D-100 until KSAT — Entering Peak Season
The author is an analyst of NH Investment & Securities. She can be reached at jiyoony@nhqv.com. -- Ed.
In 2Q21, we confirmed high growth at the elementary & middle school and adult education divisions. Earnings momentum should continue in 2H21 thanks to both sustained demand for online education and the peak season ahead of the summer vacation period and the KSAT. Investors should also focus on whether the firm hikes its Megapass price for next year.
D-100 until KSAT—entering peak season
We maintain a Buy rating and TP of W90,000 on Megastudy Edu.
The firm announced 2Q21 consolidated sales of W161.9bn (42% y-y) and OP of W29.5bn (123% y-y), with top line falling short of consensus. Usually 2Q is an offseason, when the influx of new students and product sales slow q-q. However, OPM improved significantly thanks to a rise in the company-wide online sales portion and a reduction in losses at the adult education division.
Currently, lock-in effects for online education for all school age groups are continuing due to the prolonged Covid-19 crisis. Considering that 3Q is a high-demand season ahead of the summer vacation period and the KSAT (Nov 18), earnings momentum should continue in 2H21. Additional profit upside potential exists depending on whether the price for next year’s Megapass is hiked in September/October and the normalization of offline academies’ operating conditions.
2Q21E review: Significant OPM improvement
The elementary & middle school division posted robust sales of W37.1bn (+65% y-y) and OP of W10.6bn (+147% y-y). OPM improved 9.5%p y-y, as operating leverage effects were in full swing thanks to a rise in brand awareness for Elihigh/Mbest through the home shopping and YouTube channels.
The adult education division booked sales of W25bn (+54% y-y) and an operating loss of W1.7bn (RR y-y). The consolidated subsidiary, IB Kimyoung, succeeded in narrowing its losses and recorded sound sales growth (y-y): +33% y-y for college transfer courses and +58% y-y for employment courses.
The high school division recorded sales of W99.6bn (32% y-y) and OP of W20.6bn (83% y-y). The textbook sales portion climbed to 24% (+7%p y-y) thanks to a greater regular admission portion, and a decline in correlation between EBS (a public education broadcasting channel) teaching materials and the KSAT.