JPMorgan to maintain new Oriental target of $40

Beijing Time July 22 Evening News, JPMorgan released its investment report today to maintain the new Oriental stock (nasdaq:edu) "overweight" rating, while maintaining a 40 dollar target share price unchanged.

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

New Oriental revenue and net profit exceeded expectations in fiscal year 2014, with net profit growth benefiting mainly from higher profits. New Oriental estimates that revenue gains in fiscal year 2015 will only be half the quarter of fiscal year 2014.

Revenue and profit margins exceed expectations: New Oriental's revenue rose 16% from a year earlier, 3% higher than our forecast, and 2% higher than Wall Street's forecast. Gross margin stability in 60.4%, sales, general services and administrative expenses accounted for the proportion of revenue reduced to 51%. The adjusted net profit rose 21% year-on-year, 10.3% higher than our forecast and 17% higher than Wall Street's forecast.

Fiscal year 2015 forecast: New Oriental forecast, the first quarter of the fiscal year 2015 will reach 412 million U.S. dollars to 427.5 million U.S. dollars, the year-on-year growth of 6% to 10%, below our expected year-on-year growth of 21%, also less than 2014 of the fiscal year 18.7%. The new Oriental says this is mainly due to a decrease in the number of educational centers (703 in May 2014, and 726 in May 2013) and the emphasis on profit margins rather than revenue.

Valuation: We continue to maintain the "overweight" rating of new Oriental equities while maintaining a 40 dollar target share price unchanged. (Li Ming)