CICC: raises New Oriental H-share target price to HK$55, optimistic about the growth prospects of K12 education and training business.

CICC released a research report stating that New Oriental's revenue for the first quarter of the 2026 fiscal year increased by 6% year-on-year to $1.523 billion, exceeding the bank's expectations by 1%; adjusted operating profit was approximately $336 million, with an operating profit margin of 22%, an increase of 1 percentage point year-on-year; adjusted net profit attributable to the parent company was $258 million, corresponding to a net profit margin of 17%. Management maintains the revenue guidance for the 2026 fiscal year, expecting revenue to grow by 5% to 10% annually, and guiding the second quarter revenue growth rate to be in the range of 9% to 12%. The bank expects that the overall revenue growth rate of New Oriental from 2026 to 2028 fiscal years can still exceed 10%, and the trend of expanding profit margins remains unchanged. The bank remains optimistic about the demand and growth prospects of New Oriental's K12 education-related business, considering the relatively diverse age coverage, stable revenue growth, optimization potential for profit margins, and shareholder returns reflecting long-term growth certainty and ample cash flow. The study abroad-related business was recently affected but still leads the industry, with the bank assigning a price-to-earnings ratio of 15 times for the K12 business for the 2026 fiscal year and 8 times for the study abroad business, corresponding to annual profit growth rates of 25% and a decline of 7%, respectively. Taking into account the impact of Eastern Selection and consolidation, the bank raised the H share target price from HK$46 to HK$55 and the US share target price from $59 to $71, maintaining a "buy" rating.