Shares of New Oriental Education & Technology (EDU) surged 6.10% in pre-market trading on Monday, following a positive research report from Daiwa and the announcement of a new shareholder return plan. The education company's stock has been boosted by improving business trends and analyst optimism, signaling renewed investor confidence in the Chinese education sector.

Daiwa, in its recent research report, expressed confidence in New Oriental's business stability. The firm highlighted improvements in the K-9 autumn student retention rate and noted that the overseas exam preparation business is no longer deteriorating. These factors contribute to a more positive outlook for the company's overall performance. In light of these developments, Daiwa raised its revenue forecasts for New Oriental's FY2026-2028 by 1% to 2% and increased earnings per share forecasts by 0.2% to 5%. The firm reiterated its "Buy" rating on the stock and raised the target price from HK$43 to HK$49, further fueling investor optimism.

Adding to the positive sentiment, New Oriental announced plans to return at least 50% of the previous fiscal year's net profit attributable to shareholders through dividend distributions or share buybacks, starting from FY2026. Daiwa analysts believe this shareholder return ratio could potentially be much higher, possibly reaching high double-digit percentages or even exceeding 100%. This commitment to shareholder value is seen as a key positive catalyst for the stock, contributing to the pre-market rally. The surge in New Oriental's stock also comes amid a broader uptick in Chinese ADRs, as recent data showed a rebound in China's industrial profits, easing concerns over corporate earnings pressure in the world's second-largest economy.