On October 24th, the Hong Kong stock market closed with the Hang Seng Index falling 1.3%, the Science and Technology Index falling 2.64%, and the New Oriental S (09901. HK) stock price of HKD 46.8, down 6.49%. Prior to the US stock market, as of press time, the stock price of New Oriental (NYSE: EDU) rose slightly by 0.03% to $61.5.
On the news front, New Oriental released its first quarter performance for the fiscal year 2025 ending on August 31, 2024. According to the financial report, New Oriental's net revenue for the first quarter of fiscal year 2025 increased by 30% year-on-year to $1.435 billion, slightly lower than market expectations and earlier guidance of 31% to 34% year-on-year growth. It is expected that the net revenue for the second quarter will be between 851.4 million US dollars and 871.8 million US dollars, which is lower than expected. Several institutions have lowered their target prices accordingly.
In terms of core performance, excluding Dongfang Zhenxuan's self operated products and live streaming e-commerce business, New Oriental achieved a year-on-year increase of 33.5% in net revenue to 1.2782 billion US dollars, a year-on-year increase of 58.4% in operating profit to 303.1 million US dollars, and a year-on-year increase of 48.4% in net profit attributable to shareholders to 245.4 million US dollars in the fiscal quarter.
New Oriental's business mainly consists of traditional business and new business. According to the financial report, in terms of traditional business, New Oriental's overseas exam preparation and overseas consulting business revenue increased by about 18.8% and 20.7% respectively year-on-year in the quarter; The revenue from domestic exam preparation services for adults and college students increased by approximately 30.4% year-on-year; The high school business revenue increased by about 20% to 21% year-on-year.
In the new business, non disciplinary tutoring services contributed more than half of the revenue, operating in about 60 cities. A total of about 484000 students enrolled in this fiscal quarter, a year-on-year increase of 11% and a year-on-year increase of 48%. The top ten cities in China contributed over 60% of the revenue to this business.
Yang Zhihui, Executive President and Chief Financial Officer of New Oriental, stated that the year-on-year growth rate of enrollment in non academic tutoring services this quarter was lower due to the earlier opening of the summer enrollment window compared to previous years. This means that New Oriental counted more people in the fourth quarter of the previous fiscal year. If we combine the enrollment in the fourth quarter of last fiscal year with the first quarter of this fiscal year, the growth in enrollment will be normal. Yang Zhihui stated that although the fourth and second quarters will be the off-season, the company is quite confident in its full year revenue growth and may even see an acceleration in revenue growth in the third and fourth quarters.
In addition, the New Oriental intelligent learning system and device business accounted for about one-third of the new business revenue in this quarter, and this part of the business has been carried out in about 60 cities. The active paying users in this quarter were about 323000, and the top ten cities in China contributed about 55% of the revenue to this business.
New Oriental CEO Zhou Chenggang said, "This quarter, we closely monitored the expansion of teaching spaces to match revenue growth and operational efficiency. As of the end of this quarter, the total number of schools and learning centers increased to 1089. We are constantly striving to improve the OMO teaching system and apply new technologies to enhance the user experience of educational courses
During the financial conference call for New Oriental's 2024 fiscal year, Yang Zhihui stated that the decision to divest from his peers was made cautiously after extensive transparent communication between the company and Dong Yuhui. This financial report disclosure did not further involve Dong Yuhui, but it can be seen that Dongfang Zhenxuan's operating losses for this fiscal quarter. Data shows that in the first quarter of fiscal year 2025, New Oriental's operating profit increased by 42.9% year-on-year to $293.2 million. After excluding Dongfang Zhenxuan's self operated products and live streaming e-commerce business, the operating profit increased by 58.4% year-on-year to $303.1 million.
Regarding the divested e-commerce business, Zhou Chenggang stated that Dongfang Zhenxuan has rapidly expanded its own brand products within two years, establishing 488 SKUs in different categories. The company strategically expands into offline channels and shares a common vision to reach a wider consumer base in pursuit of sustainable growth.
In addition, Zhou Chenggang emphasized that the company's newly integrated cultural and tourism business had significant growth in the quarter. The first quarter of the 2025 fiscal year is during the peak period of summer tourism, and the revenue from cultural and tourism business is about 90 million US dollars, approximately 640 million yuan. Mainly through organizing high-quality overseas study tours, as well as domestic study camps for K-12 and college students, and organizing multiple top-level cultural and tourism projects for all age groups (including middle-aged and elderly people) in 30 characteristic provinces in China and internationally. Zhou Chenggang stated that he believes this new business will bring meaningful revenue contributions starting from this fiscal year.
The management expects the company's total revenue (excluding Dongfang Zhenxuan) to increase by 25% -28% year-on-year to 851-872 million US dollars in the next quarter. The revenue growth rate has slowed down, mainly due to seasonal factors and macroeconomic headwinds affecting some high customer value businesses. It is expected that the annual revenue growth for the fiscal year 2025 will remain at about 30% year-on-year growth (excluding Dongfang Zhenxuan).
After the release of New Oriental's performance report, Citigroup released a research report stating that the management guidance of New Oriental was relatively conservative, but in line with the bank's expectations, the target price was lowered from HKD 83 to HKD 64. Goldman Sachs has lowered its target price for New Oriental's H-shares to HKD 68, believing that the company is still in the early stages of years of scale and profit expansion in a relatively stable policy environment. Dahe believes that New Oriental's revenue growth and operating profit margin guidance for the next fiscal quarter are weaker than expected, and has lowered its H-share target price from HKD 78 to HKD 70.