Market for Job Matching Services to Enjoy Structural Growth
The authors are analysts of Shinhan Investment Corp. They can be reached at kimaram@shinhan.com & mj1224@shinhan.com, respectively. -- Ed.
Leading the market for job matching platforms
Wanted Lab started off in 2015 as a human resources (HR) solution provider and currently operates the job matching platform Wanted. Using AI technology to predict job match rates, the platform recommends new opportunities to individuals and refers candidates to employers in return for 7% of the first year salary for successful hires. Unlike existing recruiting platforms, Wanted collects comprehensive data that includes CVs, application documents, prescreening/interview results, as well as first three-months attendance records for new hires. Data accumulated from over-1.3mn job matchings per year, combined with user/employer data and personal recommendations, are used to further improve AI performance.
4Q21 OP estimated at KRW1.9bn (-26.7% QoQ)
After turning to profit in 2Q21, Wanted Lab delivered an earnings surprise for 3Q21 with operating profit reaching up to KRW2.5bn (+28.5% QoQ). We now expect the company to report sales of KRW9.7bn (+7.3% QoQ) and operating profit of KRW1.9bn (-26.7% QoQ) for 4Q21 with the key earnings driver, successful hires, continuing on a steep uptrend but large marketing spend weighing on profit.
Market for job matching services to enjoy structural growth
The market for job matching services stands to see structural growth, with domestic employers increasingly preferring year-round recruitment to regular hiring. As two-way platforms tend to see growth in operating leverage alongside improvement in matching rates, we expect Wanted Lab's operating profit to reach KRW12.4bn (+83.9% YoY) for full-year 2022.
Digitalization has accelerated across all industries since the outbreak of COVID-19. Fierce competition to recruit talented IT developers will likely continue, driving the uptrend in annual salary levels and number of new hires for digital professionals—Wanted Lab's field of expertise. The company also plans to work on expanding its services to non-digital sectors this year with the total addressable market estimated at 83,000 new hires per quarter, 27x the 3,092 successful hires completed through Wanted in 3Q21.
Initiate coverage with BUY for a target price of KRW45,000
We initiate our coverage of Wanted Lab with BUY for a target price of KRW45,000, based on 2022F EPS of KRW1,122 and a target PER of 40x (30% discount to the average PER of domestic and overseas peers). With the market for job matching services still in its early phase of structural growth, Wanted Lab should continue on a steady growth path as the leading platform in the domestic market.