Haitong International released a research report noting that NEW ORIENTAL-S's (09901) total revenue for the second quarter of fiscal year 2026 increased by 15% year-on-year to $1.191 billion, exceeding market consensus expectations by 3% and surpassing the upper end of the company's previous guidance of 9% to 12%.

Non-GAAP operating profit surged 223% year-on-year to $89 million, beating consensus estimates by 62%, resulting in a Non-GAAP operating profit margin of 7.5%, which was 2.8 percentage points higher than the consensus expectation of 4.7%.

The firm continues to value NEW ORIENTAL's fiscal 2026 Non-GAAP net profit margin using a price-to-earnings (P/E) ratio of 18x; based on upwardly revised earnings forecasts, the target price has been raised from HK$49 to HK$52, with an "Outperform" rating.

Haitong International indicated that against a backdrop of persistent macroeconomic and international instability, the overall study abroad industry has been sluggish.

However, leveraging its long-accumulated mindshare among users and strong execution capabilities, the group continued to gain market share in the second quarter of fiscal 2026, still achieving a 1% year-on-year increase, and this trend is expected to continue into the next quarter.

Nevertheless, due to the highly seasonal nature of the study abroad consulting business, a relatively conservative stance is maintained towards the performance of the fourth quarter of fiscal 2026.

Looking ahead to next year, influenced by the lack of a full recovery in the overall industry and the integration of the company's test preparation and study abroad consulting businesses, revenue from the study abroad business is projected to decline.

Haitong International pointed out that it has observed the company's cost-cutting and efficiency-enhancing measures continuing to take effect.

Simultaneously, channel checks revealed that the company has made progress in optimizing teacher allocation and enriching product diversity, covering dimensions such as OMO, 1-on-1 tutoring, small group classes, and subject expansion.

The firm believes that the steady growth of the company's K12 business is sustainable.

Although revenue from the study abroad business is under pressure, the company has a clear determination to improve the profitability of this segment.

Despite the company currently maintaining low double-digit revenue growth, investors are advised to focus more on the performance of profit growth, as the management has demonstrated a firm commitment to creating returns for investors.