Outlook for Rissho Education <4714>

Financial estimates for the fiscal year ending February 2025.

For the fiscal year ending February 2025, consolidated results are projected to show revenue of 33,960 million yen, an increase of 5.4% from the previous period, operating profit of 2,670 million yen, an increase of 1.6%, recurring profit of 2,670 million yen, an increase of 0.5%, and net income attributable to the parent company's shareholders of 1,710 million yen, an increase of 2.9%, maintaining the initial plan. The progress rate up to the second quarter is 48.8% for revenue and 54.6% for operating profit, significantly exceeding the average progress rates of the last three years (49.1% for revenue, 42.0% for operating profit). The company has decided to maintain its plan while assessing the situation regarding winter courses and the number of new enrollments in "Shinmakai"; however, if revenue continues to trend positively in the latter half, it is expected that operating profit may surpass the previous record (3,042 million yen for the fiscal year ending February 2022).

(1) Learning Cram School Business.

The learning cram school business is expected to see a single-digit increase in revenue due to the recovery of student numbers, with operating profit also turning into an increase. In the third quarter, renovations for the relocation and expansion of two schools (Shiki School and Fuchu School) have been carried out, and a new school (Ishigao School) is set to open in the fourth quarter. Additionally, the second location of "spec.TOMAS" (Kachidoki School) is scheduled to open in February 2025. The Kachidoki area is experiencing a boom in tower apartments, resulting in an increasing child population, and it is expected to reach full capacity quickly. Furthermore, efforts to prevent withdrawals from key schools will continue, and the number of students is expected to continue growing at a single-digit pace in the latter half.

(2) Home Tutoring Dispatch Education Business.

Performance in the home tutoring dispatch education business was expected to remain stable compared to the previous period, but the progress up to the second quarter has slightly fallen short of plan, making the trend in student numbers for the latter half crucial. By the end of September 2024, there is a projected decrease of 1.9% compared to the same month last year, gradually narrowing the negative margin, and it is anticipated that levels will stabilize at levels comparable to the end of the previous period. The reorganization of "TOMEIKAI" campuses has been completed, but efforts for cost optimization will continue. The "Meimonkai Online," which has been seeing smooth growth in student numbers, is considering investing in overseas publicity expenses in the latter half to focus on acquiring new students.

(3) Early Childhood Education Business.

The early childhood education business is steady for "Shingakai" and is expected to see a slight increase in revenue and profit for "Shinga'S Club." For the leading "Shingakai," the effect of tuition increases implemented in November 2023 will cycle through in the fourth quarter, so how many new students can be acquired in the season after November will be the key to revenue trends, including the fiscal period ending February 2026. The quality of service has already returned to previous levels, but due to heightened competition for student acquisition, future prospects are difficult to foresee. As a result, the company will increase the number of material requests and consultation applications via the Web to connect with acquiring new members. Additionally, continual efforts to prevent withdrawals through planned individual meetings with parents will aim for an early recovery of student numbers.

In the second half, there are no new school expansions planned, but in spring 2025, two buildings of "Kodomo de Part" (Nakano, Tama-Plaza) are scheduled to open, including one classroom for "Shingakai," two schools for "Shinga'S Club After-School," and one school for "Shinga'S Club Nursery." Furthermore, it has been decided to open one "Shinga'S Club Nursery" (Kichijoji) around the same time. Therefore, it is anticipated that the number of students in the early childhood education business will shift towards an increasing trend after the fiscal period ending February 2026.

(4) In-School Individual Tutoring Business

The in-school individual tutoring business is expected to maintain strong performance in the second half, with double-digit revenue and profit growth. The number of operational schools is not expected to change significantly from 88, but there is potential for further increase, nearing 100 schools after spring 2025. The expansion of introductory school years at existing schools is also expected, leading to double-digit growth in the medium term. While competing services are emerging, the main focus is on dispatch services for instructors, and it is believed that a competitive advantage can be secured for schools seeking high-value-added services leveraging expertise in individual academic guidance for advancement.

(5) Character and Emotional Training Retreat Education Business

The character and emotional training retreat education business is forecasted to see steady revenue growth due to an increase in the number of experiential tours held.

(Written by FISCO guest analyst, Jo Sato)