New Oriental Education (EDU) PT Raised to $58.20 at BofA Securities

BofA Securities analyst Lucy Yu raised the price target on New Oriental Education (NYSE: EDU) to $58.20 (from $56.20) while maintaining a Buy rating.

The analyst comments "We raise our FY26/27E non-GAAP EPS 4%/5% on expectation of less-than-feared overseas revenue decline coupled with higher margins. We raise our POs 5%/5% to USD58.2/HKD45.4 on 17x FY26E P/E (unchanged). We reiterate Buy on New Oriental (EDU) with the following upcoming catalysts. (1) Potential upsize in shareholder returns. We see plenty of room for EDU to increase its current 50% of preceding year’s net profit (FY25 net profit was USD371mn) given its abundant cash position of USD4.8bn and strong free cash flow generation capability (USD500-700mn for FY26-28E). 100% return, if it were to be the case, would imply 4.5% yield for FY26E. (2) Better-than- feared overseas businesses. EDU guided for MSD% revenue decline in overseas business in Aug-Q and FY26. The revenue growth of non-US/UK consulting and other related services (c.60% of consulting revenue) could be better than expected, to partially offset decline in the US (of double-digit%) and UK (mildly). (3) Reacceleration of K9. Aug-Q K9 revenue growth is likely to be trailing below full year target of 20%, given class scheduling impact, temporary suspension of offline service in one important city, and price competition from smaller local company. But we expect K9 revenue growth reaccelerate from Nov-Q with the absence of above mentioned factors. (4) Margin resiliency. Cost control, improving margins in K12 and East Buy and reducing loss in culture tourism is likely to offset overseas business margin contraction, and lead to non- GAAP OPM expansion for FY26."

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