J.P. Morgan gives new Oriental an initial rating of $35

Beijing time May 8 Evening News, JPMorgan released its investment report today, gave New Oriental stock (nasdaq:edu) "overweight" initial rating, the target price set to 35 U.S. dollars.

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

"Overweight" initial rating: We give the new Oriental stock "overweight" initial rating, the target share price of 35 U.S. dollars, which means that the company's current share price still has more than 50% room to rise. We expect the new Oriental 2014 to 2016 fiscal year to maintain more than 20% of the annual composite growth rate, mainly thanks to the number of students and the average sales price growth.

Huge untapped markets: As China's per capita income grows, and "a couple only has one child" policy, it means that Chinese families have more money for education. For many years, the new Oriental business has been growing, because its English training, preparation and K-12 education market share of less than 5%. We anticipate that by providing online services (free for offline students), the ability of new Oriental to charge offline training services for the next 12 months will increase. In addition, operating leverage will also promote new Oriental profit margin growth.

Equities have underperformed: New Oriental shares have fallen 30% per cent since the record hit in January this year. The fall was mainly influenced by lower-than-expected revenue gains in the third quarter of the new Oriental fiscal year 2014. We expect revenue and profit gains to rebound in the 2015 fiscal year for new Oriental.

Valuation: We gave the new Oriental stock a "overweight" initial rating and set the target price at $35 trillion.