Guolian Securities: Supply and demand orderly repair, leading US education stocks steadily enter a new cycle

According to the financial news app Zhitong Finance, Guolian Securities released a research report stating that with the leading US stock education companies announcing their operating performance for this spring, the off-campus training industry has experienced about a year of performance transformation and post-epidemic recovery, officially entering a new operating cycle. The performance in the summer of 2025 is expected to be even more promising. Observing the performance of the leading companies in the past four consecutive quarters, the revenue growth rate in each quarter is gradually approaching the company's previous guidance and market expectations, indicating that the product form of educational services is gradually being determined, the expansion plan of business lines is becoming clearer, and the impact of non-educational businesses is diminishing. Although the operating profit side has been greatly disturbed by the stage expansion investment, the mid-term profit margin is entering a recovery process due to the stabilization of the operating environment.

Sector Overview: Stable Operating Environment, Enhanced Performance Certainty

With the leading US stock education companies New Oriental and TAL Education Group releasing their operating performance for this spring on July 31 and August 1 Beijing time respectively, the off-campus training industry has experienced about a year of performance transformation and post-epidemic recovery, officially entering a new operating cycle. The performance in the summer of 2025 is expected to be even more promising.

Observing the performance of the leading companies in the past four consecutive quarters, the revenue growth rate in each quarter is gradually approaching the company's previous guidance and market expectations, indicating that the product form of educational services is gradually being determined, the expansion plan of business lines is becoming clearer, and the impact of non-educational businesses is diminishing. Although the operating profit side has been greatly disturbed by the stage expansion investment, the mid-term profit margin is entering a recovery process due to the stabilization of the operating environment.

New Oriental: Diversified Development, Revenue Scale Reaches New High

New Oriental's revenue scale has actually surpassed the peak before the dual reduction, with an expected revenue of $4.31 billion in FY2024, equivalent to 101% of FY2021. Assessing capacity recovery, as of May 31, 2024, New Oriental had approximately 1,025 city schools and teaching points nationwide, about 61% of 2021. In terms of business lines, study abroad test preparation and consulting high school tutoring have become cash cows for the company, with revenue scale growth compared to 2021; new businesses such as EAST BUY and cultural tourism have started to show initial volume, and new educational businesses have achieved high double-digit growth throughout the year.

TAL Education Group: Technology-Driven, Accelerated Recovery of Offline Supply

TAL Education Group still has a significant gap in revenue scale compared to before the dual reduction, achieving $1.49 billion in FY2024, equivalent to 33% of FY2021; the company is currently growing at a faster pace, with a year-on-year growth rate of about 50% in USD and about 57% in RMB in 1Q FY2025. In terms of business lines, the K9 non-academic training business is the current focus of the company; in addition, the company has strategically invested in AI education large models and consumer electronics (smart learning machines), with relatively novel product forms; high school, overseas business, SaaS solutions, etc., are maintaining steady growth.

Optimistic about the innovative and high-quality growth of the education leaders in the new academic year

Currently, the regulation of off-campus training management has been advancing towards legalization, and the industry is developing in an orderly manner in a normalized regulatory environment; against the backdrop of the grand strategy of building a strong education country, new types of education services and intelligent products continue to emerge, expected to tap into and create family and social education needs. Leading companies, leveraging years of business model exploration experience and technological product development accumulation, are expected to achieve steady and remarkable high-quality growth in the new opportunity period We are optimistic about the prospects of the off-campus training industry and recommend focusing on leading national players with diversified growth such as New Oriental (EDU.US), technology-driven education services provider TAL Education Group (TAL.US), high-growth customer acquisition platform Gaotu Techedu Inc. (GOTU.US), and AI-powered digital content provider Youdao Inc. (DAO.US).

Risk Warning: Risks include policy uncertainties in the off-campus training industry, risks associated with corporate strategic transformation, lower-than-expected revenue and profit growth, as well as negative public sentiment and damage to brand reputation