Bank of America Securities released a research report stating that it has raised its non-GAAP earnings per share forecasts for NEW ORIENTAL-S (09901, EDU.US) for fiscal years 2026 and 2027 by 4% and 5% respectively, primarily due to overseas business revenue declining less than expected and improved profit margins. The target price has been raised by 5% to HK$45.4, while the US stock target price for New Oriental (EDU.US) has been increased to $58.2, reiterating a "Buy" rating.

This is based on the following potential catalysts: (1) Potential enhancement in shareholder returns. Considering the company holds abundant cash of $4.8 billion and strong free cash flow generation capability (estimated at $500-700 million for fiscal years 2026-2028), the current dividend payout ratio equivalent to 50% of net profit (fiscal 2025 net profit of $371 million) still has significant room for improvement. If a 100% payout ratio is achieved, the dividend yield for fiscal 2026 would reach 4.5%. (2) Overseas business performance exceeding expectations. Management guidance indicates that overseas revenue for the August quarter and fiscal 2026 will record mid-single-digit percentage declines, but growth in non-US/UK consulting and other related services (accounting for approximately 60% of consulting revenue) is expected to outperform expectations, partially offsetting the decline in US (double-digit decline) and UK (moderate decline) businesses. (3) K9 business re-acceleration. Affected by course scheduling adjustments, suspension of offline services in key cities, and price competition from local small institutions, K9 revenue growth in the August quarter may temporarily fall below the full-year 20% target, but it is expected that as these negative factors subside, accelerated growth will resume from the November quarter onwards. (4) Profit margin resilience emerging. Cost control, improved profit margins for K12 and Dongfang Zhenxuan, plus narrowing losses in the cultural tourism business, are expected to offset pressure on overseas business profit margins, driving expansion of non-GAAP operating profit margins for fiscal 2026.