Market: KOSPI (015760)
Brokerage : Kiwoom Securities
Analyst : Jae-won Cho
Investment Rating : Outperform (Maintained)
Target Price : KRW 70,000 (Upgraded)
Core Momentum : Despite a 4Q25 earnings miss driven by concentrated one-off costs, target price is raised based on 2026 profit growth from nuclear utilization rebounds and lagged fuel cost savings, alongside growing expectations for Team Korea’s overseas nuclear pipeline.
📊 1. [Valuation & Key Financial Metrics]
- Rating & Target Price: Outperform (Maintained), Target Price raised to KRW 70,000 (reflecting growing momentum from Team Korea’s overseas nuclear expansion, including the US market).
- Valuation Multiples: 2025E P/E 3.5x, P/B 0.64x, Dividend Yield 3.3% / 2026E P/E 3.7x, P/B 0.71x.
- Financial Estimates:
- 2024A: Revenue KRW 93.40 Trillion, Operating Profit KRW 8.36 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 0.32x, EV/EBITDA 6.5x.
- 2025E: Revenue KRW 97.43 Trillion, Operating Profit KRW 13.52 Trillion, Pre-tax Profit KRW 11.73 Trillion, Controlling Net Profit KRW 8.62 Trillion, EPS KRW 13,423, ROE 19.8%, P/E 3.5x, P/B 0.64x, EV/EBITDA 5.7x (DPS KRW 1,540, payout ratio set at 13.65%).
- 2026E: Revenue KRW 98.52 Trillion, Operating Profit KRW 16.61 Trillion (+22.8% YoY), Pre-tax Profit KRW 14.82 Trillion, Controlling Net Profit KRW 10.89 Trillion (+26.3% YoY), EPS KRW 16,957, ROE 20.9%, P/E 3.7x, P/B 0.71x, EV/EBITDA 5.4x.
- 2027E: Revenue KRW 99.64 Trillion, Operating Profit KRW 17.06 Trillion (+2.8% YoY), Pre-tax Profit KRW 15.41 Trillion, Controlling Net Profit KRW 11.32 Trillion (+4.0% YoY), EPS KRW 17,628, ROE 18.2%, P/E 3.6x, P/B 0.60x, EV/EBITDA 5.2x.
🚀 2. [Market Opportunities & Business Outlook]
- 4Q25 Earnings Review:
- Revenue posted KRW 23.7 Trillion (+1% YoY) and Operating Profit was KRW 1.98 Trillion (-18% YoY), missing market expectations of KRW 3.43 Trillion.
- Despite declines in fuel costs (-5.8% YoY) and purchased power costs (-5.0% YoY), operating profit contracted due to concentrated recognitions of carbon emission liabilities and provisions for nuclear decommissioning cost increases.
- Industrial electricity sales volume declined 2.1% YoY in 2025, marking three consecutive years of contraction amid sluggish manufacturing utilization and cumulative tariff increases.
- 2026 Earnings Drivers & Margin Expansion:
- Operating Profit is projected to reach KRW 16.61 Trillion (+23% YoY) in 2026, driven by fuel expense reductions from generation mix improvements and lagged raw material cost effects.
- KHNP’s target nuclear utilization rate for 2026 is 89% (+4.4%p YoY), supported by the operation of Kori Unit 2 and the commercial grid connection of Saeul Unit 3, which will reduce reliance on thermal coal generation.
- The sharp decline in oil prices beginning in 4Q25 will continue to stabilize fuel costs downward with a typical time lag.
- Tariff Policy & Shareholder Return Strategy:
- Government policy direction is oriented toward structural efficiency improvements—such as seasonal/time-of-use tariff restructuring and regional differential pricing—rather than direct tariff hikes.
- 2026 dividends are expected to track earnings growth proportionately rather than featuring an aggressive jump in the payout ratio.
- Team Korea’s leadership in expanding overseas nuclear project pipelines (including the US) provides medium-to-long term valuation support.
📝 Editor’s Comment (Perspective)
The analyst views KEPCO as a regulated utility navigating non-recurring liability recognitions in 4Q25, but one poised for steady operating profit expansion in 2026 driven by nuclear utilization recovery and the lagged pass-through of lower oil prices. The core perspective cautions against overly aggressive assumptions regarding immediate tariff hikes or sharp dividend payout ratio jumps, emphasizing instead the structural generation mix improvements and long-term valuation upsides tied to Team Korea’s overseas nuclear initiatives.
To verify whether this investment thesis unfolds as anticipated, key tracking points include whether KHNP achieves its 89% nuclear utilization target alongside the commercial operation of Saeul Unit 3, the realized reduction in fuel expenses reflecting lower lagged commodity prices, and the finalized parameters of the time-of-use industrial tariff reforms scheduled for later this year. These developments can be monitored through KEPCO’s quarterly financial disclosures, KPX power market statistics, and official energy policy releases from the Ministry of Trade, Industry and Energy (MOTIE).
📢 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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