How much money does Yu Minhong's oriental selection make? 4.8 billion in half a year, gross profit margin as high as 42%

Source: Visual China

Author丨Zhang Rui

Editor丨 Kang Xiao

Produced by Tencent News Xiaoman Studio

How long can the miracle of New Oriental Online's stock price soaring 20 times in half a year last? Is the 60 billion market value supported by performance, or is it overdrawn for future growth? As the most outstanding Internet company in the Hong Kong stock market in 2022, its first complete half-year financial report after the transformation released yesterday will solve the doubts of the capital market one by one.

On January 17, New Oriental Online announced the results of the first half of fiscal year 2023 (June 1, 2022 - November 30), in this half year, the company's revenue was 2.08 billion yuan, a year-on-year increase of 262.69%; The net profit was 585 million yuan, a year-on-year increase of 207.59%, which is also the first profit of New Oriental Online since its listing.

At the close of Hong Kong stocks on January 17, New Oriental Online's stock price was HK$67.3 per share, with a total market value of HK$67.8 billion, more than four times the total market value of the well-known MCN institution Yaowang Technology (13.2 billion yuan as of January 17). In May 2022, New Oriental Online's share price was as low as HK$2.84, with a total market value of less than HK$5 billion.

However, judging from its opening price of HK$63.8 per share on January 18, the capital market has not yet paid for the high gross profit and profitability of Oriental Selection. In the opening 10 minutes, New Oriental Online fell by 9% at one point, and since then the decline has begun to narrow.

From the perspective of revenue composition, Oriental Selection's self-operated and live streaming business is the main "hero" of the doubling of New Oriental Online's revenue and net profit. In the first half of fiscal 2023, the revenue of the company's self-operated products and live streaming e-commerce business was 1.77 billion yuan, accounting for 84.9% of the revenue; University education revenue was 295 million yuan, accounting for 14.2%; The revenue generated by institutional customers was 19.2 million yuan, accounting for 0.92% of the revenue.

With live streaming e-commerce becoming a major source of revenue, New Oriental Online began to consider a name change. On January 5, New Oriental Online issued an announcement that the board of directors recommended changing the company's English name from "Koolearn Technology Holding Limited" to "East Buy Holding Limited" and changing the company's dual foreign name from "New Oriental Online Technology Holdings Limited" to "Oriental Selection Holdings Limited".

The name change to "Oriental Selection Holdings Limited" means that New Oriental Online's business focus will completely shift from online education to live streaming. As an atypical MCN organization with live streaming as its main business, whether Oriental Selection can increase GMV in the future, whether its own profitability can be sustained, and whether the growth rate of revenue and net profit can maintain double growth will affect the future trend of the company's stock price and market value.

The second half of the fiscal year encountered the low season of e-commerce: 200% high growth may not be sustainable

As a company whose main business is live streaming, GMV (total transaction volume) and GMV to revenue conversion rate are one of the important indicators to measure the company's future revenue trend.

GMV is not an actual turnover, but one of the indicators of consumer purchase intention. For the six months ended November 30, 2022, the GMV of Oriental Selection Live Streaming was RMB 4.8 billion, the revenue of live streaming goods was RMB 1.766 billion, and the conversion rate of GMV to revenue was 36.79%.

What is the level of GMV of 4.8 billion yuan in half a year? MCN agency Yaowang Technology will create a total of about 15 billion GMV in 2022. Compared with Yaowang Technology, the GMV of 4.8 billion yuan in half a year of Oriental Selection is not high.

In order to promote the growth of GMV, from the end of July to the end of October, Oriental Selection launched a number of special live broadcast activities, such as "Oriental Selection Heilongjiang Tour", "Cloud Tour Northwest", "Qilu Mountain and Sea Tour", etc.

According to statistics, the GMV of the main station of each special oriental selection will double. For example, the GMV of the main site of the "Cloud Tour Northwest" special oriental selection site was 80.76 million yuan, 220% higher than the 30-day average (25.22 million yuan).

It should be pointed out that June to December is the peak season for e-commerce, including the two festival promotions of 618 and Double 11. New Oriental Online's statistics for the second half of fiscal year 2023 are from December 1, 2022 to May 31, 2023, which is the off-season for e-commerce. When there is uncertainty in GMV growth, in order to improve the conversion rate of GMV to revenue, Dongfang Zhen, which does not charge pit fees, must increase the proportion of GMV of its own products.

In addition to the conversion rate of GMV to revenue, gross margin, net profit and net profit margin are more intuitive and core indicators that reflect the company's own profitability.

According to the financial report, for the six months ended November 30, 2022, the revenue of New Oriental Online's self-operated products and live streaming e-commerce segment was 1.77 billion yuan, the cost was 1.016 billion yuan, the gross profit was 749.8 million yuan, and the gross profit margin was 42.5%.

It should be pointed out that since most of the anchors in Oriental Selection did not take a cut, the commission income when streaming third-party products was basically net profit, which raised the overall gross profit margin of self-operated products and live streaming e-commerce. Compared with the 22.73% sales gross profit margin of Yaowang Technology in the third quarter of 2022, the 42.5% gross profit margin of Oriental Selection of self-operated products and live streaming e-commerce is indeed the envy of peers, but it is also suspected of being "inflated".

With the increase in the number of self-operated products and SKUs, self-operated products with long chains and heavy operations may reduce the overall gross profit margin of the business. Therefore, it is still unknown whether Oriental Selection can maintain a high gross profit margin of 42.5% in the future.

From the perspective of net profit and net profit margin, the net profit of New Oriental Online in this half year was 585 million yuan, and the net profit margin was 28%. Due to the extremely high gross profit margin of third-party products, the future trend of the net profit margin of Oriental Selection depends on the net profit of its self-operated products in the future.

In addition to the company's own profitability, another important factor that determines the company's stock price is investors' expectations for the company's future growth, that is, whether investors have confidence and hope for the company's future development.

Although New Oriental Online's revenue and net profit increased by more than 200% year-on-year in the first half of fiscal 2023, the "target" for comparison is the first half of 2022 (June 1, 2021 - November 30, 2021). At this time, New Oriental Online is in the "double reduction" repair period, and its revenue and net profit have fallen to a trough, so it has a growth of more than 200% in revenue and net profit in the first half of fiscal 2023. With live streaming business becoming its main business, it will not be easy for Oriental Selection to maintain high growth in the future.

However, it is undeniable that Oriental Selection, which claims not to buy traffic and anchors without commission, does have advantages that traditional MCNs cannot match in terms of cost control. With the launch of more anchors and the creation of live broadcast room matrices of different categories, Oriental Selection is ready for both "people" (anchors) and "fields" (account matrix), but there is still homework to be made up in terms of "goods" (especially self-operated goods) and supply chain.

Make-up course "Goods and Supply Chain"

In terms of account matrix, Oriental Selection already has 6 live broadcast rooms, including the main account of Oriental Selection and 5 pendant accounts, which are Oriental Selection Beautiful Life, Oriental Selection Books, Oriental Selection to See the World, Oriental Selection will enter wine, and Oriental Selection self-operated products.

In terms of anchor training, in addition to Dong Yuhui, Shi Ming, Dunton, YOYO, Xiaoqi and other early anchors who came out of the circle, Lele, Tianquan, Chaofeng, Daqi, Tongtong, Taotao and other new anchors also slowly provoked the GMV beam in the live broadcast room.

According to an informed source, "After the live broadcast of Oriental Selection of Shandong Good Things on October 29, 2022, anchors such as Dong Yuhui, Dunton, Mingming, YOYO, Xiaoqi, Jesse, Dongdong, Zhongcan, and Dong Dong began to take a break, and new anchors such as Pengpeng, Tianquan, and Feng Feng also supported nearly 20 million GMV of the main account from October 31 to November 2. ”

However, in the key link of "goods" and supply chain, there is still a lot to improve in Oriental selection.

Due to Dong Yuhui's sudden exit, the early selection of Oriental personnel team configuration, product supply chain and logistics performance are under pressure. In the later stage, with the establishment of the supply chain and the expansion of personnel, the supply chain and logistics problems of third-party products with live streaming were slowly solved.

However, the core goal of Oriental Selection is not to sell third-party products, but to build a brand of self-operated agricultural products. Oriental Selection carries Yu Minhong's dream of "transforming farmers, making young farmers willing to return to the countryside, and allowing more left-behind children to grow up with their parents".

According to the financial report, for the six months ended November 30, 2022, the total revenue of Oriental Selection's self-operated products and live streaming e-commerce segment was 1.77 billion yuan, of which the total revenue of self-operated products exceeded 1 billion yuan, and the revenue of self-operated products accounted for 56.5%.

But building your own agricultural brand is no easy task. Many agricultural products are non-standard and have high requirements for preservation, which puts forward higher requirements for quality control and suppliers' cold chain logistics and storage conditions, which means that Oriental Selection also needs to make more efforts in the channel construction and supply chain system of self-operated products.

In fact, before it became popular, Oriental Selection laid out chess pieces on other short videos and e-commerce platforms. While settling in Douyin, Oriental Selection has opened a WeChat public account and video account of "Oriental Selection Official Account" and "Oriental Selection Member". On March 31, 2022, Oriental Selection launched the Mini Program Mall and connected to the video number.

In order to catch the traffic spillover brought by Douyin live broadcast, Oriental Selection not only launched the Oriental Selection APP, but also opened flagship stores on Taobao and Jingdong platforms, mainly selling Oriental Selection self-operated products.

Regarding the channel layout of Oriental Selection, Feng Nian, founder of Dian Jinshou told "Deep Web", "Launching your own e-commerce APP can precipitate traffic to your own private domain. However, compared with pushing its own independent APP, doing Oriental Selection of its own fresh agricultural brands, OTA and cross-border e-commerce is a new opportunity for Oriental Selection this year. ”

"Since it is difficult to standardize fresh agricultural products in terms of quality identification, procurement, grading and pricing and other aspects, Oriental Selection, which already has IP effects, can promote and graft the supply chain of Oriental Selection to anchors on the whole network under the endorsement of its own brand, so that its fresh brands can enter more live broadcast rooms." Fengnian added.

OTAs and cross-border e-commerce are yet to be tapped

"How can there be such a good job!" Oriental selection anchor Zhong Can ate at the restaurant in the lobby of a well-known hotel in Xiamen while introducing the hotel's two-night sea-view room. "In just an hour, we have sold 2,900 orders, Qingming and Dragon Boat do not increase the price, the time can be until June, we will go to the gym and Japanese restaurant in a while."

This is the live broadcast of Oriental Selection to see the world at 6 pm on January 15, and more than 10,000 people are online at the same time in the live broadcast room of more than 50 fans. "I'm a graduate of the Hotel Management School in Lausanne, Switzerland, and I've stayed in many well-known hotels around the world, so we can get such a good negotiated price." When netizens were asked which school they graduated from, Zhong Can replied.

Unlike the main account of Oriental Selection and the main physical goods brought in the live broadcast room such as Beautiful Life and Will Wine, Oriental Selection looks at the world equivalent to a local life account, and before pushing Xiamen Hotel, it has already pushed many hotels in Sanya and other well-known scenic spots.

"Oriental Selection World account has jumped out of the concept of live e-commerce, to hotels, tourism, routes and other OTA fields, at present their products are mainly based on well-known hotels in tourist cities, with the liberalization of outbound travel related policies, Oriental Selection to see the world or expand its business to foreign tourism, hotels and other businesses. From the perspective of the quality of the anchor alone, New Oriental Online has so many high-quality English teachers, coupled with overseas travel has been silent for 3 years, the future overseas tour is a gold mine to be tapped in the world by Oriental selection. Feng Nian said to "Deep Web".

From the perspective of platform ecology, local life is also the focus of Douyin's business in 2023. According to 36Kr, Douyin Life Service will eventually complete about 77 billion GMV in 2022, and the target GMV of Douyin Life Service in 2023 will be 150 billion. Oriental Selection's efforts in the world and the OTA field are also in line with Douyin's business priorities in 2023.

In Fengnian's view, in addition to the local life business, cross-border e-commerce is also a new growth point for Oriental Selection in the future. "New Oriental Online has a reserve of high-quality English teachers, as well as the blessing of two major IP traffic of Yu Minhong and Dong Yuhui, which is an advantage that other live broadcast rooms do not have. Coupled with the fact that TikTok will focus on e-commerce in 2023, cross-border e-commerce may become another force for Oriental selection. "Bumper year forecast.

According to the Tianyancha App, recently, Beijing New Oriental Xuncheng Network Technology Co., Ltd., the main entity of New Oriental Online, applied for the registration of a number of "EASTBUY" trademarks, and the international classification involves convenience food, website services, scientific instruments, etc., and the current trademark status is pending.

According to Bloomberg and Yahoo Finance, the total transaction volume of TikTok's e-commerce business is targeted at $2 billion in 2022, and the annual e-commerce transaction volume target by 2023 is $23 billion, a 10-fold increase in the target GMV compared to 2022.

If Oriental Selection can really do local life and cross-border e-commerce, its performance in the capital market may be a different picture.

However, after all, cross-border e-commerce is a long-chain, heavy operation business, involving front-end traffic acquisition, warehousing, logistics, after-sales and many other links and other infrastructure services, whether Oriental Selection can enter the game and even do a good job in cross-border e-commerce business is still unknown, but for the capital market, it is full of imagination.

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