[Click eStock] "Megastudy Education, Profitability Improvement Expected Due to Withdrawal from Civil Service Business"

Yuanta Securities analyzed on the 6th that Megastudy Education is expected to improve profitability due to the withdrawal from the civil servant business.

Megastudy Education's annual performance last year showed sales of 942.3 billion KRW, a 0.8% increase compared to the previous year, but operating profit decreased by 3.0% to 123.6 billion KRW.

Researcher Kwon Myung-jun of Yuanta Securities analyzed, "The sluggish performance of offline dormitory academies and the kindergarten and elementary school sectors is considered a factor in the slowdown of performance growth." Net profit was 50.5 billion KRW, down 47.3% year-on-year, attributed to non-recurring losses such as the impairment loss on ST Unitas.

This year, a decrease in sales is expected due to the withdrawal from the civil servant business. However, Researcher Kwon forecasted, "Sales decline will be limited due to sales recovery through system changes in high school offline and offline dormitory academies, a trend of escaping the influence of EBS in the middle school sector, and continuous growth in the university transfer business."

Since the civil servant business was the only loss-making division of Megastudy Education, it is analyzed that profitability improvement is expected through withdrawal. In October 2022, the company sought a turnaround by acquiring ST Unitas, which operates Gongdangi, but the Fair Trade Commission prohibited the merger due to concerns over monopoly in the civil servant academy market. Accordingly, the company decided to withdraw from the civil servant business and proceeded with the sale at a transfer price of 11.4 billion KRW by the end of 2024.

The civil servant division recorded annual sales of about 50 to 60 billion KRW, with 59.9 billion KRW in 2022, 57.7 billion KRW in 2023, and 43.5 billion KRW on a cumulative basis for the third quarter of last year, but continued to post operating losses of 25.0 billion KRW in 2022, 20.3 billion KRW in 2023, and 6.6 billion KRW on a cumulative basis for the third quarter of last year. Researcher Kwon evaluated, "Although sales will decrease due to the withdrawal from the civil servant division, operating profit will improve."

Meanwhile, Megastudy Education has set a shareholder return policy to distribute about 60% of net profit based on separate financial statements over three years (2024?2026) to enhance shareholder value. On the 10th of last month, the company decided to cancel 691,000 treasury shares held, and on the 26th of last month, announced a cash dividend plan of 1,500 KRW per share.

Researcher Kwon stated, "Operating profit is expected to improve in 2025 due to the withdrawal from the civil servant business, and accordingly, the scale of the shareholder return policy will also expand." He analyzed, "The current stock price is below a price-earnings ratio (PER) of 5.5 times based on the 2025 forecast, which is below the historical PER bottom (6.9 times in 2018), and the price-to-book ratio (PBR) is also at a historical low level."