4QFY26 results beat; expect solid momentum to sustain in FY27E

4QFY26 resultsbeat; expect solid momentumto sustain in FY27E Target PriceUS$90.00(Previous TPUS$82.00)Up/Downside53.6%Current PriceUS$58.58 New Orientalannounced 4QFY26 results: net revenue was up by 23% YoY toUS$1.53bn, 4% ahead of the Visible Alpha (VA) consensus estimate thanks tothe solid growth of coreeducational businesses;non-GAAPoperatingincomeincreasedby35% YoY to US$110mn,beatingVA consensusby 7%thanks totheoutperformanceofrevenue and enhanced operatingefficiency.InFY26,netrevenue/non-GAAPoperatingincomegrewby16%/33%YoYtoUS$5.66/0.74bn. Looking intoFY27E,managementguidednet revenue to growby14-18%YoY to US$6.45bn-6.68bn,also ahead of VA consensus ofUS$6.27bn.Meanwhile,managementexpectsfurthermargin improvement inFY27E,underpinned by the enhanced operational efficiency and operatingleverage.The company’s focus onteachingquality bearfruit, which improvedstudentretention,enhanced utilization of teaching centre and acceleratedrevenuegrowth.Weraise ourFY27-28E non-GAAP OPforecastsby 8-9%, andliftour SOTP-derived target price to US$90.0(previous: US$82.0). MaintainBUY.◼ China Internet Saiyi HE, CFA(852) 3916 1739hesaiyi@cmbi.com.hk Wentao LU, CFAluwentao@cmbi.com.hk Ye TAO, CFA(852) 3850 5226franktao@cmbi.com.hk Coreeducational business maintained strongmomentum.In 4QFY26:1)new educational business initiativesrevenue grew by 25% YoY, primarilydriven by the solid growth ofactive paid users of intelligent learning system(+28% YoY) and non-academic tutoring courseenrolment(+17% YoY); 2)domestic test preptargeting adults and university studentsincreased by29% YoY;3) overseastest prepand consultingrevenue was up by 4% YoYdespitemacro and geopolitical uncertainty. For 1QFY27E, we forecast totalnetrevenueto grow by 19% YoY to US$1.82bn, with new educationalinitiatives/high-schooltutoring/domestictestprep/overseas-relatedbusiness up by 25%/19%/21%/5% YoY.◼ Shuyin GUO(852) 3916 3716guoshuyin@cmbi.com.hk East Buy achieved solid revenue and earnings performance.East Buyalso recorded strong growth in FY26, with revenue up by 27-32% YoY toRMB5.6-5.8bn and net income of RMB520-550mn (vs net income ofRMB6mnin FY25).Looking into FY27,East Buy will expand offlineexperience stores via New Oriental's learning centres, accelerate privatelabel development, refine membership operations, and improve supplychain efficiency. OntheAI front, New Oriental leverages AI to enhance itseducationalofferings and boost internal operational efficiency.Thecompany also recently launched a proprietary AI-poweredpersonalizedlearning platform andachievedmeaningful sales in 25 days after launch.◼ Enhancing margin and shareholder return.Non-GAAP OPM improvedby 0.6pptsYoY to 7.2% in 4QFY26, mainly thanks to thedisciplined capacityexpansion,improved utilizationand solid earnings performance of East Buy.Managementexpectsfurther marginexpansionin FY27E, supported byoperating leverage and enhanced operationalefficiency. The companyannounces an additional US$200mn 12-month share repurchase programand expects to pay a total cash dividend of US$300mn for FY27, whichtranslates into an attractive shareholder return yield of c.6%. Source: FactSet Business forecasts update andvaluation Valuation 1) US$86.1for the educational and consulting business (96% of total valuation), based on20x FY27E PE, which isatapremiumtothe educationalsector average(17x) given NewOriental’s solid leadership in China’seducationalsector. 2) US$2.8for East Buy (3% of total valuation), based on9x FY27E PE, which ison parwiththee-commercesector average. 3) US$1.1for the Tourism and others business (1% of total valuation), based on9x FY27EPE,which ison par withtheother OTA platforms. Disclosures& Disclaimers Analyst CertificationThe research analyst who is primary responsible for the content of this research report, in whole or in part, certifies thatwith respect to the securities or issuer that the analyst covered in thisreport: (1) all of the views expressed accurately reflect his or her personal views about the subject securities or issuer; and (2)no part of his or her compensation was, is, or will be, directly or indirectly, related to the specific views expressed by that analyst in this report.Besides, the analyst confirms that neither the analyst nor his/her associates (as defined in the code of conduct issued by The Hong Kong Securities and Futures Commission) (1) have dealt in or traded in the stock(s)covered in this research report within 30 calendar days prior to the date of issue of this report; (2) willdeal in or trade in the stock(s) covered in this research report 3 business days after the date of issue of this report; (3)serve as an officer ofany of the HongKong listed companies covered in this report; and (4) have any financial interests in the Hong Kong listed companies coveredin this report. CMBIGM RatingsBUY : Stock with potential return of over 15% over next 12 monthsHOLD: Stock with potential return of +15% to-10% over next 12 monthsSELL: Sto