About the Company
Founded in 1993, New Oriental Education & Technology Group (EDU) is the largest provider of private educational services in China with over 22.6 million student enrollments. The company IPO’d on the NYSE in September 2006.
Headquartered in Beijing, New Oriental group currently has a network of 721 schools/learning centers and over 17,200 teachers in 52 cities. Additional it has a large online network with over 11.2 million users.
They provide a comprehensive range of educational products for students of all ages, including POP kids programs, summer camps, private schools, after school tutoring, adult English as well as domestic and overseas entrance tests preparation.
Excellent Quarterly Results
The company reported its Q1 FY 2016 (ended August 31) results on October 20. Revenue for the quarter increased 16.4% year-over-year to US$458.5 million, with strong growth in the K-12 after school tutoring business. Net income increased 14.4% year-over-year to US$128.5 million. The online education platform, Koolearn.com, recorded revenue growth of about 32% year-over-year, with paid users up by more than 150%.
The company saw strong demand for its products and services, despite soft macroeconomic environment. Total student enrollments in academic subjects tutoring and test preparation courses increased by 13.8% during the quarter.
Strong Guidance
New Oriental expects revenue in the second quarter of FY 2016 (from September 1, 2015 to December 30, 2015) to be in the range of US$267.0 million to US$276.4 million, representing year-over-year growth in the range of 13% to 17%.
Chinese Consumer Remains Strong
China’s economy grew 6.9% in the third quarter-- its weakest level since 2009—but stronger than the consensus forecast of 6.8%. Some believe that growth trend reflects a steady rebalancing of China’s growth model from manufacturing and investments to services and consumption led growth.
Services, which now account for more than 50% of the output, grew 8.6% year-over-year, as Chinese consumers are spending more with rising incomes and still healthy labor market.
Rising Estimates
After strong results, analysts have been raising their estimates for the company. Zacks Consensus Estimates for current and the next fiscal year have gone up to $1.50 per share and $1.96 per share respectively, from $1.42 and $1.75, before the results. Rising estimates sent the stock to a Zacks Rank # 1 (Strong Buy).
The Bottom Line
The company has a recognized brand name and a leadership position in areas like overseas test prep, English language tutoring, overseas study consulting and K-12 after school tutoring. Private education industry in China has been growing rapidly thanks mainly to rising incomes of the expanding middle class in the country.
New Oriental group is also a pioneer in the online education industry in China. Of late, they have increased their spending on their online education platform, which is expected to boost revenues in the coming years.This stock was earlier featured as the “Bull of the Day” on May 9 this year; it is up about 11% since then.
The company has a recognized brand name and a leadership position in areas like overseas test prep, English language tutoring, overseas study consulting and K-12 after school tutoring. Private education industry in China has been growing rapidly thanks mainly to rising incomes of the expanding middle class in the country.
New Oriental group is also a pioneer in the online education industry in China. Of late, they have increased their spending on their online education platform, which is expected to boost revenues in the coming years.This stock was earlier featured as the “Bull of the Day” on May 9 this year; it is up about 11% since then.
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