New Oriental Earnings: Beats Expectations; Raise Fair Value on Better Outlook

New Oriental’s fiscal third-quarter (ending February 2023) results beat management guidance and our expectations thanks to strong demand for high school tutoring and overseas-related business. We believe high school tutoring benefited from a friendlier regulatory environment and overseas-related business was helped by pent-up demand. We think the positive trend will carry into fiscal 2024. As such, we have raised our revenue forecast to USD 2.96 billion in fiscal 2023 and USD 3.56 billion in fiscal 2024 from USD 2.76 billion and USD 3.31 billion, respectively. We have also increased our earnings estimates to USD 186 million in fiscal 2023 and USD 244 million in fiscal 2024 from USD 122 million and USD 177 million, respectively. As a result, we raise our fair value estimate to USD 36/HKD 28 from USD 32.50/HKD 25.50.