Everbright Securities released a research report stating that, considering intensified industry competition and an elevated business base, it has revised down its forecasts for NEW ORIENTAL-S's (09901) net profit attributable to shareholders for fiscal years 2026-2028 to $442 million, $514 million, and $582 million (down 8%, 8%, and 8% respectively). The corresponding EPS for FY26-28 is projected at $0.28, $0.33, and $0.37, with current P/E ratios of 22x, 19x, and 16x. As a leader in the education and training sector with sustained strong demand, the firm maintains its "Overweight" rating.

Key highlights from Everbright Securities' report include:

**Performance Overview**: In FY26Q1, NEW ORIENTAL-S reported net revenue of $1.523 billion, up 6.1% YoY, while net profit attributable to shareholders stood at $2.407 million, down 1.9% YoY. Non-GAAP net profit was $258 million, a 1.6% YoY decline. Core business growth remained steady, with accelerated revenue guidance for Q2.

**Revenue Breakdown**: 1) **Overseas Business**: Revenue from overseas test preparation rose 1.0% YoY, while overseas consulting revenue grew 2.0%, showing slower growth. Younger student segments in test prep and non-US/UK destinations (particularly Asian countries) performed better. 2) **Domestic Test Prep for Adults & College Students**: Revenue surged 14.4% YoY, maintaining robust growth. 3) **New Education Initiatives**: FY26Q1 revenue increased 15.3% YoY, though growth slowed due to intensified competition from summer "low-cost/free classes." With student re-enrollment in autumn, Q2 revenue growth is expected to rebound. Non-academic tutoring expanded to ~60 cities, serving ~530,000 enrollments, while smart learning systems/devices reached ~60 cities with ~452,000 active paid users.

**Outlook**: The company forecasts FY26Q2 net revenue between $1.132 billion and $1.163 billion, up 9%-12% YoY, marking a sequential acceleration. Full-year FY26 revenue guidance remains at $5.145–$5.390 billion (5%-10% YoY growth). Additionally, NEW ORIENTAL-S announced a three-year shareholder return plan, allocating ≥50% of prior fiscal year net profit to dividends/share buybacks, including a $190 million cash dividend and a $300 million share repurchase program, reflecting management confidence.

**Operating Efficiency**: FY26Q1 Non-GAAP operating profit rose 11.3% YoY to $336 million, with margins improving 1.0ppt to 22.0%. Cost optimization and operational efficiency gains drove the margin expansion, supported by prudent capacity expansion, OMO system adoption, and AI integration in education/operations. Further profit improvements are anticipated in FY26Q2 amid revenue acceleration and cost-saving measures.

**Risks**: Regulatory tightening, slower-than-expected new business expansion, and heightened industry competition.