We derive a target price of HK$83 for EDU by applying a sum-of-the-parts (SOTP) valuation approach, which captures the unique characteristics and growth prospects of each business segment, implying a 22x non-GAAP EV/NOPAT multiple for the educational segment excluding East Buy.
 EDU's K9 segment, the primary growth driver benefiting from strong demand and aggressive market share capture through rapid learning center expansion, warrants a valuation premium. We assign a 26x FY25E non-GAAP EV/NOPAT multiple to this high-growth segment, reflecting its strategic importance and growth potential. For Senior High School, we apply a 24x FY25E non-GAAP EV/NOPAT multiple, acknowledging its stable profitability and established market position in a relatively stable regulatory environment. Other Educational Segments, including overseas prep, consulting, and cultural tourism, are valued more conservatively at a 22x FY25E non-GAAP EV/NOPAT multiple. These segments provide diversification and support overall margin improvement through synergies with core offerings. We value East Buy based on a 1.5x FY25E P/S multiple, reflecting its ongoing transformation and strategic pivot towards an omnichannel model. This valuation acknowledges near-term challenges while recognizing East Buy's long-term strategic value to EDU's ecosystem.

Key downside risks that could impede the stock from reaching our target price include: 1) regulatory uncertainties: further policy tightening could impact the K-12 AST business; 2) increased competition: industry consolidation and new entrants may pressure margins; 3) execution risks: challenges in scaling up new initiatives and managing costs effectively; and 4) foreign exchange fluctuations: possible influence on financial results and investment returns.