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IB Kimyoung: Employment education market shows slow growth




The author is an analyst at NH Investment & Securities. She can be contacted at jiyoony@nhqv.com. — Ed.

IB Kimyoung is expected to record stable income at the University Transfer Division through: 1) an increase in the number of transfer slots at the Police College and the Faculties of Pharmacy and Medicine for the 2023 academic year; and 2) an increase in the number of colleges adopting “transfer” English tests. That said, relative to other national education stocks, IB Kimyoung stocks appear to need confirmed earnings growth driven by the recovery in sales in the employment division and effective cost control to justify their high valuations.

The police academy will recruit 50% of the students by transfer of admission

We expect the number of admissions to transferred universities to increase further in the future. From the 2023 academic year, the police college must recruit 50% of incoming students by transfer admission, and the acceptance rate for next year’s transfer enrollment is 30.3: 1 (compared to 52:1 for general college applicants). Meanwhile, pharmacy colleges have moved to a six-year integrated system on abolishing the Pharmacy Education Eligibility Test (PEET) from the 2022 academic year, allowing students to transfer of third year via the general transfer test. Also, as most medical and dental graduate schools that previously screened graduate students based on Medical Dental Education Eligibility Test (MDEET) scores are now being converted to medical or medical colleges dental, an increase in transfers to medical fields is expected.

Additionally, we would like to point out that many of the top 15 colleges and universities located in Seoul now require transfer admission applicants to take “transfer” English exams (internally developed English tests focused on assessing candidates’ reading comprehension), instead of accepting scores. standardized English tests, and such a trend should benefit IB Kimyoung, a dominant player in Korea’s college transfer exam teaching market (up to 80% market share).

2H22 outlook: controlling the costs of the employment education division will be the key to results

In 2Q22, sales growth slowed to +8% and +2% respectively in the academic transfer and employment education divisions due to the release of the Omicron variant. We expect these divisions to also post mid-single-digit sales growth in 3Q22.

Accordingly, we are revising our 2022E sales and OP forecasts (consolidated) down to 85.4 billion W (+7% YoY) and 3.7 billion W (-53% YoY) respectively. annual) to reflect: 1) a slower-than-expected recovery in the employment education division (IT, beauty); and 2) a higher expense burden to fund recruitment and infrastructure investment for new businesses.

Trading at a 2022E and 2023F P/E of 28x and 25x respectively (Sept. 21, W2160), IB Kimyoung shares look overvalued among domestic education stocks (average 2022E P/E of 8x). Confirmation of earnings growth driven by the recovery in job center sales and effective cost control should be needed to justify such high valuations.

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