FIRST SHANGHAI released a research report stating that, considering the stabilization of NEW ORIENTAL-S's (09901, EDU.US) core business and significant improvement in shareholder returns, it has assigned the company a FY26E net profit PE multiple of 25x. The target price has been adjusted to $74.5/ HK$57.9, with a maintained "Buy" rating.

On one hand, the macro environment's impact on overseas study services and the high base of new businesses have slowed the company's education business growth. On the other hand, the company continues to advance cost reduction and efficiency improvements, enhancing the utilization of its service outlets. It is expected that the company's Non-GAAP net profit margin will continue to improve.

Key points from FIRST SHANGHAI are as follows:

**Performance Overview** As of August 31, 2025, the company's FY26Q1 net revenue increased 6.1% YoY to $1.52 billion (in USD terms), slightly exceeding the previous guidance range ($1.46–1.51 billion). Operating profit stood at $310 million, up 6% YoY, while Non-GAAP operating profit rose 11.3% YoY to $336 million. Net profit attributable to shareholders declined 1.9% YoY to $240 million, with Non-GAAP net profit at $258 million, down 1.6% YoY. The slight decline was mainly due to dividend withholding tax and fluctuations in other income. The Q1 Non-GAAP operating profit margin reached 22.0%, up 1.0 percentage points YoY, reflecting solid operational performance.

**Divergent Performance in Education Business** By segment, FY26Q1 overseas test preparation and study abroad consulting services grew 1.0% and 2.0% YoY, respectively, while overseas youth test training showed faster growth, partially offsetting declines in adult test services. The college and adult test business increased 14.4% YoY. In new businesses, overall Q1 revenue rose 15.3% YoY, with non-academic tutoring enrollments reaching 530,000, up 9.5% YoY. The smart learning systems and devices segment recorded 452,000 active paying users in Q4, surging 39.9% YoY.

**FY26Q2 and FY26 Outlook** The company expects FY26Q2 (September 1, 2025–November 30, 2026) net revenue to range between $1.132 billion and $1.163 billion, representing 9%–12% YoY growth. Additionally, it maintains its FY26 (June 1, 2025–May 31, 2026) net revenue growth forecast, projecting total revenue of $5.145–5.39 billion, up 5%–10% YoY.

**Active Shareholder Return Plan** In July 2025, the company approved a three-year shareholder return plan, committing to distribute no less than 50% of the prior fiscal year's net profit to shareholders starting from FY26. Along with its earnings report, the company announced a FY26 shareholder return plan comprising a $190 million cash dividend (to be paid in two installments, expected in December 2025 and June 2026) and a $300 million share repurchase (within the next 12 months), resulting in a combined return rate of approximately 5%. The total dividend and buyback plan amounts to $490 million.