Daiwa has released a research report stating that New Oriental Education & Technology (09901) delivered a solid performance for the fourth quarter of fiscal year 2026, which ended in May. Revenue and adjusted operating profit exceeded market expectations by 5% and 7%, respectively.

Management forecasts revenue growth of 14% to 18% year-on-year for fiscal year 2027. The midpoint of this guidance is approximately 5% higher than the market consensus. Daiwa currently assigns a "Buy" rating to New Oriental.

Looking ahead to fiscal year 2027, Daiwa anticipates that the completion of the overseas business restructuring will lower the fixed-cost base, which is expected to support a structural expansion in profit margins. Additionally, the rising profit contribution from East Buy (01797), AI-driven efficiency improvements, cost management measures, and operating leverage from both the education business and East Buy could all act as margin drivers. These factors are likely to help New Oriental achieve its medium-term goal of raising operating profit margins to the mid-teens percentage range.

Daiwa noted that while declining birth rates represent a long-term structural risk, management believes this will make future parents more discerning about education quality. This trend, they argue, could benefit industry leaders like New Oriental by allowing them to capture a larger market share.