BOCOM INTL: Raises target price for New Oriental-S (09901) HK Stock to 55 Hong Kong dollars, maintains "buy" rating.

BOCOM International released a research report stating that it has raised the target price of NEW ORIENTAL-S (09901) Hong Kong stock by 19.6%, from 46 Hong Kong dollars to 55 Hong Kong dollars, and also raised the target price for its US stock, maintaining a "buy" rating. The company still sees a strong demand for the company's K12 education-related business and growth prospects, considering the relatively diverse age coverage, steady income growth, potential for profit margin optimization, and shareholder returns reflecting long-term growth certainty and ample cash flow. The study abroad-related business has been affected recently, but still leads the industry. In the first quarter of the fiscal year 2026, New Oriental's revenue increased by 6% year-on-year to 1.523 billion US dollars, exceeding the bank's expectations by 1%; adjusted operating profit was about 336 million US dollars, with an operating profit margin of 22%, an increase of 1 percentage point compared to the same period last year; adjusted net profit attributable to the parent company was 258 million US dollars, corresponding to a net profit margin of 17%. The performance of the study abroad-related business exceeded expectations, with test preparation/counseling revenue increasing by 1%/2% compared to the same period last year, compared to the previous forecast of a 5% decrease. The undergraduate/adult business maintained a steady growth rate, with revenue increasing by 14% year-on-year; the K9 new business revenue increased by 15% year-on-year, with better performance in study aids than non-academic subjects. The company announced a cash dividend of 190 million US dollars and a 3 billion US dollar share buyback plan, better than previous expectations. The management team maintained the group revenue guidance for the fiscal year 2026, expecting a year-on-year revenue growth rate of 5-10%, and indicated that second-quarter revenue growth is expected to be in the range of 9-12%, compared to the VA's previous forecast of 9%. Compared to previous market concerns about business growth, the continuation of the K12 business renewal rate and improvement in product quality are expected to drive revenue back into a steady growth range, while continued efficiency improvements will also benefit the stability or slight increase in operating profit margins. The study abroad-related business may still be under pressure, but it is also benefiting from the growth in revenue from youth-related language training (expected to exceed 25%) and the expansion of study abroad consulting business in non-English-speaking areas, with revenue impacts gradually manageable. The bank expects the company's overall revenue growth rate for the fiscal years 2026/2027/2028 to still exceed 10%, with a consistent trend of profit margin expansion.