New Oriental’s rating outlook revised to positive by Moody’s

Investing.com -- Moody’s Ratings has affirmed New Oriental Education & Technology Group Inc.’s Ba1 corporate family rating and revised its outlook to positive from stable, according to a Monday announcement.

Moody’s Vice President Shawn Xiong stated the positive outlook reflects New Oriental’s track record of restoring and growing its business through economic cycles and regulatory changes while maintaining a solid financial profile.

The rating agency expects the company to continue adhering to its prudent financial policy and maintain its strong balance sheet while developing its businesses.

New Oriental’s Ba1 rating is supported by its position as a leading private education services provider in China with over 30 years of established track record and good brand recognition. The company’s solid credit profile and strong net cash position provide a buffer against potential business uncertainties.

Following China’s "Double Reduction" policy implementation in 2021, which regulated K-9 academic after-school tutoring, New Oriental successfully transitioned to other services. The company now focuses on overseas test preparation, domestic adult education, university studies, intelligent learning systems, and non-academic tutoring.

These new offerings have shown strong growth over the past two years, helping the company’s core revenue recover to levels comparable to fiscal year 2021.

Moody’s forecasts New Oriental’s core education business revenue to grow steadily at 5%-10% over the next 12-18 months, supported by demand for non-K9 educational services.

The company’s livestreaming business contribution declined to approximately 12% in FY2025 from 21% in FY2024 following the spin-off of its "Time with Yuhui" platform. Moody’s projects this segment will achieve low single-digit revenue growth with stable margins.

The rating agency expects New Oriental’s adjusted EBITDA margin to improve slightly to 21%-22% over the next 12-18 months, up from 20%-21% in FY2025, supported by cost reduction measures initiated since March 2025. Debt leverage is expected to stay below 1.0x during this period.

New Oriental maintains a very good liquidity position with cash, restricted cash, current term deposits, and short-term investments totaling approximately $4.8 billion as of May 31, 2025.

Moody’s noted that while the company faces competition in China’s private education market and execution risks with new business initiatives, its diversified service offerings, financial buffers, and execution capabilities help mitigate regulatory uncertainties.

The rating could be upgraded if New Oriental continues to sustain organic revenue growth while maintaining its strong credit profile and net cash position. A downgrade is unlikely given the positive outlook.

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