[Click eStock] "Megastudy Education, Bold Shareholder Returns... Target Price Maintained"

Shareholder Return Policy Announced in April, Worth 160 Billion KRW
Current Stock Price Does Not Reflect Shareholder Returns
Medical School Expansion to Contribute to Megastudy Education Growth

Yuanta Securities analyzed on the 21st that Megastudy Education's current stock price does not reflect its aggressive shareholder return policy. The investment opinion 'Buy' and the target price of 93,000 KRW were maintained. Megastudy Education closed at 60,000 KRW on the previous trading day.

Researcher Kwon Myung-jun of Yuanta Securities stated, "After the failed merger and acquisition (M&A) in March, on April 15th, a shareholder return policy (2024~2026) to enhance shareholder value was presented," adding, "Around 60% of the separate net income will be used for shareholder returns through share buybacks and dividends." He explained that if the separate net income remains similar to the past three years, more than 160 billion KRW will be utilized for the shareholder return policy. However, he added, "Considering the market capitalization before the shareholder return policy plus the estimated amount from the shareholder return policy, the current stock price does not reflect this."

Megastudy's first-quarter sales were 249.3 billion KRW, and operating profit was 20.2 billion KRW. Sales increased by 2.8% year-on-year, but operating profit decreased by 16.2%. Researcher Kwon said, "Sales growth continues in the core high school business division," and added, "The decline in profit margin is due to increased selling and administrative expenses, with a significant impact from a 3 billion KRW increase in advertising expenses caused by intensified competition in online education for infants and elementary students."

The recent issue of increasing medical school quotas is a positive factor for Megastudy Education. The expansion of medical school quotas is expected to increase the number of college entrance exam takers, leading to sales growth in the high school business division. An increase in not only repeat test takers but also students retaking the exam after a gap year is anticipated. Researcher Kwon said, "It is highly likely that transfer students will also increase sequentially," and added, "In fact, the first-quarter results confirmed improvements in sales and profits in the university business division."