HK Stock Market Move | NEW ORIENTAL-S (09901) fell more than 5% during trading hours, with institutional pointing to the company's profit growth being dragged down by a decline in e-commerce business sales.

NEW ORIENTAL-S (09901) fell more than 5% during the trading day, falling 4.9% as of the time of publication, to HKD 45.65, with a trading volume of HKD 87.006 million. Shenwan Hongyuan Group released a research report stating that it is expected that in the second quarter of the 25th fiscal year of NEW ORIENTAL-S (2QFY25, from 2024.9 to 2024.11), the revenue will be USD 993 million, a year-on-year increase of 14.2%, and the Non-GAAP net profit attributable to the parent company will be USD 53 million, a slight increase of 4.7% year-on-year. The high revenue growth is driven by the continuous growth of the education business, while the profit growth is affected by the decline in sales of the e-commerce business compared to the same period last year. The bank believes that as the proportion of the e-commerce business continues to decrease, the disturbance to revenue and profit will be significantly reduced. The market is expected to focus on the core education business. Currently, the education business continues to grow rapidly, and the increase in production capacity will drive the company's valuation recovery. The bank continued to point out that due to the separation of the "EAST BUY" live broadcast room, it is expected that the revenue contribution from EAST BUY in 2Q will be approximately USD 121 million, a significant decrease of 35.8% year-on-year. The Non-GAAP operating profit is USD 10 million, with a Non-GAAP operating profit margin of 3.5%, a significant decrease of approximately 9.2 percentage points year-on-year. The net profit attributable to the parent company for EAST BUY is approximately USD 4 million. The revenue and profit contributions account for 12% and 7.9% respectively. Compared to last year, both the revenue and profit contributions have decreased significantly by 9.5 and 23.6 percentage points. The bank expects that the proportion of revenue and profit from the e-commerce business in FY25 will be 11.5% and 4.6%, respectively, a significant decrease of 9.5 and 10.1 percentage points from FY24.