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1、36,32,28,24,New Oriental,1,2,Deutsche Bank Markets Research,Rating Buy Asia China,Company New Oriental,Date 30 January 2013 Forecast Change,Consumer Education Services,Reuters,Bloomberg,Exchange Ticker,Price at 28 Jan 2013 (USD) Price target - 12mth (USD) 52-week range (USD),17.90 21.00 28.82 - 9.50
2、,EDU.N,EDU US,NYS,EDU,HANG SENG INDEX,23,672,FY2Q13 results: margin recovery,tougher than expected Core markets underperformance led by structural change New Oriental (EDU) recorded a top line of USD165.9m (+30% yoy) in FY2Q13, which was in line with consensus and our estimates, backed by the strong
3、 performance in the K-12 and VIP segments. However, student enrollments witnessed meager 7.2% yoy growth given 1) the underperformance in Beijing and Shanghai core markets, 2) significantly intensifying competition in the overseas test prep segment, and 3) troughed utilization. In the quarter, EDU a
4、lso kickstarted headcount reductions and expansion moderation. Margin erosion wider than expected as utilization hits trough,Vivian Hao Research Analyst (+852) 2203 6241 Paul Ginocchio, CFA Research Analyst (+1) 415 617-4207 Key changes,EDU recorded an EBIT loss of USD26.9m, missing the consensus es
5、timate of USD9.8m by a wide margin, but better than the loss we estimated of USD35.1m. We believe the deeper-than-pre-signaled margin dilution is mainly due to 1) structural shifts that led to de-leveraging and overseas test prep segment underperformance, 2) overhead inflation induced by overly aggr
6、essive expansion, and 3) one-time expenses incurred for SEC investigations.,Price target Sales (FYE) Op prof margin (FYE) Net profit (FYE),22.00 to 21.00 990 to 968 12.4 to 11.2 132.8 to 120.2 ,-4.5% -2.2% -9.5% -9.5%,Profitability recovery a thorny way down the road Despite healthy top-line guidanc
7、e by management (25-30% yoy) for FY3Q13, we expect EDU to continue to witness slowing enrollment growth in the near term due to the changing market landscape. We also expect robust ASP growth to sustain and margins to continue to face strong headwinds for the rest of FY13.,Price/price relative 20 16
8、,Reducing target price by 5% to USD21; maintaining Buy; valuation & risks Given the moderated enrollment growth outlook for overseas test prep and a,12 8 1/11,7/11,1/12,7/12,likely prolonged margin recovery process, we reduce our net revenue and,GAAP net income estimates by 2.2%/5.2% and 9.4%/6.7% f
9、or FY13/14,HANG SENG INDEX (Rebased),respectively. As such, we lower our target price by 5% to USD21, still based on a 20 x PE against CY13E GAAP EPS of USD1.02 and a PEG of 0.8x, on an earnings CAGR of 25% over CY12-15E. Our revised target price generates 17% upside potential while EDU has de-rated along with the education sector. We,Performance (%) Absolute HANG SENG INDEX,1m -6.4 4.4,3m 7.2 9.9,12m -27.2 15.5,maintain our Buy rating. Key risks: macro softness, continued underperformance in core markets, and unfavorable regulatory changes. Forecasts And Ratios,