In recent quarters, in a still-recovering scenario for B3 education firms, Yduqs (YDUQ3) has emerged among market analysts’ preference for a healthy portfolio in the premium and distance education (EAD) sector.
However, the results of the education company, owner of brands such as Ibmec and Estácio, showed poor results, with the action being one of the most notable losses in the Tuesday (16) session on Ibovespa. YDUQ3 assets fell 11.76% to R$14.03.
XP notes that the company delivered slightly negative results in the second quarter of ’22, with an adjusted net loss of R$16 million.
The highlight was the premium insurance sector, which achieved strong growth driven by the maturation of existing vacancies in medical schools and the authorization of additional vacancies.
On the downside, the campus segment continues to show challenging growth numbers, with a stable student base despite a strong discount program.
“The digital sector has shown a decline in revenue, but we believe this negative trend may reverse as new positions continue to mature, resulting in student base growth and margin expansion,” notes analyst Rafael Barros, of XP.
Bradesco BBI highlights that net revenue is down 2% year-over-year, compared to BBI’s forecast of a 1% decline, which also highlights a 12% drop in on-campus revenue, to R$524 million, after a flat figure and 12 The percentage of annual decrease in the average ticket, due to the company’s “Double Brilliance” discount program.
Classroom funding was lower than expected, growing 40% in annual variance in face-to-face learning and stabilizing in distance learning. Ebitda’s adjusted margin (earnings before interest, tax, depreciation and amortization on net revenue) decreased 0.8 percentage point (pp), versus the Bradesco BBI estimate of 2.5, due to a lack of
operational leverage. The margin did not deteriorate further due to the decrease in the bonus provision and the reversal of contingencies.
Yduqs anticipates a challenging scenario for the second half of the year in terms of enrollment (stable vs Bradesco BBI estimate, 15% onsite and 10% in distance learning), but a positive frequent reminder (i.e. after first term) for freshmen and (ii) an Ebitda margin Stable (in line with the BBI consensus, up 0.4 percentage point).
Morgan Stanley noted that, as the company’s management had already expected, revenue and margins declined, but they were below the bank’s revised estimates.
Analysts also see a bleak outlook for the second half of the year due to the continued deterioration in macro conditions, particularly given the CD categories, which are its target audience. This should lead to modest results, similar to the second half of 2022, with pressures on revenue in both volumes (weak entry numbers) and pricing (plus discounts), and little expansion in margins. There should be a decline in the third quarter of the year 22 on an annual basis, and the fourth quarter of the year 22 should be recovered on the same comparison basis.
However, Morgan analysts continue to recommend overweight (above market average exposure) for the assets, with a target price of R$23, or 44.6% higher than that recorded in the previous session. They estimate that “Yduqs is still affected by challenging macro conditions, but has good operations and is well positioned to recover.”
Along the same lines, XP indicates that despite the poor results, it maintains a positive attitude towards the stock based on the current 7.7 times price multiplier over expected earnings for the end of 2023. The target price is R$33.70, or an 112% upside potential.
Overall, our assessment of the result was slightly negative due to weak revenue with a worse outlook for the second half of 2022 and higher financial expenditures. So we maintain our most cautious view
With a target price at the end of 2023 of R$21 (or up 35%), due to short-term and intraday valuation
Challenging,” notes the BBI. However, the bank’s recommendation for YDUQ3 tracks outperformance (above average market performance).
Itaú BBA, in turn, has a market performance recommendation (performance in line with the market average) for the YDUQ3, with a target price of R$23 at the end of 2022.
“Following the strong uptake observed at the beginning of the year, we have seen a deterioration in year-over-year dropout rates, particularly in digital and on-campus modules (without taking into account the Premium segment), which combined with weaker ticket dynamics, resulted in a 2% drop in revenue. In terms of profitability, lower costs and expenses as well as higher financial expenses resulted in a net loss for the quarter, lower than we had anticipated.
Difficult semester, but with positive points
Eduardo Parenti, CEO of Yduqs, said in an earnings conference call this Tuesday that the company is very proud of its Q222 results. He highlighted that the company has a strong portfolio, with a flexible Premium segment that “carries” through very difficult times, and face-to-face EaD services that are agile and responsive to market conditions. “The financial strength is very strong and allows us, with our leverage, the freedom to carry out operations such as buybacks,” he highlights.
According to the CEO, even in the difficult scenario, the company achieved significant growth in revenue and base in distance education. Eduardo Parenti said that university digital education suffers greatly in all social classes. The average ticket per semester grew by 2%, which he says is not what the company would like to see, but the market is more conservative in terms of prices.
Expectations are that the third quarter will be a slightly lower performance and the fourth quarter will be better in Yduqs operations. According to Parente, the company comes from a series of negative externalities on the business, but the diversification strategy through medicine, EAD and M&A [fusões e aquisições] Authenticated.
For CFO Rossano Marques, the revenue mix is increasingly diversified. He states that the premium and digital sectors are the company’s levers and they already account for 53% of the company’s total revenue in the first half of 2022 (versus 48% in the first half of 2021).
For the second semester, attracting students will be challenging, but with a positive development in frequent tickets for new students. Despite the difficult time, according to Eduardo Parenti, the company improved its investment in the future of the company, but it did not stop it.
In terms of mergers and acquisitions (M&A), there are no negotiations at the moment, but Eduardo Parentes has not ruled out a move like this happening sometime in the next twelve or eighteen months. The CEO says the company views mergers as high value, especially at a time when players are trading at much lower multiples. “We see the potential to do this (mergers and acquisitions) very positively, but in an appropriate way,” he highlights.
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