Market: KOSPI (015760)
Brokerage : Kiwoom Securities
Analyst : Jae-won Cho
Investment Rating : Outperform (Maintained)
Target Price : KRW 48,000 (Downgraded)
Core Momentum : While second-half cost pass-through necessitates a 2026 earnings contraction and a 4Q operating deficit, KEPCO’s relative upside remains muted compared to nuclear pure-plays despite Team Korea export catalysts.
📊 1. [Valuation & Key Financial Metrics]
- Rating & Target Price: Outperform (Maintained), Target Price lowered to KRW 48,000 (reflecting downward earnings revisions and a reduced target multiple).
- Financial Estimates:
- 2025A: Revenue KRW 97.43 Trillion, Operating Profit KRW 13.49 Trillion, Controlling Net Profit KRW 8.54 Trillion, EPS KRW 13,311, ROE 19.4%, P/E 3.5x, P/B 0.63x, EV/EBITDA 5.8x.
- 2026E: Revenue KRW 98.62 Trillion, Operating Profit KRW 8.35 Trillion (-38.1% YoY), Controlling Net Profit KRW 4.87 Trillion (-43.0% YoY), EPS KRW 7,589, ROE 9.7%, P/E 5.4x, P/B 0.50x, EV/EBITDA 7.2x, Dividend Yield 1.9% (DPS estimated at KRW 660–880).
- 2027E: Revenue KRW 99.32 Trillion, Operating Profit KRW 12.09 Trillion (+44.8% YoY), Controlling Net Profit KRW 7.71 Trillion, EPS KRW 12,007, ROE 13.7%, P/E 3.4x, P/B 0.44x, EV/EBITDA 6.0x.
- 2028E: Revenue KRW 100.32 Trillion, Operating Profit KRW 14.24 Trillion, Controlling Net Profit KRW 9.12 Trillion, EPS KRW 14,201, ROE 14.3%, P/E 2.9x, P/B 0.38x, EV/EBITDA 5.4x.
🚀 2. [Market Opportunities & Business Outlook]
- 1Q26 Earnings Review:
- Consolidated Operating Profit reached KRW 3.78 Trillion (+1% YoY), missing market consensus of KRW 4.24 Trillion.
- Electricity sales volume declined 0.9% YoY, led by a 2.4% YoY drop in industrial power sales.
- Fuel costs rose 4.1% YoY and power purchase costs fell 0.4% YoY. The 1Q fuel expense increase was driven by lower nuclear utilization and higher thermal generation rather than commodity prices.
- 2026 Earnings Downturn & Cost Trajectory:
- Surging raw material prices since March will flow into earnings starting in 2H26, resulting in a 38% YoY contraction in full-year operating profit to KRW 8.35 Trillion.
- Annual fuel costs and power purchase costs are projected to increase by 7% and 13.8% YoY, respectively, in 2026 (fuel cost increases are partly mitigated by higher nuclear utilization in 2H).
- Although structural earnings baseline has improved with electricity tariffs over 40% higher than in 2022, accumulated cost burdens and seasonal demand drops are expected to push 4Q26 Operating Profit into a deficit of -KRW 983.3 Billion.
- Stock Drivers & Relative Performance Outlook:
- Uncontrollable external cost variables pose risks of further downward earnings revisions, constraining debt repayment capacity and dividend flexibility.
- Team Korea’s overseas nuclear export catalysts remain the primary rebound driver; however, KEPCO’s relative stock performance is likely to lag domestic nuclear pure-plays due to lower earnings growth visibility and diluted benefit intensity.
📝 Editor’s Comment (Perspective)
The analyst characterizes KEPCO as a regulated utility that has structurally elevated its baseline earning power through cumulative tariff hikes, but one destined for an unavoidable earnings contraction in 2026 and a quarterly deficit in 4Q as elevated commodity costs are fully transmitted in the second half. The core perspective emphasizes that while Team Korea’s overseas nuclear project pipeline offers thematic support, KEPCO’s vulnerability to macro cost headwinds and weaker operational leverage will likely lead to relative share price underperformance compared to pure-play nuclear equipment and engineering peers.
To verify whether this investment thesis holds true, investors should monitor the quarterly pass-through of fuel and power purchase costs in 2H26 leading up to the projected 4Q operating deficit, the actual dividend distribution based on a 15–20% payout ratio assumption, and the tangible earnings contribution realized from Team Korea’s overseas nuclear project milestones. These factors can be tracked through KEPCO’s quarterly financial disclosures, KPX power market data, and official MOTIE energy cooperation updates.
📢 Disclaimer & Source
Source: This content has been structured and newly written based on officially disclosed financial facts and data from brokerage reports.
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