Cailian News, August 3 1 Daily (Reporter Cheng Mengqi) "If you are confused by the current uncertainty or frustrated by the uncontrollable future, then come to the East and choose a live studio." This sentence comes from Dong Yuhang's mouth, which is used to introduce the new book "Resilience" by Zhang Xiaomeng, vice president of cheung kong graduate school of business, and seems to express the voice of New Oriental in transition. Moreover, the word "New Oriental Transformation" appeared in the prominent position of the video title. On August 30th, New Oriental rose nearly 28% to close at HK$ 29. 15, and its share price reached a new high since June 17. On the afternoon of August 3 1 day, the share price continued to rise by 7%, and once stood at a high of HK$ 30.95, with a market value of over HK$ 30 billion. For New Oriental, which is in the process of "transformation", its share price has risen 5.5 times in three months, and its market value has returned to 30 billion yuan. Does this mean that the transformation is successful? With the live broadcast of New Oriental Online, can the stock price still stand above HK$ 30? Revenue fell by 40% and employees fell by 90%. The recent share price rise of New Oriental Online is related to its fiscal year 2022 annual report, which also revealed some progress after the transformation. As of May 3, 2022, the total revenue of New Oriental Online in fiscal year 2022 was 899 million yuan, down 36.7% year-on-year; The net loss was 534 million yuan, a year-on-year decrease of 67.8%; Non-K 12 business has achieved profitability. New Oriental Online said that in the second half of 20021,it began to explore the live e-commerce business. Among them, the new live e-commerce business "Oriental Select" with agricultural products as the core has made remarkable progress. In the financial report, the income of New Oriental Online K 12 education and preschool education declined most obviously. Affected by the "double reduction" policy, the education income of New Oriental Online K 12 decreased by 62% to 300 million yuan, and the income of preschool education decreased by 76% to190,000 yuan. At the same time, the university education sector has become the largest source of income for New Oriental Online, with a revenue of 520 million yuan in fiscal year 2022, down 6% year-on-year. It is worth noting that New Oriental Online laid off a large number of employees during the reporting period. As of May 3, 2022, it had 9 10 full-time employees and 390 part-time employees, compared with 6,437 full-time employees and 5,044 part-time employees in the same period last year. The recent performance of Oriental Select is not reflected in the annual report. New Oriental's online live e-commerce business exceeded expectations, and "Oriental Select" has achieved profitability and positive cash flow. It is expected that from FY 2023, "Oriental Select" will probably become the main growth driver of New Oriental Group. New Oriental Online also said in the financial report that in view of the potential of new e-commerce business, New Oriental Online has shifted its strategic focus to the development of this new branch. It is worth noting that the live e-commerce business broke out in June, and the latest annual report was as of May 3 1. Therefore, the performance of the Oriental Select Live Room after popularization is not included in the reporting period. Yin Qiang, CFO of New Oriental Online, said in the fiscal year 2022 performance conference call, "Teacher Yu said that Oriental Select was allowed to lose 654.38 billion yuan a year, but I didn't expect to make a profit this year." Yin Qiang said that in the past three months, the eastern GMV should be around 2 billion, and the average daily GMV should be around 2 1 10,000. The latest financial report shows that the gross profit margin of live broadcast business is 37.8%. The profit rate is much higher than that of pure live broadcast or MCN company, mainly because there is no comparable business model in the market. It is not a pure live broadcast company, nor an MCN company, thus saving the market cost and anchor sharing cost. It is worth mentioning that Oriental Select recently launched an independent App, which has been launched on major application platforms. According to third-party data, the cumulative total download volume of the app is close to 200,000. Yin Qiang said that at present, Tik Tok is still the mainstay of Oriental Selection, because Tik Tok has great traffic and future development space, but the company's overall strategy in the future will still be multi-platform, multi-channel and multi-product. Some insiders also said that the strategic significance of choosing app in the East is greater than the economic benefits. Is the valuation of New Oriental Online higher than HK$ 30? Judging from the current stock price performance, the transformation of New Oriental Online is successful. On June 1 day, 2022, the opening price of New Oriental Online was HK$ 3.7. On the afternoon of August 3rd1Sunday, its share price reached HK$ 30, which increased 5.5 times in three months. But the historical peak of New Oriental Online in 2020 is HK$ 43.45. Many investors in the market are wondering whether New Oriental Online, which costs more than HK$ 30, is expensive enough when the "double drop" affects the liquidation. After all, after the results were released, a number of brokers raised the target price of New Oriental Online, but the highest price was only 2 prefixes. For example, CICC raised the target price of New Oriental Online to HK$ 26. According to the latest research report of CICC, New Oriental Online has completed the transformation and adjustment, and will continue to focus on live e-commerce, university business and institutional business operations in the future, with live e-commerce business as the main growth driver. Its retained business was profitable in the past. The live broadcast e-commerce business has the characteristics of not buying traffic, lower anchor cost than traditional multi-channel (MCN) institutions, and higher profitability of self-operated products. Banks believe that the company's profitability is more certain. Wan Hongyuan Securities said that the impact of "double drop" on New Oriental Online has been completely eliminated, and the Oriental selection and sub-live broadcast rooms are expected to maintain high growth. At the same time, it is difficult for employment to stimulate the demand for academic qualifications, which in turn will drive the demand for examinations and training to pick up. It is expected that the business of New Oriental online college students will stabilize and rebound. China Merchants Securities said that it will continue to be optimistic about the business model chosen by the East. In addition, due to the weak growth prospects, it lowered the target price-earnings ratio of education business. The overall target price was raised from HK$ 20.9 to HK$ 22.8, maintaining a neutral rating. Wan Hongyuan said that through SOTP valuation, under the neutral assumption (the live e-commerce business adopts 9 times PS (the increase of self-operated proportion drives the increase of income) and the college students' business adopts 15 times PE), the target enterprise value of New Oriental Online is 26.493 billion Hong Kong dollars, corresponding to the target price of 26.43 Hong Kong dollars. The share price of online New Oriental has exceeded the latest target price given by the above-mentioned brokers, and the share price has not been radical enough after reaching the peak of HK$ 30, and has retreated to HK$ 29. For a long time to come, is it too early to successfully transform New Oriental Online, which relies on live broadcast services to support its stock price and valuation? In this regard, industry insiders said that it depends on whether the gross profit margin of Oriental Select can be stabilized at the current level in the next nine months and whether GMV can surpass the performance in the past three months. It also depends on the passenger flow of the live broadcast studios and apps selected in the east and the proportion of self-operated goods.