Market: KOSPI (015760)
Brokerage : Hana Securities
Analyst : Jae-seon Yoo (RA: Woo-kyu Sung)
Investment Rating : BUY (Maintained)
Target Price : KRW 73,000 (Upgraded)
Core Momentum : While 4Q earnings missed consensus and risks surrounding industrial tariff cuts and subsidiary overseas project costs linger, favorable settlement adjustments and 2H nuclear power ramp-ups support an upgraded target price.
📊 1. [Valuation & Key Financial Metrics]
- Rating & Target Price: BUY (Maintained), 12-Month Target Price raised by 12.3% to KRW 73,000 (applying a Target P/B of 0.8x to 2026E BPS).
- Valuation Multiples: 2026F P/E 4.61x (Consensus 4.6x), P/B 0.73x (Consensus 0.7x).
- Financial Estimates:
- 2024A: Revenue KRW 93.40 Trillion, Operating Profit KRW 8.36 Trillion, Net Profit KRW 3.49 Trillion, EPS KRW 5,439, ROE 9.22%, P/E 3.69x, P/B 0.32x, DPS KRW 213.
- 2025P: Revenue KRW 97.43 Trillion, Operating Profit KRW 13.52 Trillion, Net Profit KRW 8.62 Trillion, EPS KRW 13,423, ROE 19.61%, P/E 3.52x, P/B 0.63x, DPS KRW 1,540 (Dividend payout ratio set at 13.7%, down 2.7%p YoY).
- 2026F: Revenue KRW 97.77 Trillion, Operating Profit KRW 14.44 Trillion, Net Profit KRW 8.82 Trillion, EPS KRW 13,731, ROE 17.00%, P/E 4.61x, P/B 0.73x, DPS KRW 1,790.
🚀 2. [Market Opportunities & Business Outlook]
- 4Q25 Earnings Review:
- Revenue reached KRW 23.7 Trillion (+0.7% YoY) and Operating Profit recorded KRW 2.0 Trillion (-18.0% YoY), missing market consensus.
- Overall power sales volume fell 1.4% YoY due to weak industrial demand, while ASP rose 2.4% YoY; past tariff hike effects fully expired with this quarter.
- Nuclear utilization declined to 75.1% (-11.7%p YoY), which increased coal generation; however, reduced LNG generation led to a 5.8% YoY decline in fuel costs to KRW 4.6 Trillion.
- Power purchase costs decreased to KRW 7.4 Trillion (-5.0% YoY) helped by lower SMPs despite a lower baseload output share.
- Operating expenses saw a sharp rise in other expenses, driven by concentrated recognition of subsidiary overseas project expenses and provisions.
- Cost Variables & Earnings Drivers:
- Subsidiary overseas project costs, rising since 1Q25, pose ongoing potential liability recognition risks until project completion in 2029.
- Downward movement in SMP is likely limited beyond 2Q26.
- Full-year 2026 nuclear utilization is projected to follow a low-first-half, high-second-half trajectory due to scheduled maintenance.
- Policy & Regulatory Catalysts:
- Favorable settlement coefficient adjustments for KEPCO’s parent entity provide structural capital expansion support ahead of bond issuance limit constraints.
- Discussions underway for seasonal and time-of-use tariff adjustments for industrial users (likely structured as tariff reduction benefits to prevent industrial load loss).
- Near-term visibility on overseas nuclear exports remains low outside of Southeast Asia, though mid-to-long term project pipelines remain relevant.
📝 Editor’s Comment (Perspective)
The analyst views KEPCO as a regulated utility navigating the expiration of historical tariff hike benefits alongside persistent risks from subsidiary overseas project costs and potential industrial tariff cuts, but one reinforcing its financial baseline through favorable parent-level settlement adjustments. The core perspective prioritizes structural equity defense via regulatory mechanisms and generation mix normalization from 2H nuclear restarts over speculative near-term overseas contract catalysts or expectations of additional tariff hikes.
To verify whether this investment thesis unfolds as anticipated, key tracking points include the magnitude of additional provisions and contingency expenses recognized from subsidiary overseas projects through 2029, the finalized framework of seasonal and time-of-use industrial tariffs and its impact on average selling prices, and the recovery rate of nuclear utilization in 2H26. These developments can be monitored through KEPCO’s quarterly financial disclosures, notes on contingent liabilities in periodic reports, KPX power market data, and official MOTIE regulatory releases.
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Source: This content has been structured and newly written based on officially disclosed financial facts and data from brokerage reports.
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