Market: KOSPI (015760)
Brokerage : Daishin Securities
Analyst : Min-ho Hur
Investment Rating : BUY (Maintained)
Target Price : KRW 62,000 (Downgraded)
Core Momentum : While near-term earnings momentum weakens due to soaring oil/LNG costs and tariff uncertainties, focus shifts toward overseas nuclear expansion catalysts driven by the Special Act on US Investment.
📊 1. [Valuation & Key Financial Metrics]
- Rating & Target Price: BUY (Maintained), 6-Month Target Price lowered by 23% to KRW 62,000 (Target P/B lowered from 0.87x to 0.69x).
- Target Price Valuation Rationale: Incorporates cost increases from surging LNG prices from 3Q26 and uncertainty over the timing of offsetting power tariff hikes (material tariff adjustments aimed at balance sheet recovery are not projected until 4Q27).
- Key Financial Results & Estimates:
- 1Q26 Results: Revenue KRW 24.40 Trillion (+0.7% YoY, +3.0% QoQ), Operating Profit KRW 3.78 Trillion (+0.8% YoY, +94.1% QoQ, missing consensus of KRW 4.24 Trillion), Net Profit KRW 2.45 Trillion (+5.1% YoY).
- 2Q26 Estimates: Revenue KRW 21.94 Trillion (0.0% YoY, -10.1% QoQ), Operating Profit KRW 2.08 Trillion (-2.5% YoY, -45.0% QoQ), Net Profit KRW 1.13 Trillion (-0.8% YoY, -53.9% QoQ).
- 2026 Full-Year Forecast: Operating Profit projected at KRW 8.91 Trillion (-34% YoY).
🚀 2. [Market Opportunities & Business Outlook]
- 1Q26 Review & Short-Term Cost Environment:
- 1Q operating profit missed consensus due to reduced sales volume in high-margin industrial power (-2.4%), higher KRW/USD exchange rates, and lower nuclear utilization.
- Implementation of seasonal time-of-use industrial tariffs in mid-April resulted in an effective -1.7% tariff reduction.
- Concerns persist over Middle East energy infrastructure restoration timelines following the US-Iran conflict, with significant LNG import cost spikes expected from 3Q26.
- Due to government inflation-control measures, power tariff hikes remain constrained during commodity spikes, postponing tariff relief until energy prices stabilize.
- Expansion into Overseas Nuclear Markets (From Late June):
- Momentum from US-Korea investment cooperation expected following the enactment of the Special Act on US Investment and the launch of the Korea-US Strategic Investment Corporation (tentative) on June 18.
- Out of a total $350 Billion investment framework, $200 Billion (up to $20 Billion annually) is allocated to Korean government-led equity investments in nuclear (SMRs, large-scale reactors), power grids, AI data centers, and critical minerals.
- Leveraging EPC and O&M track records, KEPCO Group is positioned for key roles in US reactor buildouts and potential direct export of Korean reactor models.
- Post-2027 export pipeline includes project discussions across Vietnam, Türkiye, Saudi Arabia, UAE Phase 2, and Czech Phase 2.
📝 Editor’s Comment (Perspective)
The analyst views KEPCO as a utility navigating a transient earnings deceleration caused by commodity cost spikes and delayed tariff hikes, but one that is pivoting toward a valuation re-rating driven by the Special Act on US Investment and a broadening global nuclear export pipeline. The core perspective prioritizes long-term overseas expansion—specifically bilateral US energy partnerships and pipeline projects across emerging markets—over near-term domestic margin fluctuations.
To evaluate whether this investment thesis unfolds as anticipated, key tracking points include the company’s margin resilience against 3Q LNG price increases, the concrete progress of equity investments and contracts via the Korea-US Strategic Investment Corporation post-June 18, and tangible milestones in overseas nuclear bids across Vietnam and the Czech Republic. These developments can be verified through KEPCO’s quarterly financial disclosures, DART filings, and official government releases regarding overseas energy cooperation.
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