Deutsche Bank launches research report today to maintain new Oriental buying rating

Summary: View the latest quotes Beijing time February 21 morning, Deutsche Bank released a study today, the New Oriental (nyse:edu) stock rating remained unchanged, while its target price from 31 U.S. dollars to 19.4% to 37 U.S. dollars. Here is the report

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In the morning of February 21, Beijing time, Deutsche Bank released its research report today, keeping the stock rating of New Oriental (nyse:edu) unchanged, while raising its target price from $31 to $19.4% to $37.

The following is a summary of the contents of the report:

Review of fiscal year 2014: significant leverage; online business is still in its infancy

-strong performance with significant leverage:

The second quarter of the new Oriental 2014 strong performance, net revenue of 208.3 million U.S. dollars (up 26%), compared to our expectations and Wall Street analyst average forecast of 2% and 1% respectively, mainly because of: 1 registered strong growth (up 11.8%), 2 of the product average price steadily increased.

In addition, the implementation of new Oriental in its rationalization strategy has been strong, thus transforming into a significant lever (the operating profit margin for the period not under US GAAP is 3%, usually 0). As a result, the US depository receipts for the second quarter, which did not follow us GAAP, were 0.06 dollars better than we expected-$ 0.04 trillion and Wall Street analysts ' average forecast of $0.01 trillion.

At the same time, we believe that New Oriental's new online education program is still in its infancy and may be susceptible to competition. We keep the new Oriental stock rating in the "buy" unchanged.

-enrolment growth in primary and secondary education curricula:

The total number of students enrolled in the second quarter of the new Oriental 2014 was 565,100 (an increase of 11.8% per cent), with the main impetus coming from primary and secondary school counseling (registered growth of 16% per cent). The number of registered candidates increased 30% year-on-year, while the number of registered overseas Test services declined slightly. As a result, education revenues in the second quarter were 17% higher than we had expected.

In addition, sales of products to the higher prices of small classes, but also to promote the second quarter of new Oriental revenue growth stronger than expected one reason.

-Continue to implement rationalization strategies; online business may face challenges:

New Oriental continued to implement its rationalization strategy, the second quarter of the study center only a net increase of 5, a total of 11 closed. Strict cost control measures have led to a 12% lower total operating expenditure for the quarter than we expected. At the same time, New Oriental is also discussing new plans for its online strategy, and we believe the new plan will focus on products for adults, which, because of its higher price competitiveness and greater coverage, could erode the offline business of the new Oriental.

-The target price is raised from USD 31 to $19.4% to $37; Risk:

We maintain the same revenue forecasts for New Oriental 2014 and 2015, as well as 11% and 9% per cent of the net profit forecasts for the US general accounting standards.

The new target price we set for new Oriental shares is 1 times times the growth rate of the market (unchanged), in the 2014 fiscal year to 2016, 23% (above 22%) grew at a compound annual growth rate of 23%, based on the 2014-fold (previously 23 times-fold) P/E ratio set per share earnings forecast for the fiscal year 22 times.

Risk: Competition from market newcomers who focus on providing online products.