| Valuation method | Value, HK$ | Upside, % |
|---|---|---|
| Artificial intelligence (AI) | 4986.50 | 10165 |
| Intrinsic value (DCF) | 620.06 | 1176 |
| Graham-Dodd Method | 262.90 | 441 |
| Graham Formula | 377.20 | 676 |
New Oriental Education & Technology Group Inc. is a leading private education provider in China, offering comprehensive educational services under the renowned New Oriental brand. The company operates through three main segments: K-12 After-School Tutoring (AST), Test Preparation and Other Courses; Online Education; and Other Services. New Oriental provides test preparation courses for international exams like TOEFL, IELTS, and SAT, along with after-school tutoring for Chinese students seeking to improve their academic performance. The company also offers language training in English and other foreign languages, operates a full-time private school in Yangzhou, and provides overseas study consulting services. With a physical network of 122 schools and 1,547 learning centers across China as of 2021, complemented by robust online learning platforms, New Oriental has established itself as a dominant player in China's education sector. The company has successfully navigated regulatory changes in China's private education industry by pivoting its business model while maintaining its market leadership position and brand recognition.
New Oriental presents a compelling investment case as China's largest private education provider with strong brand recognition and a diversified service portfolio. The company has demonstrated resilience in navigating regulatory changes, maintaining profitability with HKD 309.6 million net income and generating strong operating cash flow of HKD 1.12 billion. With a conservative balance sheet featuring HKD 1.39 billion in cash against HKD 662 million debt and a beta of 0.236 indicating lower volatility than the market, New Oriental offers defensive characteristics. However, investors should remain cautious about ongoing regulatory risks in China's education sector and potential limitations on growth in certain segments. The company's ability to adapt its business model while maintaining its extensive physical and digital infrastructure positions it well for sustainable growth in the evolving Chinese education market.
New Oriental maintains a dominant competitive position in China's private education sector through its extensive physical network, strong brand equity built over nearly three decades, and comprehensive service offerings. The company's competitive advantages include its nationwide presence with 122 schools and 1,547 learning centers, creating significant barriers to entry for new competitors. Its diversified portfolio spanning test preparation, K-12 tutoring, language training, and overseas consulting services provides multiple revenue streams and cross-selling opportunities. The strong brand recognition, particularly in test preparation for international exams, creates customer loyalty and pricing power. However, the competitive landscape has intensified following regulatory changes that forced many smaller players to exit the market, leaving larger, well-capitalized competitors to capture market share. New Oriental's scale advantages in curriculum development, teacher training, and digital platform infrastructure provide cost efficiencies that smaller rivals cannot match. The company's successful transition to compliant business models following regulatory changes demonstrates operational flexibility and management execution capabilities. While facing competition from both traditional education companies and emerging online education platforms, New Oriental's integrated offline-online approach and trusted brand position it favorably in the evolving education ecosystem.