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<Research>M Stanley Reduces TP of New Oriental (EDU.US) to US$87; EAST BUY (01797.HK) Drags Margins
Recommend 4 Positive 13 Negative 5 |
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Morgan Stanley commented in a report that NEW ORIENTAL-S (09901.HK)'s increased investment in EAST BUY (01797.HK) has led to margin compression in 3FQ24, which will continue to affect 4FQ24 and FY25. However, the broker expected NEW ORIENTAL's education business to maintain strong growth and profit expansion in the next financial year. The broker lowered its earnings forecast on NEW ORIENTAL for FY24-FY26 by 13-14%. Morgan Stanley also dropped its target price on NEW ORIENTAL's American Depositary Receipts (EDU.US) to $87 from $95, but maintained its Overweight rating as the company's valuation remained attractive after the price adjustment. Morgan Stanley explained that its profit forecast cut on NEW ORIENTAL is mainly reflective of the drag on margins from EAST BUY, but the improvement in revenues and margins of NEW ORIENTAL's core education business remained unchanged. The broker believed that leading education organisations such as NEW ORIENTAL would benefit from a stable regulatory environment for education, as well as a lack of supply of quality education due to strong demand. This trend is expected to continue over the next 2-3 years. Supply and demand dynamics in the education sector are more favourable than in other sectors. AAStocks Financial News |
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