"The land of the Central Plains, Luoshui soup, the granary of China, and the people's health of Wufu", just when Dong Yuhui started his trip to Henan with his small composition, a storm was quietly brewing on the stock market of New Oriental Group.
On the evening of April 24, New Oriental Group released its financial report for the third quarter of fiscal year 2024, with net revenue increasing by 60.1% year-on-year to US$1.207 billion, and operating profit increasing by 70.6% year-on-year to US$113 million.
Despite the acceptable financial results, New Oriental's share price in the U.S. stock market fell 13.96%. In the subsequent Hong Kong stock trading day, the stock price plummeted by more than 18% at one point, and finally closed with a decline of 12.27%.
This makes many shareholders wonder why a stock price that looks good will fall. Behind this, there are actually multiple complex factors hidden, the numbers are only the tip of the iceberg, what really determines the stock price is the information and the long-term expectations of the market that are hidden behind the numbers.
01 Why did it fall?
"I just bought it yesterday and it fell", how the performance increased sharply, "why is it rotten like this, looking at my position is broken", in the Oriental Fortune and other stock bars, many shareholders expressed confusion.
In such an atmosphere, all kinds of speculation and doubts are endless. "Someone wants to take over?", "Is it because the buyback program has expired?" Investors try to interpret the abnormal performance of the market from various angles.
Or are there people who struggle to find answers in the chaos. An experienced investor commented on the forum: "This company may not be a good place to invest, it is too sensitive to market fluctuations, and its industry is facing many challenges. There is also a view that "it may be that the company's growth is not meeting expectations".
Most of these speculations and opinions, while highly subjective, are not entirely groundless.
In July 2022, New Oriental authorized a share repurchase program of up to US$400 million, which was originally scheduled to end in May 2023. The Board of Directors authorized the extension of the program until May 31, 2024. In other words, the buyback program expires in a month.
As of April 23, 2024, New Oriental has repurchased about 6 million American Depositary Shares, with a total value of US$195 million, which is the same as the previous quarter, which means that there were no repurchases in the third quarter. Purely in terms of numbers, although it is also in line with the statement of no more than 400 million US dollars, this is like someone claiming that the monthly salary does not exceed 100,000 yuan, which makes people have a certain expectation, but after careful questioning, they find that the actual salary is only 3,000 yuan, and the expectation is instantly raised and then falls heavily.
The company's growth is not as expected can also be verified by the relevant data.
Although the company's revenue increased by 60.1% year-on-year in the third quarter, which is a considerable growth rate, an in-depth analysis found that the year-on-year growth rate of net profit attributable to shareholders was only 6.8%, indicating that the company did not achieve corresponding profit growth while increasing revenue.
More critically, adjusted net profit attributable to the parent was $105 million, a figure that missed the agency's previous expectation of $120 million. At the same time, the company's net profit margin was 8.7% in the third quarter, a significant decline compared to 13% in the same period last year. BOCOM International expects that the company's operating profit margin in the fourth quarter may decline by 3 percentage points year-on-year to 6%, mainly due to the increase in investment in Oriental Selection, the off-season of education business, and the investment in cultural tourism.
Even though the net profit attributable to shareholders increased from $30.1 million in the previous quarter to $87.2 million in the current quarter, the growth rate in this quarter has declined sharply compared with the year-on-year growth rate of 4007.4% in the previous quarter, which undoubtedly poured cold water on investors' expectations.
In addition, according to New Oriental's forecast, the company's total net revenue for the fourth quarter of fiscal year 2024 (March 1, 2024 to May 31, 2024) will be between $1.102 billion and $1.127 billion, a year-on-year increase of 28% to 31%, and the growth rate is also falling sharply.
However, in the U.S. stock market, although there is a certain correlation between stock price fluctuations and the company's earnings performance in the current quarter, it is not always positively correlated, and it depends on the long-term. For New Oriental, long-term stability seems to depend on e-commerce.
02 Still failed to "Dong Yuhuihua"
New Oriental's business can be roughly divided into two parts, one is including overseas exam preparation and overseas consulting business, domestic exam preparation business for adults and college students, non-academic tutoring business, etc., and the other is e-commerce.
At present, although Oriental Selection contributes more than 20% of the group's revenue, Shen Meng, executive director of Xiangsong Capital, analyzes that investors are more concerned about the latter, and it is not certain whether the former will completely get rid of the impact of the policy.
After the "small composition turmoil", Dong Yuhui led the team to create a live broadcast room of "Walking with Hui". It seems to provide Dong Yuhui with a more independent and free stage, but in fact, Dong Yuhui is strongly bound to Dongfang Selection, and all the income generated by "Walking with Hui" is also included in Dongfang Selection's financial report.
After independence, the performance of Dong Yuhui and Dongfang Selection can be described as two heavens of ice and fire. At present, the fans of walking with Hui have reached 1810.1W, and the average number of viewers per game in the past 30 days has reached the average daily viewing of the live broadcast is 883.8w, on the contrary, Dongfang Selection is a lot colder, during the same period, the average daily viewing of Dongfang Selection is 601.7w, and the latter's fans are nearly 12 million more than those of Hui. Relative to Hui, the fans of Dongfang Selection have not risen but fallen, and a total of 5.6W has decreased in the past 30 days.
Reflected in the sales volume, it is naturally higher with Hui. According to data, in March 2024, Hehui Peer ranked first with sales of 602 million, far ahead of the second place of 328 million yuan, and higher than the 286 million of Dongfang Selection.
The more popular Dong Yuhui is, it proves the fact that Dongfang Selection is inseparable from Dong Yuhui, and his every move is still closely connected with Dongfang Selection, which tugs at the heartstrings of the market and investors. His influence has surpassed that of ordinary anchors with goods, and has become an important figure who can influence market sentiment.
This close attention makes Dongfang Selection's stock price extremely sensitive and vulnerable, and the over-reliance on a single person undoubtedly increases the company's operating risk. After all, an individual's development intentions and career plans are difficult to predict. Therefore, from an investor's point of view, Dongfang Selection's high dependence on Dong Yuhui is not a good thing.
This may also be an important reason why Dongfang Selection is eager to "Dong Yuhui", but live broadcast e-commerce follows the principle of the strong and strong, and a hundred waist anchors may not be able to defeat one Dong Yuhui. But at present, it is difficult to say that "Dong Yuhuihua" has succeeded, it seems that there are two live broadcast rooms, which are nothing more than the left hand to the right hand.
An incident in February this year fully proved that Dong Yuhui had a significant impact on the stock price of Dongfang Selection. At that time, Dong Yuhui caused a heated discussion on Weibo because of his "refusal to explain underwear and underwear", and he deleted all his Weibo in anger. On the day he emptied Weibo, Dongfang Selection's stock price plummeted more than 6% intraday and finally closed with a decline of 3.89%.
What's more, Oriental Selection is still in the investment period, not only to strengthen the development of its own products, but also to expand to different channels.
Moreover, at the beginning of April, Dongfang Selection has launched the "Hourly Delivery" service in Beijing, which undoubtedly requires a lot of capital and resource investment, and it is still full of unknowns, and everything is still difficult to conclude.