Market: KOSPI (015760)
Brokerage : IBK Securities
Analyst : Tae-hyun Kim
Investment Rating : Buy (Maintained)
Target Price : KRW 77,000 (Upgraded)
Core Momentum : Despite a 4Q25 earnings miss driven by one-off subsidiary costs, target price is upgraded on improving power mix profitability from higher nuclear output, expanding shareholder returns, and nuclear export re-rating.
📊 1. [Valuation & Key Financial Metrics]
- Rating & Target Price: Buy (Maintained), Target Price raised by 28.3% to KRW 77,000 (from KRW 60,000, target multiple raised to reflect nuclear export sentiment and valuation re-rating).
- Valuation Multiples: 2025F P/E 3.5x, P/B 0.6x, Dividend Yield 3.3% / 2026F P/E 4.1x, P/B 0.7x.
- Financial Estimates:
- 2024A: Revenue KRW 93.40 Trillion, Operating Profit KRW 8.37 Trillion, Pre-tax Profit KRW 5.26 Trillion, Controlling Net Profit KRW 3.49 Trillion, EPS KRW 5,439, ROE 9.2%, P/E 3.7x, P/B 0.3x, EV/EBITDA 6.5x.
- 2025F: Revenue KRW 97.43 Trillion, Operating Profit KRW 13.53 Trillion, Pre-tax Profit KRW 11.73 Trillion, Controlling Net Profit KRW 8.62 Trillion, EPS KRW 13,423, ROE 19.6%, P/E 3.5x, P/B 0.6x, EV/EBITDA 5.9x.
- 2026F: Revenue KRW 99.28 Trillion, Operating Profit KRW 14.91 Trillion, Pre-tax Profit KRW 13.53 Trillion, Controlling Net Profit KRW 9.97 Trillion, EPS KRW 15,525, ROE 19.0%, P/E 4.1x, P/B 0.7x, EV/EBITDA 6.6x.
- 2027F: Revenue KRW 102.22 Trillion, Operating Profit KRW 16.03 Trillion, Pre-tax Profit KRW 14.36 Trillion, Controlling Net Profit KRW 10.68 Trillion, EPS KRW 16,642, ROE 17.3%, P/E 3.8x, P/B 0.6x, EV/EBITDA 6.1x.
🚀 2. [Market Opportunities & Business Outlook]
- 4Q25 Earnings Review:
- Consolidated Revenue posted KRW 23.69 Trillion (+0.7% YoY), meeting the market consensus of KRW 23.90 Trillion.
- Operating Profit recorded KRW 1.98 Trillion (-18.0% YoY), missing consensus (KRW 3.43 Trillion) by 42% due to increased subsidiary overseas project expenses, higher repair/maintenance costs (+69.3% YoY), and rising other operating expenses (+16.7% YoY).
- Electricity sales volume totaled 129.6TWh (-1.4% YoY), where residential (20.0TWh, flat) and commercial (31.8TWh, +2.1% YoY) held up, while industrial demand (67.7TWh, -3.7% YoY) declined.
- Balance sheet improvements: Consolidated borrowings decreased to KRW 129.8 Trillion (-2.1% YoY), with the borrowing ratio improving to 262.9% (-57.5%p YoY) and the debt-to-equity ratio falling to 416.8% (-79.9%p YoY).
- Generation Mix & Profitability Structure:
- Full-year 2025 generation mix: Nuclear 48.7% (+0.6%p), Coal 37.4% (+1.5%p), LNG 9.9% (-1.9%p), Renewables 2.8% (-0.1%p).
- Fuel costs (-5.8% YoY) and purchased power costs (-5.0% YoY) maintained downward trends.
- Profitability improvement remains supported by stable raw material prices and the expansion of low-cost nuclear baseload output, even in the absence of additional tariff hikes.
- Shareholder Returns & Nuclear Export Catalysts:
- Dividend per share (DPS) for 2025 announced at KRW 1,540 (~3.2% dividend yield), marking the resumption of meaningful dividend payouts since 2020 (compared to KRW 213 in 2024).
- Continued expectations for dividend expansion underpinned by ongoing earnings improvements.
- Momentum from overseas nuclear project exports continues to boost investor sentiment and drive multiple expansion.
📝 Editor’s Comment (Perspective)
The analyst views KEPCO as a regulated utility that navigated temporary fourth-quarter margin compression from subsidiary overseas project costs, but has structurally re-established its shareholder return profile and is entering a valuation re-rating cycle supported by balance sheet deleveraging, power mix improvements, and global nuclear export opportunities. The core perspective emphasizes the resumption of meaningful dividend payouts and margin expansion from lower-cost nuclear generation over non-recurring quarterly cost overruns.
To verify whether this investment thesis unfolds as anticipated, key tracking points include the extent of unit generation cost savings achieved through an increased nuclear output mix in 2026, the containment of any further one-off project liabilities from subsidiaries, and the sustainability of dividend growth aligned with operating profit expansion. These developments can be monitored through KEPCO’s quarterly financial disclosures, notes in periodic regulatory reports, and official shareholder meeting announcements.
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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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