[Click eStock] "Cheongdam Learning, Expected to Benefit from China's Private Education Regulations"

[Asia Economy Reporter Yoo Hyun-seok] KTB Investment & Securities analyzed on the 28th that Cheongdam Learning is expected to benefit from the spillover effects of China's private education regulations. The investment opinion 'Buy' and the target price of 43,000 KRW were maintained.

On the 24th, the Chinese government released the "Opinions on Reducing Homework and External Learning Burden for Students in Compulsory Education." This is a strong private education regulation policy that includes banning the listing of private education companies teaching regular subjects (Korean, English, Math) and halting new approvals for companies in regular subjects. Additionally, foreign capital investment in Chinese private education companies was also prohibited.

However, KTB Investment & Securities expects these regulations to rather present an opportunity for Cheongdam Learning. Researcher Kim Jae-yoon of KTB Investment & Securities said, "This is to address the issue of declining birth rates due to the increase in private education expenses in China," adding, "Although there were concerns about damage since Cheongdam Learning has also entered the Chinese English education business, these regulations are judged to be an opportunity for Cheongdam Learning."

He explained, "Cheongdam Learning and Shinnamyang's ESL programs are play-school programs focused on English conversation, which fall under cultural education not included in regular subjects," adding, "In other words, this part is not affected by private education regulations, and a shift in demand from English subject classes to English conversation is expected." He further added, "The ban on foreign capital entry also limits the market entry of overseas competitors, which is expected to raise the entry barriers for the early childhood English education market that Cheongdam Learning has preemptively secured."

Along with this, the second-quarter performance is also an expected factor. KTB Investment & Securities forecasted that Cheongdam Learning's sales and operating profit in the second quarter will increase by 16.3% and 80.4% year-on-year to 51.6 billion KRW and 10.1 billion KRW, respectively. He said, "This is due to the increase in the number of enrolled students following the success of online classes started last year," explaining, "Although the recent stock price has adjusted down about 15% from the June peak due to concerns over China's private education regulations, a review of the actual regulations suggests spillover benefits instead." He added, "Along with the expected record-high performance due to the increase in enrolled students, the recent stock price decline is judged to be a buying opportunity."