Market: KOSPI (015760)
Brokerage : Hanwha Investment & Securities
Analyst : Yurim Song (RA: Yein Kim)
Investment Rating : Buy (Maintained)
Target Price : KRW 64,000 (Maintained)
Core Momentum : While second-half earnings contraction is unavoidable due to energy price volatility, KEPCO’s cost defense via nuclear generation and overseas export catalysts highlight deep value appeal following recent share price corrections.
📊 1. [Valuation & Key Financial Metrics]
- Rating & Target Price: Buy (Maintained), Target Price KRW 64,000 (Maintained, applying a target multiple of ~0.7x to 12-month forward BPS based on expected ROE of 14.2%).
- Current Valuation Multiples: 12M Fwd P/E 3.1x, P/B 0.5x (reflecting a 37% share price decline since March that erased all year-to-date gains).
- Financial Estimates:
- 2025A: Revenue KRW 97.43 Trillion, Operating Profit KRW 13.49 Trillion, Controlling Net Profit KRW 8.55 Trillion, EPS KRW 13,311, ROE 19.4%, P/E 3.5x, P/B 0.6x, Dividend Yield 3.3%.
- 2026E: Revenue KRW 100.50 Trillion, Operating Profit KRW 12.54 Trillion (Revised down from the KRW 18 Trillion level to KRW 12 Trillion level due to Middle East tensions), Controlling Net Profit KRW 7.49 Trillion, EPS KRW 11,667, ROE 14.6%, P/E 4.0x, P/B 0.5x, Dividend Yield 3.3%.
- 2027E: Revenue KRW 101.26 Trillion, Operating Profit KRW 12.67 Trillion, Controlling Net Profit KRW 7.87 Trillion, EPS KRW 12,264, ROE 13.5%, P/E 3.8x, P/B 0.5x, Dividend Yield 3.3%.
🚀 2. [Market Opportunities & Business Outlook]
- 1Q26 Earnings Preview:
- Revenue projected at KRW 24.9 Trillion (+3.0% YoY) and Operating Profit at KRW 4.3 Trillion (+13.6% YoY), beating the market consensus of KRW 4.19 Trillion by 1.8%.
- First-quarter operating profit expansion is driven by the continuing year-on-year decline in energy import prices.
- Cost Environment & Second-Half Outlook:
- Energy commodity prices peaked at WTI $117.6 and JKM $22.4 before stabilizing around $87 and $15 respectively, though remaining elevated compared to prior-year averages.
- Full-year 2026 operating profit estimates have been lowered to the KRW 12 Trillion range to incorporate the commodity shock, resulting in an inevitable year-on-year earnings contraction in 2H.
- Potential for further estimate downgrades remains open, but the magnitude of any additional revision is expected to be limited.
- Baseload Nuclear Role & Structural Catalysts:
- Increased energy commodity volatility reaffirms the strategic necessity of low-cost nuclear baseload generation.
- Nuclear energy is expected to demonstrate fundamental value through expanded cost-cushioning contributions in domestic operations and structural growth via overseas nuclear export expansions.
📝 Editor’s Comment (Perspective)
The analyst views KEPCO as a utility undergoing an earnings estimate reset and facing a second-half profit contraction triggered by Middle East energy disruptions, but one whose share price has sufficiently priced in macro risks following a steep 37% correction. The core perspective prioritizes the structural value of nuclear baseload capacity in shielding generation costs against commodity swings, along with overseas nuclear export catalysts and historical trough valuations, over short-term quarterly margin deceleration.
To evaluate whether this investment thesis holds true, key monitoring variables include the stability of energy import prices around current levels ($87 WTI, $15 JKM), the extent of fuel cost savings achieved through higher nuclear output shares in 2H, and concrete bidding milestones within the overseas nuclear export pipeline. These developments can be verified through KEPCO’s quarterly financial disclosures, KPX power market data, and official MOTIE energy policy releases.
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