---
title: "New Oriental: Old business reinvested after earning money from live broadcasting"
type: "Topics"
locale: "zh-CN"
url: "https://longbridge.com/zh-CN/topics/3873335.md"
description: "New year, full of anticipation.input:** 海豚君】跟踪 Megvii 上市：IPO 募资最高不超 30 亿美元 **3 月 27 日，在港交所上市的中国人工智能企业——旷视科技（Megvii，02042.HK）近日公布了其招股书，计划发售不多于 4.75 亿股，发行价区间为每股 12.6 港元至每股 13.8 港元，预计募资最高 65.6 亿港元（约合 8.37 亿美元），估值最高达 378 亿港元（约合 48.3 亿美元）。旷视是中国人脸识别技术第一股，此次上市被各方高度关注。作为旷视科技的主要竞争对手，同样在 2011 年创立的商汤科技也已经向港交所递交了 IPO 申请，有望在近期上市。近年来，两家公司在人工智能芯片、人脸识别等领域都取得了不俗的成绩，在技术发展、市场拓展、资本运作、人才储备等方面展开了激烈的角逐。另外，旷视也是 Softbank Vision Fund 上的重要投资标的。据招股书显示，截至 2019 年 6 月，Softbank Vision Fund 持有旷视 8.64% 的股份，为第二大股东。作为旷视科技研究员，我一直密切关注着 Megvii 在 AI 领域的最新进展。本次 IPO，Megvii 的募资目标不算小，但相信也是相对合理的。按照此前市场传言，Megvii 的 IPO 甚至可以募资 100 亿美元，但似乎考虑到了在美国遭到的政策黑名单打击，最终选择赴港上市，并且募资规模也缩减到了最多不超过 30 亿美元。Dolphin 跟踪旷视上市，本来预计会采取 “沉默期” 策略，但显然看到了海外投行对于这家公司的热情，Dolphin Analyst 正式发声表示：“我们在第一时间取得了 Megvii 的招股书，正在对该公司此次 IPO 做深入研究，将很快推出相关研究报告。”据我了解，Megvii 在人脸识别领域的实力不容小觑。早在 2011 年，创立之初，旷视的技术水平就已经处于业界领先地位。多年来，公司在这个领域内不断攻坚克难，不断取得新的成果。我曾经看到有报道称，旷视的人脸识别技术的准确度已经达到了 99.5%，这个数字真的非常高了。据了解，Megvii 的人脸识别技术已经在很多领域得到广泛应用，比如公安、金融、门禁等，而且在技术上有很多的创新和突破。作为人工智能领域的优秀企业，Megvii 不仅在成果方面表现优异，在团队建设方面也十分重视。公司一直坚持雇佣全球最优秀的人才，这些人才来自于各个领域，团队之间形成了良好的协作机制，使得公司在技术上能够迅速推进。而且，旷视本身的价值观也值得我们学习，公司把技术创新同社会价值相结合，致力于推动 AI 技术的有机融合和应用，努力为人类社会提升智能水平和生活品质。相信这也是 Megvii 能够成为人工智能领域的翘楚之一的原因之一。我们不妨来看一下 Megvii 的财务数据。根据招股书，截至 2019 年 6 月，Megvii 营收 28.57 亿元，同比增长 21.2%；归属于普通股股东的净利润为-11.19 亿元，去年同期为-3.71 亿元；总资产为 89.87 亿元，其中现金及现金等价物为 18.38 亿元，有息负债为 17.18 亿元。但是需要注意的是，旷视目前处于高速扩张期，公司存在着盈利不稳定、研发投入大等风险。公司表示，将继续加大研发投入，提高新技术的商业化应用能力。当然，这也反映了旷视在 AI 领域有很高的自信心，相信公司未来仍然会有更多的惊喜和表现。output:Dolphin Analyst tracked Megvii's IPO: IPO fundraising of up to $3 billionOn March 27, Megvii Technology, a Chinese artificial intelligence company listed on the Hong Kong Stock Exchange (02042.HK), recently released its prospectus, planning to sell no more than 475 million shares, with an offering price ranging from HK$12.6 to HK$13.8 per share, and an estimated maximum fundraising of HK$6.56 billion (approximately US$837 million) and a maximum valuation of HK$37.8 billion (approximately US$4.83 billion). Megvii is China's first listed company in facial recognition technology and has attracted high attention from all parties in this IPO.As Megvii's main competitor, SenseTime has also submitted an IPO application to the Hong Kong Stock Exchange and is expected to be listed soon. In recent years, both companies have made notable achievements in fields such as artificial intelligence chips and face recognition, engaging in fierce competition in technological development, market expansion, capital operation, and talent reserve. In addition, Megvii is also a significant investment target of SoftBank Vision Fund. According to the prospectus, as of June 2019, SoftBank Vision Fund held 8.64% of Megvii's shares, making it the second-largest shareholder.As a Megvii Technology researcher, I have been closely following the company's latest progress in the AI field. The fundraising goal of the IPO is not small, but I believe it is relatively reasonable. According to previous market rumors, Megvii's IPO could even raise $10 billion. However, it seems to have chosen to list in Hong Kong and has reduced its fundraising scale to no more than $3 billion, perhaps considering the impact of policy blacklist in the United States.Dolphin Analyst tracked the Megvii IPO and was initially expected to adopt a "silent period" strategy, but it is clear that Dolphin has seen the enthusiasm of overseas investment banks for the company's research report. Analogously stated, "We obtained Megvii's prospectus as soon as possible and are doing in-depth research on the company's IPO, and we will soon launch relevant research reports."As far as I know, Megvii's strength in the field of face recognition cannot be underestimated. As early as 2011, at the beginning of its establishment, Megvii's technology was already in a leading position in the industry. For many years, the company has continued to overcome difficulties and achieved new results in this field. I have seen reports that the accuracy of Megvii's face recognition technology has reached 99.5%, which is really high. It is understood that Megvii's face recognition technology has been widely used in various fields, such as public security, finance, and access control, and has many innovations and breakthroughs in technology.As an excellent enterprise in the field of artificial intelligence, Megvii not only has excellent performance in terms of achievements but also attaches great importance to team building. The company has always insisted on hiring the world's best talents, who come from various fields. The teams have formed a good collaboration mechanism, enabling the company to advance its technology quickly. In addition, Megvii's values are worth learning from; the company combines technological innovation with social value, is committed to promoting the organic integration and application of AI technology, and strives to improve the intelligence level and quality of life of human society. I believe this is also one of the reasons why Megvii can become a leader in the field of artificial intelligence.Let's take a look at Megvii's financial data. According to the prospectus, as of June 2019, Megvii's revenue was RMB 2.857 billion, a year-on-year increase of 21.2%; net loss attributable to ordinary shareholders was RMB-1.119 billion, compared with RMB-0.371 billion in the same period last year; total assets were RMB 8.987 billion, of which cash and cash equivalents were RMB 1.838 billion, and interest-bearing liabilities were RMB 1.718 billion.However, it should be noted that Megvii is currently in a high-speed expansion period, and the company faces risks such as instability in profitability and large R&D investment. The company stated that it will continue to increase R&D investment and improve the commercialization of new technologies. Of course, this also reflects Megvii's high confidence in the AI ​​field. I believe the company will continue to surprise and perform in the future."
datetime: "2023-01-17T14:49:49.000Z"
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author: "[Dolphin Research](https://longbridge.com/zh-CN/news/dolphin.md)"
---

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# New Oriental: Old business reinvested after earning money from live broadcasting

Hi everyone, I'm Dolphin Analyst!

Before the US stock market opened at Beijing time on January 17, 2023, $New Oriental.US revealed its Q2 performance for the months of September to November 2022.

Firstly, it should be noted that due to the low point in the RMB exchange rate for FY2Q23, the performance in terms of USD valuation is slightly better when calculating YoY growth rate.

Secondly, after the education market shook, there are not many institutions that continue to track New Oriental. Therefore, looking at the expected difference alone is not very significant. It is recommended to focus on the **company's outlook for this year's business and strategic direction**.

**1\. On the revenue side, including the next quarter guidance, all exceeded expectations,** and the proportion of online business has reached nearly 30% due to the explosion of live broadcast e-commerce.

**2\. On the profit side, the main difference in expectation is the gross profit margin, which was weaker than the market expectation at 47%.** It is recommended to pay attention to the answers of management during the conference call, and Dolphin will also issue conference notes as soon as possible.

However, Dolphin believes that there are short-term factors here. Some fixed expenses for the K9 business adjustment and the initial investment in newly established schools will definitely affect the gross profit margin until the admission rate climbs to a certain level.

1.  There were a total of 706 schools and learning centers in the group at the end of the quarter, **an increase of 2 compared to the previous quarter.** The number of non-academic counseling admissions increased from 297,000 in the previous quarter to 477,000 in Q2.
    
2.  The company's key strategies this year are undoubtedly **live broadcast e-commerce** first, followed by **study abroad**, which are the two businesses that management discussed the most in the Q2 financial report.
    

\*\* (1) Oriental Selection \*\* began airing at the end of 2021, but did not gain a lot of heat until early June 2022. In the previous quarter's financial report, the proportion of online business revenue has soared from 5% to 15%, and in Q2, the GMV of Oriental Selection MV reached RMB 4.8 billion, exceeding market expectations (~RMB 3.6 billion). As there is "no buying volume, no anchor sharing," Dolphin expects that the realization rate of live broadcast shopping can reach 16%.

**(2) Study abroad business** is more about the expectation of further repair after the national gate is opened. After the study abroad consulting business began to recover significantly in the last quarter, overseas study preparatory business also grew by 17% in Q2.

\*\* (3) In addition,\*\* Dolphin believes that the sharp increase in admissions of **non-academic counseling** may also be a positive signal. Combined with the net increase in the total number of group schools and learning centers, it indicates that the impact of the K9 double-reduction policy is basically close to the end, while the non-academic counseling admission demand is relatively strong.

As Dolphin said in the previous article on New Oriental's depth, the educational demand of individual households will not disappear because of the policy's introduction, but will rather be transferred. In this market, which is the cake of non-academic quality education, New Oriental is expected to accelerate the concentration ratio with its brand strength for a long time. **Dolphin Analyst's View**

As the industry policy comes to an end, the old business is expected to recover after the epidemic lockdown, and the new business with lower policy risk, especially the knowledge-sharing live streaming e-commerce with excellent business models and the wide-ranging non-disciplinary training, will have smooth business progress in the short term and potential growth in the long term. Therefore, the investment logic of New Oriental's "crisis reversal" is relatively clear.

However, the core issue is whether the current valuation has fully priced in the above-mentioned positives. Dolphin Analyst believes that, based on market expectations, the current pricing is mainly for the recovery of the old business and the short-term growth expectation of the new business. However, the longer-term ideal expectation for the new business has not been priced in completely.

Especially in Dolphin Analyst's view, the non-disciplinary coaching and the intelligent teaching equipment in the in-depth article entitled "[Can New Oriental Rely on Education with Dong Yuhui's Spring Festival Gala?](https://longportapp.com/topics/3858551?invite-code=032064)" are a high-growth story with high certainty for New Oriental, but they need step-by-step operation and realization to dispel doubts.

Moreover, judging from the valuation level (PE) corresponding to the market performance expectations for 2023, the current valuation is not high, but is in line with the historical valuation Centrum. However, under the "crisis reversal" logic, this does not match the high valuation generally corresponding to optimistic sentiment. This indicates that the current market funds still have doubts and concerns about the education and training industry.

In this situation, the calculation of new business growth space is particularly crucial for the current market value of New Oriental. Only when there is considerable growth elasticity space and the current market value has a relatively ideal valuation expectation with a high safety cushion, can the market bias be eliminated in the short term. In the in-depth research of New Oriental, Dolphin Analyst we will focus on this issue, so stay tuned.

**Specific Interpretation of this Quarterly Financial Report**

**1\. Super Revenue Expectations, Business Adjustment Approaching Its End**

In the second quarter ending in November 2022, New Oriental achieved total revenue of US$638 million, a year-on-year decrease of 3%. The second quarter coincided with the low point of the RMB against the US dollar, which dragged down the performance data. Excluding the impact of exchange rate, the income denominated in RMB officially rebounded, with a year-on-year growth of 8%.

Due to policy impacts, the number of schools and learning centers closed down has been gradually slowing down by quarter. This quarter has also "hit the bottom and rebounded," with a net increase of 2 schools and learning centers in the second quarter, totaling 708. On the one hand, it indicates that the handling of K9 offline courses is approaching the end, and on the other hand, it can also roughly predict the good progress of new business. ![Automatically generated description for application](https://pub.pbkrs.com/cms/2023/0/5XF5gf6qudGbFdiz84eCt3DSUBMmo5im.jpg?x-oss-process=style/lg)

Looking at the prepayment of tuition fees from deferred income, deferred income in the second quarter was USD 1.139 billion, an increase of USD 0.126 billion compared to the previous quarter, and a growth acceleration compared to the same period. Looking again at the revenue situation, although the second quarter is the off-season and the outbreak of epidemics has occurred in many parts of the country, the single-quarter revenue has not decreased much compared to the previous quarter.

**II. Segmented business: live e-commerce leads, study abroad rebounds**

After significant changes in operations, the disclosure scope of segmented business of New Oriental has also changed. First, looking at specific product services, the biggest change before and after the policy is that the K9 subject coaching business has been completely withdrawn, but new businesses such as K12 non-academic training, smart learning products and camp study have been introduced, as well as the innovative model of combining knowledge sharing with live e-commerce.

In the "Subsidiary Operations" section of the New Oriental annual report, it is divided into two categories: "**Educational Services**" and "**Other, including books**". However, management will highlight the business situation with significant changes in the current period. They generally disclose data and information according to the following merging/splitting criteria:

1.  K12 extracurricular education (after closing K9, only high school subject training and K12 quality education remain)
    
2.  Overseas business (test preparation and study abroad consulting)
    
3.  Adult and college courses (domestic test preparation, adult English, and small languages)
    
4.  Online courses (New Oriental Online)
    
5.  Other businesses
    

In addition, as new businesses promoted by New Oriental gradually contribute more and more to income after the implementation of policies, a segment called "New Business" composed of three sub-items: K12 non-academic training, smart learning products, and study trips will also periodically disclose their revenue proportion.

**Dolphin Analyst attempted to break down the operating situation of each quarter according to the above criteria based on historical financial reports, conference calls, and surveys (not an accurate value, only a reference to change trends).**

Looking at the changes in the revenue share of different businesses, online business contribution ratio significantly increased in the second quarter. As for the old business situation disclosed by management, overseas test preparation and study abroad consulting increased by 17% and 14%, respectively, while adult training and domestic college student test preparation decreased by 9% compared to the same period last year. **K9 Business Operations and New School Investment or Decrease in Gross Profit Margin**

After passing through the FY2Q22 performance bottom, with the acceleration of campus closures, the company's profitability level is also rapidly recovering. Starting from FY4Q22, the gross profit margin further accelerated its improvement to the level before the double reduction policy, and also benefited from the contribution of live e-commerce revenue with high gross profit (no anchor sharing, higher gross profit of self-operated products) in the overall group. In 1Q23, the gross profit margin continued to approach the historical high level with the sustained popularity of Dongfang Zhenxuan.

Although the sales expense ratio has fluctuated in the four quarters due to the enrollment season, it has remained in the range of 10%-15%. Historically, the management expense ratio has also been relatively stable, but **after the policy was introduced**, due to the closure of schools, the handling of teaching equipment, and the downsizing of the teacher team, short-term expenses such as provision for impairment losses, compensation payments, etc. were relatively high, causing the expense ratio to fluctuate significantly.

However, since the first quarter of 2023, the short-term fluctuation in the expense ratio caused by business adjustments has begun to ease, and due to the more private nature of Dongfang Zhenxuan, its live e-commerce revenue is relatively restrained in buying volume while contributing to high gross profit. Therefore, the gross profit margin and operating profit have been simultaneously optimized and increased in 1Q23.

The gross profit margin in the second quarter did not continue the trend of improvement in the first quarter, and it fell to 47.7% on a month-on-month basis. The gross profit margin of the online business, including live broadcasts, was 47%, which indicates that the gross profit margin of the old business is also similar, but there is still a gap compared with the historical equilibrium. The market has higher expectations for the improvement of the gross profit margin in this quarter, so this expectation gap may be of more concern to the market.

Dolphin Analyst believes that the decline in the gross profit margin here has accidental factors.

1.  On the one hand, due to reasons such as off-season and the repeated outbreaks of the epidemic, the opening of offline courses was affected, which in turn reduced the recognition of revenue for the period.
    
2.  On the other hand, the company established two new schools this quarter, and basic infrastructure investment is needed in the early stage. During the uphill stage of the enrollment rate of new schools, the rental and labor costs added by the newly established schools will drag down the repair of the gross profit margin in the short term.
    

Live e-commerce business can not only help New Oriental quickly get out of the trough and improve cash flow in the short term, but also become a new business growth engine in the long run. This form of knowledge sharing through live streaming has a more advantageous profit model, and also has the potential to feed the offline education and training business through online traffic, increase user stickiness, and greatly improve the unhealthy business model of the original education and training business of huge buying traffic. This will improve the overall profitability of the group.

Dolphin Analyst expects the operating profit margin of live streaming e-commerce business to reach a steady state of 25-30%, which is significantly higher than the steady state of 10-15% of the original offline education and training business. If the online business revenue contribution can reach 30%, it means that the long-term steady state operating profit margin of the entire group is expected to approach 20%.

**Dolphin ("New Oriental") historical article:**

Depth

January 13, 2023 "[Dong Yuhui Joins the Spring Festival Gala, Can New Oriental Still Rely on Education in the Future?](https://longportapp.com/topics/3858551?invite-code=032064)"

Risk disclosure and statement for this article: [Dolphin Disclaimer and General Disclosure](https://support.longbridge.global/topics/misc/dolphin-disclaimer)

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