Market: KOSPI (015760)
Brokerage : Hana Securities
Analyst : Jae-seon Yoo (RA: Soo-hyun Park)
Investment Rating : BUY (Maintained)
Target Price : KRW 45,000 (Maintained)
Core Momentum : While FX stabilization provides relief, elevated SMP levels and scheduled nuclear maintenance continue to weigh on costs, suggesting that confirmation of full earnings recovery will require more time.
📊 1. [Valuation & Key Financial Metrics]
- Rating & Target Price: BUY (Maintained), Target Price KRW 45,000 (Maintained, 12M Horizon).
- Valuation Multiples: 2026F P/E 5.5x (Consensus 5.6x), P/B 0.44x (Consensus 0.4x).
- Financial Estimates:
- 2025A: Revenue KRW 97.43 Trillion, Operating Profit KRW 13.49 Trillion, Pre-tax Profit KRW 11.59 Trillion, Net Profit KRW 8.54 Trillion, EPS KRW 13,311, ROE 19.40%, DPS KRW 1,542.
- 2026F: Revenue KRW 97.46 Trillion, Operating Profit KRW 8.17 Trillion (-39.4% YoY), Pre-tax Profit KRW 5.64 Trillion, Net Profit KRW 4.12 Trillion (-51.8% YoY), EPS KRW 6,420, ROE 8.24%, DPS KRW 160.
- 2027F: Revenue KRW 97.56 Trillion, Operating Profit KRW 7.02 Trillion (-14.1% YoY), Pre-tax Profit KRW 4.53 Trillion, Net Profit KRW 3.40 Trillion (-17.6% YoY), EPS KRW 5,293, ROE 6.35%, DPS KRW 140.
🚀 2. [Market Opportunities & Business Outlook]
- 2Q26 Earnings Review:
- Revenue reached KRW 21.9 Trillion (-0.1% YoY) and Operating Profit came in at KRW 1.1 Trillion (-47.2% YoY), missing market consensus expectations.
- Electricity sales volume declined 1.0% YoY due to sluggish industrial demand, and average selling price dropped 0.7% YoY, marking the first tariff reduction since 2021.
- Fuel costs surged to KRW 4.9 Trillion (+14.1% YoY) driven by commodity and FX headwinds coupled with a drop in nuclear utilization rates to ~74.0% (-8.4%p YoY). Coal plant utilization stood at 45.0% (+7.2%p YoY).
- Power purchase costs settled at KRW 8.5 Trillion (-1.3% YoY) due to softer average SMPs despite base-load generation declines; however, higher RPS expenses and labor costs led to overall margin contraction.
- H2 Outlook & Key Financial Drivers:
- The KRW/USD exchange rate stabilizing around the low 1,400s serves as a buffer for raw material and power procurement costs.
- Rising 3Q SMP exceeding 150 KRW/kWh limits immediate cost relief.
- Taking scheduled maintenance into account, 2H nuclear utilization rate is estimated around 80%, with the 2027 recovery trajectory contingent upon the restart timeline of units currently undergoing overhaul.
- Grid expansion in transmission-constrained areas presents potential for generation mix enhancements.
- In the regionally differentiated electricity rate scheme scheduled for 2H, the potential implementation of further industrial tariff cuts represents a critical monitoring variable.
📝 Editor’s Comment (Perspective)
The analyst characterizes KEPCO as a utility navigating a transitional period where positive foreign exchange tailwinds are largely offset by sharp SMP increases and prolonged nuclear maintenance schedules, capping near-term margin expansion. The underlying perspective prioritizes the timing of power generation mix normalization and SMP stabilization over temporary currency relief, taking a prudent stance on immediate earnings growth expectations.
To assess whether this investment thesis holds true, investors should track whether the 3Q SMP surge moderates from above 150 KRW/kWh, whether 2H nuclear utilization successfully rebounds to the targeted 80% level to lower generation costs, and how the forthcoming regional tariff reform affects industrial electricity pricing. These dynamics can be verified through upcoming quarterly financial disclosures, KPX power market data, and official MOTIE regulatory releases.
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