Why JPMorgan Is Raising Estimates At New Oriental Education

In a report published Tuesday, JP Morgan analysts maintained an Overweight rating on

, while raising the price target from $25 to $29. The analysts mention that the company is the "largest player in a growth sector." New Oriental Education (EDU) operates one of the largest networks of learning outlets in China, offering language learning, course preparation and tutorials for the K-12 curriculum. New Oriental Education's share price has climbed 20 percent year-to-date and is at record highs. The stock has outperformed Russell 2000 by 14 percent over this period. Despite this, the analysts believe there is further upside as the company continues to generate sales growth. In the report JP Morgan noted, "EDU is benefiting from its largest national network of tutorials with the widest range of services. Upside could come from new areas such as online courses and counseling services for overseas studies. The company has invested heavily in FY15 on online services and we expect lower costs and more benefits from these new services in FY16." "The risks from online competitors lowering demand for live tutorial services seems to have been over-hyped in CY14 and has had a limited impact on demand for EDU and its peers," the analysts added. The EBIT margin estimate for FY16 has been raised to 14.7 percent, reflecting an improvement in FY15 estimated OPM of 11.6 percent. "We expect the fast rise in spending on online services to peak in FY15 and fall as a proportion of sales in FY16," the analysts said.