New Oriental:2Q result,topline beat,OP margin missed

2Q results - topline beat consensus but operating profit miss.

    2QFY18 revenue was USD467mn, up by 37% yoy, and beat consensus by 2%.

    The company reported a non-GAAP operating profit of loss of USD3.76mn (vs.

    positive operating profit of USD2.38mn in 2QFY17), which missed consensus by19%. In our view, this is likely due to continuous promotion and fast capacityexpansion in the past two quarters. For 3Q, management guided revenue growthof 35-38% yoy.

    2Q results highlights.

    Total student enrollments growth recorded 43% yoy, mainly driven by K-12enrollment growth of 52% yoy. K-12 revenue growth recorded 47% yoy, with UCanand POP Kids revenue delivering 45% and 51% YoY growth. The total numberof schools and learning centers was 940 as of Nov 30, 2017, an increase of 151yoy compared to 789, and a net increase of 41 qoq compared to 899 as of Aug31, 2017.