Market: KOSPI (015760)
Brokerage : Shinhan Securities
Analyst : Seung-hoon Han
Investment Rating : BUY (Maintained)
Target Price : KRW 45,000 (Maintained)
Core Momentum : Despite a near-term earnings vacuum from elevated SMPs and cost burdens, low valuation support remains solid alongside upcoming policy catalysts including the 12th Basic Plan and regional tariff reforms.
📊 1. [Valuation & Key Financial Metrics]
- Rating & Target Price: BUY (Maintained), Target Price KRW 45,000 (applying a Target P/B of 0.55x to BPS of KRW 80,660).
- Current Valuation Support: 12-Month Forward P/B of 0.42x and P/E of 5.4x act as key downside support.
- Financial Estimates:
- 2025A: Revenue KRW 97.43 Trillion, Operating Profit KRW 13.49 Trillion, Controlling Net Profit KRW 8.54 Trillion, P/E 3.5x, ROE 19.4%, P/B 0.6x, Dividend Yield 3.3%.
- 2026F: Revenue KRW 98.29 Trillion, Operating Profit KRW 7.66 Trillion (Revised down by -9.1%), Controlling Net Profit KRW 4.00 Trillion, P/E 5.7x, ROE 8.0%, P/B 0.4x, Dividend Yield 1.7%.
- 2027F: Revenue KRW 98.89 Trillion, Operating Profit KRW 7.76 Trillion (Revised down by -20.1%), Controlling Net Profit KRW 4.37 Trillion, P/E 5.2x, ROE 8.1%, P/B 0.4x, Dividend Yield 2.3%.
- 2028F: Revenue KRW 99.78 Trillion, Operating Profit KRW 10.72 Trillion, Controlling Net Profit KRW 6.66 Trillion, P/E 3.4x, ROE 11.4%, P/B 0.4x, Dividend Yield 2.8%.
🚀 2. [Market Opportunities & Business Outlook]
- 2Q26 Earnings Review:
- Consolidated Operating Profit recorded KRW 1.1 Trillion (-47.2% YoY), missing the consensus expectation of KRW 2.0 Trillion.
- Extended maintenance at Wolsong Units 2, 3, and 4 led to lower nuclear utilization of 74.8% (-8.5%p YoY) and a decline in nuclear generation share to 49.1% (-5.3%p YoY).
- Coal generation utilization rose to 45.5% (+7.3%p YoY) to offset nuclear downtime, lifting fuel costs to KRW 4.93 Trillion (+14.1% YoY) and repair/maintenance expenses to KRW 832.9 Billion (+13.8% YoY).
- Total operating expenses reached KRW 20.8 Trillion (+4.9% YoY), while power purchase costs settled at KRW 8.49 Trillion (-1.3% YoY) aided by lower average SMP.
- 2H Cost Drivers & Environment:
- Daily SMP crossed the 150 KRW/kWh threshold in early August (up from a July average of 138 KRW/kWh), entering an upward trajectory.
- Geopolitical tensions (US-Iran conflict) impacting energy commodity prices will be fully reflected in 3Q costs, causing short-term earnings deceleration.
- The KRW/USD exchange rate easing to the low 1,400s partially cushions cost pressures.
- Additional power tariff hikes remain unlikely due to government inflation-control measures and expectations of peak oil prices.
- Policy Catalysts & Mid-to-Long Term Drivers:
- Unit cost relief expected as nuclear maintenance ends and Saeul Unit 3 commences commercial operation in 2H.
- Potential inclusion of new nuclear power plants in the upcoming 12th Basic Plan for Electricity Supply and Demand draft (expected Sep–Oct).
- Implementation framework for regionally differentiated electricity tariffs expected to take shape within the year.
📝 Editor’s Comment (Perspective)
The analyst views KEPCO as an energy utility currently navigating a temporary ‘earnings momentum vacuum’ caused by prolonged nuclear maintenance and rising system marginal prices, but one supported by deep valuation buffers and approaching policy tailwinds. The perspective emphasizes mid-to-long term structural policy drivers—such as generation mix recovery and nuclear expansion targets in the 12th Basic Plan—over near-term cost fluctuations and tariff freeze constraints.
To verify whether this investment thesis unfolds as anticipated, key tracking points include the operational recovery of the Wolsong reactors alongside Saeul Unit 3 grid connection, the persistence of SMP levels above 150 KRW/kWh, and the official scale of new nuclear capacity additions in the 12th Basic Plan draft along with the finalized regional tariff framework. These dynamics can be monitored through KEPCO’s quarterly disclosures, KPX power market data, and official regulatory announcements from the Ministry of Trade, Industry and Energy (MOTIE).
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