On the evening of August 23, Oriental Selection announced its results for the 2024 fiscal year ending on May 31, 2024. The topic of Dong Yuhui’s resignation and breakup fee, which has attracted much attention from the outside world, received some information disclosure in this financial report.
On July 25 this year, Oriental Selection announced the resignation of Dong Yuhui. Previously, Dong Yuhui served as senior partner of Oriental Selection, cultural assistant to the chairman of New Oriental Education Technology Group (edu.n), and concurrently as vice president of New Oriental Culture and Tourism Group. The open letter at that time stated that Hehui Peer, a wholly-owned subsidiary of Oriental Selection, was officially independent from Oriental Selection, and Dong Yuhui personally held 100% of its shares.
Dong Yuhui (buyer), Beijing New Oriental Xuncheng Network Technology Co., Ltd. (seller) and Hehui Peer (Beijing) Technology Co., Ltd. (target company) entered into a sale agreement. The seller agreed to sell and the buyer agreed to acquire 100% of the equity of the target company for a consideration. It is RMB 76.5855 million.
At the previous shareholder communication meeting of Oriental Selection, Yu Minhong, chairman and CEO of Oriental Selection, said that Dong Yuhui will receive 50% of the net profit of Hui Peer after his resignation. After the distribution, Hehui Peer still has 141 million yuan left in its books. At that time, Yu Minhong said that the remaining 141 million yuan after allocating 50% of the net profit would also be allocated to Dong Yuhui and would be reflected in the fiscal year report.
Therefore, taken together, the net profit of the two parts of Hehui Peer is 141 million yuan, plus the equity acquisition payment of 76.58 million yuan from Hehui Peer, the total "breakup fee" for Dong Yuhui's resignation from Oriental Selection is approximately 358 million yuan.
Yu Minhong revealed at the communication meeting that 50% of the original profit of 141 million yuan has been allocated to Dong Yuhui. The remaining part, according to the financial report, 129 million yuan of the 141 million yuan net profit has been allocated to Dong Yuhui, and the remaining part has been allocated to Dong Yuhui. 12 million yuan will be retained by Yuhui.
According to this financial report, Xuncheng entered into a sales agreement with Dong Yuhui and the target company ("Sales with Hui Peer"). Xuncheng will transfer 100% of the equity in the target company to Dong Yuhui for a consideration of 76.58 million yuan. At this point, plus the 12 million yuan in the book of Traveling with Hui, Dong Yuhui's breakup fee of 358 million yuan promised by Oriental Selection has been fully fulfilled.
After Dong Yuhui resigned, Goldman Sachs issued a research report stating that it maintained its forecast for Oriental Selection’s fiscal year 2024 roughly unchanged, but lowered its revenue forecast for the company from 2025 to 2027 based on a reduction of 32% to 36% in total merchandise transaction forecast25 % to 26% to reflect the negative impact of Dong Yuhui's departure and the weaker total merchandise transaction growth in the remaining business from June to July. Therefore, Goldman Sachs lowered Oriental Selection’s adjusted net profit forecast from 2025 to 2027 by 39% to 40%.
As shown in the financial report data, Oriental Selection showed an increase in revenue but not profit during the period. The financial report shows that from June 1, 2023 to May 31, 2024, Oriental Selection’s total revenue was approximately 7.073 billion yuan, a year-on-year increase of 56.82%. Among them, the total revenue from continuing operations after the sale of the education business all comes from self-operated products and live broadcast e-commerce, increasing 68.1% from 3.9 billion yuan in fiscal year 2023 to 26.5 billion yuan. This increase is mainly due to Douyin, Taobao and self-operated products. The app’s multi-platform strategy, diversified product categories and SKUs, and our Prime Day promotion starting in December 2023.
’s financial report shows that Oriental Selection’s total merchandise volume (gmv) increased by 43% to 14.3 billion yuan in fiscal year 2024, of which gmv from Douyin accounted for the majority. In fiscal year 2024, the total number of paid orders for third-party products and self-operated products on Douyin increased from 136 million orders in fiscal year 2023 to 181 million orders.
Accompanying the growth in revenue is the increase in costs and the decrease in net profit and gross profit margin.
's financial report shows that as of May 31, 2024, the total revenue cost of Oriental Selection's continuing operations was 4.8 billion yuan, an increase of 101.6% from 2.4 billion yuan in the same period last year, mainly due to the substantial growth of Oriental Selection's business, resulting in self-operated products. Due to the increase in inventory costs and transportation costs; the net profit from continuing operations was 249 million yuan, a decrease of 69% from 799 million yuan in the same period last year; the adjusted profit from continuing operations was 709 million yuan, a decrease from 799 million yuan in the same period last year. 916 million yuan, a decrease of 22.6%; the gross profit margin of continuing operations decreased from 38.2% in fiscal year 2023 to 25.9%, mainly due to the promotion of Member Day activities and changes in product mix, that is, Oriental Selection sold more and usually had lower profit margins of agricultural products.
Yu Minhong said that the business of Oriental Selection has achieved rapid development in two years, but has also encountered great setbacks and challenges. He emphasized at the communication meeting that through this divestiture, the internal conflicts and external disputes between the two companies, Dongfang Selection and Hehui Peer, can be resolved at once. Dongfang Selection can also carry out large-scale layout and reforms, without having to worry about the imbalance in the relationship between the two parties. The future development of Oriental Selection will depend on one leg being traffic and the other leg being products.
Source: West Lake Voice Comprehensive Zhejiang Online, Jinguan News
