To The Moon

Thanks to a live stream, New Oriental Online's stock price doubled in three days.

Its founder, Yu Minhong, announced the transformation of agricultural products live six months ago, meanwhile, had a large increase in share holdings. The stock of New Oriental Online had also doubled in a month in response to these news.

If the last doubling was the capital market paying for Yu Minhong's ambition, this time is that investors really see the hope.

It all come from when New Oriental had promoted goods in the live stream with the combination of Chinese and English delivery, which beat netizens’ expectation that they could learn a lot by buying goods.

The“Oriental selection”, a broadcast platform, was on the hot topic because of the novelty of the live broadcast. The number of fans grew from less than a million at the end of May to 4.64 million on June 13, topping the TikTok TOP3 bandwagon.

According to circulation from CITIC,

the single-day GMV (gross merchandise transaction) from the Oriental Selection live broadcast was about 1 million on May 22, while the GMV has been up to 19.72 million on the 11th, which is 16 times the initial live broadcast to bring goods after the bilingual live broadcast broke the circle on June 10:

In China, live stream e-commerce is not only thriving, but also highly profitable. 

Chinese entrepreneur and internet celebrity Luo Yonghao, also the former teacher in New Oriental Education, turned to look for opportunity in live stream for paying off 600 million in debt, after failure of business.

In June 2022, Luo Yonghao announced that he quit all social platforms and would restart his business in AR.

As early as October 2021, Luo Yonghao said, 

"I'll return to the technology industry." At the same time, he also highlighted that it was the day he finished paying off his debt he would be back.

From this perspective, Luo Yonghao paid off 600 million debt by two-year live stream, which is exactly high profits.

Differing from other live broadcast platforms, mostly famous teachers out of New Oriental Education, which are similar to Luo Yonghao, are humorous and articulate with unique merits of erudition.

And in the Oriental selection live broadcast room, there are many famous teachers. The live room is less dependent on individuals, dispelling concerns about anchors’ leaving.

Combined with the launch of self-operated products by Oriental Selection, New Oriental is promising in e-commerce.

In October 2020, Sunway Corporation had announced that it wanted to acquire 40% stock shares of Luo Yonghao's live-streaming operation company, corresponding to a valuation of nearly 1.5 billion, while the company had been established for only 6 months at that time.

According to announcement at that time, the live company earned 11.4 billion yuan in revenue and 39.94 million in net profit within six months, promising to reach not less than 150 million and 200 million yuan in net profits in 2022 and 2023.

At that time, the average GMV was 31.13 million in the live broadcast room.

According to CITIC, the annual GMV will reach 3.7 billion yuan, assuming that the amount of fans of Oriental Selection reaches 10 million and the average daily GMV is over 10 million.

In Luo Yonghao's live stream, the net profit/GMV can reach 3% as the increase in the proportion of self-owned products and customer unit price. What’s more, the profit margin in Oriental Selection is expected to increase to 5%, realizing 20 times PE and 3.7 billion market value.

In addition, revenue from university business is $500 million, which corresponds to a market value of $1 billion based on a 10% net margin and 20x PE. Considering the 1.6 billion yuan net cash and equivalents, the reasonable market valuation is 6.3 billion yuan.

As of June 14, New Oriental Online's market capitalization was $8.2 billion.

From the segments of services, the business of traditional university education remains sluggish with 20 times PE, which is the best performance it can reach:

From now on, the fate of New Oriental Online entirely depends on how far the live stream for goods promotion can go?

In the present climate, the netizens appreciates the kind of goods promotion out of curiosity. It’s unknown how long this fervor will last. According to the circulation of the average daily GMV of 10 million, there are great uncertainty in the future.

Therefore, after the curiosity cooling down, the stock price of New Oriental Online may suffer great volatility.

$New Oriental Education & Technology(EDU)$  $NEW ORIENTAL-S(09901)$