IB Kimyoung: Slow-growing employment and education market

The author is an analyst at NH Investment Securities. Her contact is her jiyoony@nhqv.com. — Ed.

IB Kimyung plans to: 1) Earn stable income in the university transfer department due to increased transfer quotas for police academy, pharmacy, and medical colleges in 2023; 2) An increase in the number of universities adopting “transfer” English tests. That said, compared to other domestic education stocks, IB Kimyoung’s stock will need to justify a higher valuation with solid earnings growth from a rebound in sales in the employment sector and effective cost control. .

Police Academy to hire 50% of students for transfer

The number of transfer students is expected to increase further in the future. From 2023, the National Police Academy will recruit 50% of transfer students, and the next year’s transfer admission pass rate will be 30.3 times (52 times for general university applicants). On the other hand, the Faculty of Pharmaceutical Sciences will abolish the Pharmaceutical Education Qualification Examination (PEET) from 2022 and shift to a six-year integrated system, making it possible to transfer to the third year through a general transfer examination. In addition, many medical and dental graduate schools, which used to select graduate students based on MDEET (Medical Dental Education Eligibility Test) scores, have been converted to medical colleges or dental schools, and the number of transfers to medical schools is increasing. is expected.

In addition, many of Seoul’s top 15 colleges and universities, instead of accepting scores, offer transfer applicants a “transfer” English test (an in-house developed English test focused on measuring an applicant’s reading ability). test). Such a trend should be beneficial for IB Kimyoung, a dominant player in the Korean university transfer exam education market (up to 80% market share).

Outlook for the second half of 2022: Cost control in the employment and education sector will be the key to earnings

2Q22 yy sales growth slowed to +8% and +2% respectively in the college transfer and employment education sectors due to the prevalence of the Omicron variant. These divisions are expected to post mid-single-digit sales growth in the third quarter of 2022 as well.

Therefore, we have lowered our 2022 (consolidated) sales and operating profit forecasts to KRW 85.4 billion (+7% YoY) and KRW 3.7 billion (-53% YoY), respectively. (computer, beauty) department. 2) Increased cost burden for new business recruitment and infrastructure investment.

IB Kimyoung shares, trading at 28x and 25x P/E in 2022E and 2023F respectively (21 Sept, W2,160), appear overvalued among domestic education stocks (8x average P/E in 2022). To justify such a high valuation, we need confirmation of earnings growth from a sales recovery in the employment sector and effective cost control.