Goldman Sachs Group, Inc.: Valuation trending reasonable, strong growth prospects, maintains a "buy" rating for New Oriental Education & Technology Group, Inc. Sponsored ADR (EDU.US) and TAL Education Group Sponsored ADR Class A (TAL.US).

Goldman Sachs Group, Inc. released a research report stating that after the relatively disappointing stock performance last year, they are optimistic about the performance of the two giants in the Chinese education industry, New Oriental Education & Technology Group, Inc. Sponsored ADR (09901)(EDU.US) and TAL Education Group Sponsored ADR Class A (TAL.US) in 2025. The reasons for this optimism are that the valuations are more reasonable, and the growth prospects remain strong. The bank maintains a "buy" rating on New Oriental Education & Technology Group, Inc. Sponsored ADR, with a target price of 65 Hong Kong dollars for Hong Kong stocks and 83 US dollars for US stocks. They also maintain a "buy" rating on TAL Education Group Sponsored ADR Class A, with a target price of 15 US dollars. The report points out that both New Oriental Education & Technology Group, Inc. Sponsored ADR and TAL Education Group Sponsored ADR Class A represent resilient domestic consumer demand in a stable regulatory environment and still very diversified market. With mature learning centers and operational leverage, as well as increased revenue recognition from deferred revenue for TAL Education Group Sponsored ADR Class A, the profit margin expansion trajectory for both companies is clear. The expected compound annual growth rate for earnings per share for the fiscal years 2024 to 2027 is expected to reach 31% and 58% respectively. The forecasted price-to-earnings ratio for the core education services of New Oriental Education & Technology Group, Inc. Sponsored ADR and TAL Education Group Sponsored ADR Class A in 2025 is 18 times, which may be mispriced relative to the growth prospects of the Chinese internet companies covered by the bank. Goldman Sachs Group, Inc. believes that factors leading to undervaluation include investor sentiment and concerns about fundamentals, and they point out that key themes worth watching in the education industry this year include K-12 learning services, K-12 learning content solutions, and overseas study. In terms of financial reports, the bank expects New Oriental Education & Technology Group, Inc. Sponsored ADR to have a 28% year-on-year increase in core revenue (in US dollars) in the second quarter of 2025, reaching $874 million, with a 1 percentage point decrease in Non-GAAP operating profit margin to 2.3%. The growth of core revenue in the third quarter is expected to accelerate to a year-on-year increase of 28% in Chinese yuan, but will slow down to a 25% growth in US dollars due to unfavorable foreign exchange factors. It is expected that TAL Education Group Sponsored ADR Class A will have a third quarter revenue of $569 million, a 52% year-on-year increase, with a Non-GAAP operating loss of $25 million and a Non-GAAP operating profit margin of -4.3%.