[Click eStock] Megastudy Education, Continued Structural Earnings Growth

[Asia Economy Reporter Lee Seon-ae] NH Investment & Securities announced on the 9th that it maintains a buy rating and a target price of 115,000 KRW for Megastudy Education.

Jung Ji-yoon, a researcher at NH Investment & Securities, stated, "The company recorded an overall operating profit margin of 25% in the third quarter, continuing the operating leverage effect from the previous quarter," and emphasized, "The adult core business (civil service) is also continuing to reduce losses, and with the restructuring of the high school and adult markets next year, structural earnings growth is expected to continue."

2022 is expected to be a year of market restructuring. In the high school online lecture industry, the competitive intensity is expected to weaken due to the decision of lower-tier operators to cease operations, shifting from a competition among four companies to a market dominated by top operators, who are expected to expand their market share. Despite a high base, the high school segment is expected to achieve double-digit growth next year through favorable external factors such as an increase in the proportion of regular admissions and strengthened competitiveness, as well as the effects of price increases and improvements in the pass product mix.

Starting next year, the company plans to focus on external growth such as recruiting star instructors due to the revision of subjects for the 7th and 9th grade civil service exams. In the adult segment, the core business (civil service) recorded a cumulative sales growth rate of 117% in the third quarter this year, and if the current operating pace continues, achieving the annual break-even point (BEP) in 2023 is also expected.

Meanwhile, the company announced third-quarter consolidated sales of 196 billion KRW (+56% y-y) and operating profit of 49 billion KRW (+167% y-y), in line with the company's estimates. The overall operating profit margin was 25%, with particularly encouraging margin performance in the elementary/middle and high school segments.