Committed to Overseas Market Expansion
The author is an analyst of NH Investment & Securities. She can be reached at jiyoony@nhqv.com. -- Ed.
Digital Daesung likely recorded sound 1Q22 earnings. Accumulated transaction value for 2023 Daesung Allpass is estimated to have expanded in the mid-20%-range y-y in 1Q22. Following the roll-out of an online reading platform service for Hanwoori subscribers from early-2022, strong investment to secure new education content is to continue.
Strengthening fundamentals as comprehensive education platform
We maintain a Buy rating and TP of W12,000 on Digital Daesung.
Having launched online reading content platform Jellypage (66.7% stake owned by Digital Daesung) at end-2021, the firm has begun offering beta versions of education, webtoon, and e-book services to its existing 125,000 Hanwoori subscribers. Moving ahead, we expect the company to continue investment in order to secure new education content. In Vietnam, an international school is slated to open in time for the 2023 autumn season, with Digital Daesung remaining strongly committed to overseas market expansion as a mid/long-term growth strategy. In our view, Digital Daesung has bolstered its fundamentals as an integrated education platform that encompasses not only online high school (Daesung Mimac) and domestic education businesses but also elementary/ middle school businesses and overseas education ventures.
1Q22 preview: Tuition hike effects to appear in earnest
Digital Daesung is forecast to post healthy 1Q22 earnings, with consolidated sales of W56.8bn (+13% y-y) and OP of W5.2bn (+59% y-y).
High school division sales likely reached W46.3bn (+13% y-y). Competition has eased in the KSAT online education market, as the number-four firm suspended its operations this year. Such a development should benefit Digital Daesung thanks to its robust price competitiveness. Backed by a hike in refundable class tuition to W380,000 (+30% y-y), accumulated transaction value through March for 2023 Daesung Allpass (for which sales began in mid-Oct 2021) is estimated to have jumped by a mid-20% figure y-y. At Yigam, which sells Korean language textbooks/mock exams, stable sales growth was likely achieved on the relatively high difficulty of the 2022 KSAT national language segment.
For the elementary & middle school business, 1Q22 sales are projected at around W11.1bn (+12% y-y). We estimate OPM of roughly 19%, considering greater operational efficiency stemming from the merger of the Hanwoori online reading platform in Feb 2021 and lock-in effects for existing members related to online reading platform Jellypage.