[Click eStock] "Digital Daesung, Entering Profit Growth Phase by 2023"

Daishin Securities Report
Target Stock Price Set at 13,000 Won

[Asia Economy Reporter Minji Lee] Daishin Securities on the 7th issued a buy rating and a target price of 13,000 KRW for Digital Daesung. Considering the increased market share in the CSAT internet lecture market and the benefits from overseas expansion, it is expected that the stock price could surpass the level recorded in early last year.

Digital Daesung's e-learning division sales for next year are expected to reach 116.3 billion KRW, a 37.2% increase compared to this year. This is because the duopoly structure of two companies (Megastudy, Daesung MyMac) in the CSAT internet lecture market is intensifying, and they have entered a phase of lecture price increases. Regarding pass products, the price rose from 230,000 KRW in March to 290,000 KRW last month, and after the CSAT, it increased to 320,000 KRW. Considering that the price was 190,000 KRW at the end of last year, this represents a significant increase of about 68.4%.

A concern in the high school internet lecture market is the decline in the school-age population, but according to Statistics Korea, the high school student population is expected to increase until 2028. The school-age population is projected to rise from 1,315,000 in 2022 to 1,394,000 in 2028.

The trend of expanding the proportion of regular admissions in the university entrance system is also positive. The proportion of regular admissions within the total university entrance system is expected to increase from 22.6% this year to 24.3% in 2022. Researcher Han Kyung-rae of Daishin Securities explained, “The CSAT absenteeism rate reached a record high of 13.2%, which could lead to an increase in repeat test-takers, also contributing to sales growth,” adding, “This is a factor that could resolve the excessive valuation discount on education companies.”

Digital Daesung's total sales next year are expected to reach 206 billion KRW, a 46% increase compared to the same period last year. Operating profit is estimated to grow by about 116.8% to 35.8 billion KRW. Additionally, the company is expected to secure a solid cash cow through the merger of Hanuri and Daesung Dormitory Academy and the subscription platform business. Operating profit is forecasted to be 44.6 billion KRW in 2022 and 56.8 billion KRW in 2023, representing increases of 24.5% and 27.3% year-on-year, respectively.

Researcher Han Kyung-rae stated, “Prices and sales rates of high school internet lectures are expected to rise simultaneously, and sales of 27 billion KRW are anticipated from Daesung Dormitory Academy,” adding, “In 2022, the performance of Hanuri’s subscription platform service will be reflected, and in 2023, the results from Chadwick International School Vietnam will be incorporated.”