[Click eStock] Megastudy, Decline in Private Education Company Investor Sentiment... Target Price Down 17%

NH Investment & Securities Report

NH Investment & Securities maintained a buy rating on Megastudy Education on the 11th but lowered the target price by 17% to 76,000 KRW.

Jiyoon Jeong, a researcher at NH Investment & Securities, explained, "Over the past year, negative factors such as the issue of star instructors and private education regulations have already been largely reflected in the stock price, but considering the recent unfavorable investor sentiment across the private education market, we lowered the target price."

Megastudy's consolidated sales for the second quarter are estimated at 219.8 billion KRW, with operating profit at 46.5 billion KRW, representing growth of 11% and 9% respectively compared to the same period last year. Operating profit is expected to slightly underperform market expectations, which is analyzed to be due to the negative base effect in sales from the elementary and middle school and high school sectors, as well as increased costs from expanding offline high school academies.

Sales in the high school sector are estimated at 131.6 billion KRW, with operating profit at 32.5 billion KRW, reflecting increases of 13% and 6% respectively during the same period. Although deferred revenue increased by an average of 13% in Q4 last year and Q1 this year, profitability did not significantly improve due to increased costs related to the expansion of dormitory and Russell academies. Sales in the elementary and middle school sector are estimated at 53.5 billion KRW, with operating profit at 16.8 billion KRW, showing growth of 11% and 10% compared to the same period last year. Researcher Jeong said, "The official launch of the infant platform on July 11 will serve as a growth driver in the second half of the year."

The adult sector is estimated to have an operating loss of 2.9 billion KRW. The online growth rate of the Ivy Kim Young integration segment is approaching 40%, and the deficit is expected to have narrowed through the restructuring of inefficient campuses in the employment sector.

Researcher Jeong analyzed, "Investor sentiment is not favorable, but the company's fundamentals are sound," adding, "With a price-to-earnings ratio (PER) of 5.5 times, it is a low valuation zone, so it is advisable to buy from a mid- to long-term perspective."