[ET Net News Agency, 14 January 2021] Morgan Stanley cut its target price for Koolearn
Technology (01797) to HK$18 from HK$26 and reiterated its "overweight" rating.
The research house said Koolearn will see its S&M expenses as a percentage of revenue
increase to 91% and 71% in FY2021 and FY2022, respectively, from 81% in 2019, in order to
grow its large group K12 online tutoring business.
Morgan also noted the company is moving into offline recruitment for its online large
group classes and has entered 100 cities in China. It forecasted Koolearn's online large
group revenue to grow 386% in FY2021 to RMB522mn due to a low base, and then 84% in
FY2022, mainly driven by enrollment.
Koolearn targets 110 new DFUB cities in FY2021, however, management wants to slow down
expansion in FY2022 o allow it to breakeven in FY2023. Morgan expects its DFUB brand's
revenue will grow 193% in FY2021 to Rmb501mn, and then 106% in FY2022, mainly driven by
the ramp-up of its newly entered cities. (KL)