Citi released a research report saying that, driven by the K-9 business, New Oriental-S (09901)'s revenue for the third fiscal quarter increased 60.1% year over year, but due to Oriental selection delays, the profit margin before interest and tax remained at the level of 11.7% under non-US GAAP. The bank expects that without Oriental Selection, profit margins will increase by 3 percentage points. The target price was raised by 90% to HK$99, which is the bank's first choice in the K-12 education industry and maintains a “buy” rating.
For the fourth fiscal quarter, the bank predicts a 29% year-on-year increase in revenue, but profit margins will fall to 5.9% due to increased production capacity and increased employee incentives and investment in new businesses. However, the bank believes that industry consolidation and Oriental selection spending reduction should reverse this trend, bringing the profit margin to 13.1% in the 2025 fiscal year.