ProGrit Inc. (9560): A new hope for Japan’s English learners

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ProGrit is a small, innovative company that provides English coaching services in Japan. Despite its modest market cap of ¥15 billion, ProGrit addresses a critical issue in Japanese society: the persistent struggle with English language proficiency. Below, I outline the reasons why ProGrit has the potential for substantial growth.

Summary

ProGrit, founded in 2018, is not an English school but a provider of English coaching services. The company aims to find the right method for each learner and emphasize consistent practice over time. Despite Japan spending ¥165 billion annually on English education, the country's English proficiency ranks 87th worldwide and 15th in Asia. ProGrit believes this discrepancy is due to ineffective learning methods.

Explosive Growth

ProGrit has demonstrated significant growth since its inception. The company became profitable in its second year of operation and has maintained a 34% compound annual growth rate (CAGR) from 2018 to 2023. In Q3 of the fiscal year ending August 2024, ProGrit achieved record sales, gross margin, and operating profit.

Financial Highlights

• Revenue: ¥4.072 billion

• Operating Income: ¥803 million

• Net Income: ¥601 million

• Operating Income Margin: 19.7%

• Return on Equity (ROE): 44.0%

• Return on Invested Capital (ROIC): 36.3%

• Revenue Growth: 48.8%

Sales Forecast and Profitability

ProGrit's fiscal year ends in August, and Q3 data shows continued robust performance:

• Record sales, gross margin, and operating profit.

• Significant investment in brand building and R&D, including AI-assisted listening and speaking programs.

• Rising sales have absorbed the costs associated with these investments.

For FY 2024, ProGrit forecasts:

• Revenue: ¥4.25 billion (+40.6% YoY)

• Operating Profit: ¥750 million (+50.9% YoY)

• Net Profit: ¥540 million (+49.7% YoY)

Growing Demand for English Proficiency

Japan's decreasing population and increasing foreign hires, along with the desire of young Japanese to seek opportunities abroad, have heightened the need for English proficiency. ProGrit addresses this need with its unique coaching method, which focuses on personalized learning and consistent practice.

Shadowing and AI Programs

ProGrit's shadowing method, where learners listen to and repeat English phrases, has been particularly successful. The company's AI program allows learners to record and send their practice sessions for instructor feedback. As of Q3 2024, ProGrit has accumulated 16,000 students and nearly 7,000 users of its SHADOTEN program.

High Satisfaction and Continuation Rates

ProGrit boasts high service satisfaction rates and continuation rates, with over 70% of graduates continuing with advanced courses or subscription services. This indicates strong customer loyalty and effectiveness of the coaching methods.

Specialized Approach

ProGrit uses applied linguistics and second language acquisition theories to create tailored learning plans for each student. This scientific approach ensures that learners are using the most effective methods for language acquisition. Additionally, ProGrit's programs are designed to integrate into daily life, making it easier for busy professionals to maintain consistent study habits​ (ALL英会話)​​ (高品質・格安のオンライン英会話なら - Weblio英会話)​.

Popularity and Investor Interest

ProGrit's popularity extends beyond individual learners to institutional investors. The company meets with 20 to 30 institutional investors quarterly, indicating significant interest in its business model and growth potential.

Risk – Competition

The primary risk for ProGrit is competition from other English learning services and methods. Major competitors include ENGLISH COMPANY and RIZAP ENGLISH, both of which have unique strengths:

• ENGLISH COMPANY offers scientifically-backed training programs and small group lessons tailored to different proficiency levels​ (本気の英会話)​​ (サクキミ英語)​.

• RIZAP ENGLISH provides a structured environment with regular check-ins and a focus on practical English skills, which can be more intensive​ (高品質・格安のオンライン英会話なら - Weblio英会話)​.

However, ProGrit's focus on personalized coaching, comprehensive support, and scientifically-proven methods sets it apart. ProGrit's programs are also known for their rigorous follow-up and continuity plans, ensuring long-term improvement even after the formal coaching period ends.

Where and How to Buy ProGrit Stock

To purchase ProGrit stock, investors can use several major brokerage firms. Rakuten Securities, SBI Securities, Nomura Securities, Matsui Securities, and Monex Group offer access to IPOs. For international investors, brokers such as Interactive Brokers, Charles Schwab, TD Ameritrade, and Fidelity provide access to the Japanese market.

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