the margin for new education businesses to exceed 20% in the future, driven by lower fixed costs and higher utilization [47]

Core Viewpoint - New Oriental Education & Technology Group Inc. reported strong financial results for the second fiscal quarter of 2024, with significant year-over-year growth in revenues and net income, indicating a robust recovery and expansion in its educational services and related businesses [1][4]. Financial Highlights - Total net revenues for the second fiscal quarter increased by 36.3% year over year to US$869.6 million [2][6]. - Operating income was US$21.3 million, a turnaround from a loss of US$2.5 million in the same period of the prior fiscal year [2][9]. - Net income attributable to New Oriental surged by 4,007.4% year over year to US$30.1 million [2][10]. - Non-GAAP operating income for the quarter was US$50.9 million, representing a 212.2% increase year over year [2][9]. - The company reported a positive operating cash flow of US$300.6 million for the quarter [4][12]. Operational Highlights - The total number of schools and learning centers increased to 843 as of November 30, 2023, up from 793 as of August 31, 2023 [3]. - The overseas test preparation and overseas study consulting businesses grew by approximately 46.5% and 31.7% year over year, respectively [4]. - Domestic test preparation for adults and university students recorded a growth of approximately 42.7% year over year [4]. - New educational business initiatives achieved a revenue growth of 68.3% year over year, with non-academic tutoring courses attracting approximately 786,000 student enrollments [4]. Cost and Expenses - Operating costs and expenses for the quarter were US$848.3 million, a 32.4% increase year over year [7]. - Selling and marketing expenses increased by 62.2% year over year to US$155.0 million [7]. - General and administrative expenses rose by 29.6% year over year to US$270.7 million [7]. Balance Sheet and Cash Flow - As of November 30, 2023, New Oriental had cash and cash equivalents totaling approximately US$1.9 billion, with total cash, cash equivalents, term deposits, and short-term investments amounting to approximately US$4.8 billion [13]. - Deferred revenue increased by 44.4% year over year to US$1.645 billion [13]. Outlook - New Oriental expects total net revenues for the third quarter of fiscal year 2024 to be in the range of US$1,070.9 million to US$1,093.5 million, reflecting a year-over-year increase of 42% to 45% [18].

Financial Performance - Total net revenues for the second fiscal quarter of 2024 increased by 36.3% year over year to US$869.6 million[2] - Operating income was US$21.3 million, compared to a loss of US$2.5 million in the same period of the prior fiscal year, representing a 957.8% increase[3] - Net income attributable to New Oriental surged by 4,007.4% year over year to US$30.1 million for the second fiscal quarter of 2024[3] - Non-GAAP net income attributable to New Oriental for the quarter was US$50.2 million, representing a 182.6% increase year over year[13] - New Oriental's net income for the three months ended November 30, 2023, was RMB30,066 (US$4.2 million), compared to RMB732 (US$0.1 million) in the same period of the prior year[30] - Non-GAAP net income attributable to New Oriental for the three months ended November 30, 2023, was $50,158 thousand, compared to $17,750 thousand in the prior year, representing an increase of 182%[32] - For the six months ended November 30, 2023, net revenues were $1,969,621 thousand, a 42.3% increase from $1,383,036 thousand in the same period of 2022[38] - The company reported a net income of $214.866 million for the six months ended November 30, 2023, compared to $101.167 million for the same period in 2022, reflecting a year-over-year increase of approximately 112.3%[52] Business Growth - The total number of schools and learning centers reached 843, an increase of 50 compared to the previous quarter[5] - The overseas test preparation and overseas study consulting businesses grew by approximately 46.5% and 31.7% year over year, respectively[5] - New educational business initiatives achieved 68.3% revenue growth year over year, with approximately 786,000 student enrollments in non-academic tutoring courses[6] - For the first six months ended November 30, 2023, East Buy recorded total revenue of RMB2,795.0 million (US$386.3 million), a 34.4% increase from RMB2,080.1 million in the same period of the prior fiscal year[19] - East Buy's net profit for the same period was RMB249.2 million (US$34.4 million), a 57.4% decrease from RMB585.3 million in the prior fiscal year[19] Cash Flow and Assets - Operating cash flow for the quarter was approximately US$300.6 million, with cash and cash equivalents totaling around US$4.8 billion[6] - New Oriental's total current assets increased to RMB4,976.9 million (US$688.5 million) as of November 30, 2023, from RMB4,413.9 million (US$610.5 million) as of May 31, 2023[29] - New Oriental's cash and cash equivalents increased to RMB1,942.6 million (US$268.5 million) as of November 30, 2023, from RMB1,663.0 million (US$230.5 million) as of May 31, 2023[29] - Cash, cash equivalents, and restricted cash at the end of the period on November 30, 2023, totaled $2,120,746 thousand, up from $1,122,824 thousand a year earlier, marking an increase of 88.9%[36] Liabilities and Equity - Total liabilities for New Oriental increased to RMB3,035.7 million (US$420.5 million) as of November 30, 2023, compared to RMB2,577.7 million (US$360.5 million) as of May 31, 2023[29] - The total liabilities as of November 30, 2023, were $3.036 billion, which is consistent with the previous reporting period[53] - The company’s total equity as of November 30, 2023, was $4.075 billion, a slight decrease from $4.096 billion as of May 31, 2023[53] Future Outlook - New Oriental expects total net revenues in the third quarter of fiscal year 2024 to be in the range of US$1,070.9 million to US$1,093.5 million, representing a year-over-year increase of 42% to 45%[20] Operating Costs - Total operating costs and expenses for the three months ended November 30, 2023, were $848,258 thousand, up from $640,702 thousand in the same period of 2022, reflecting a 32.4% increase[32] - The cost of revenues for the six months ended November 30, 2023, was $860.411 million, up from $638.174 million for the same period in 2022, representing an increase of approximately 34.7%[51] Tax and Fair Value Changes - The provision for income taxes for the six months ended November 30, 2023, was $74.231 million, compared to $26.912 million for the same period in 2022, indicating an increase of approximately 175.5%[52] - The company recognized a gain from fair value change of investments amounting to $18.166 million for the six months ended November 30, 2023, compared to a loss of $1.539 million for the same period in 2022[52] Accounting Policies - The adjustments made in the reconciliation of financial results under IFRSs reflect the different accounting treatments according to the Group's accounting policies, ensuring compliance with both US GAAP and IFRSs[49]