EDU - New Oriental Education: Emerges Stronger After Regulation Reset Initiate With Buy

2024-04-10 08:18:59 ET

Summary

• New Oriental Education revived from 2 years of policy-induced downturn with a stronger competitive position to tap into China’s vast after-school tutoring market.
• Investors have yet to fully recognize the business potential of EDU’s large and loyal client base, which it accumulated over 3 decades.
• EDU is undervalued at 21x FY25, with EPS growing at over 40%. 3Q24 earnings, due on April 20th, can lead to another leg up.
• The recent price pullback for EDU is a healthy correction, easing pressures from profit-taking pressures from crowded long positions.

Key Investment Thesis

I initiate New Oriental Education & Technology Group Inc. ( EDU ) at Buy. Despite strong share price rally in 2023, I see significant upside remains, driven by its robust earnings growth and its ability to generate new growth via monetizing its large client pool, whereas current valuation reflects consensus views that EDU's revenue growth will decelerate rapidly as its existing businesses matures....

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