Market: KOSPI (015760)
Brokerage : Daishin Securities
Analyst : Min-ho Hur
Investment Rating : BUY (Maintained)
Target Price : KRW 80,000 (Maintained)
Core Momentum : Despite 4Q25 one-off costs and reduced dividend payouts, strong 2026 earnings growth driven by power mix recovery and structural overseas nuclear expansion under the US-Korea partnership support the investment thesis.
📊 1. [Valuation & Key Financial Metrics]
- Rating & Target Price: BUY (Maintained), 6-Month Target Price KRW 80,000 (Maintained).
- Valuation Multiples: 2026F P/E 3.6x, P/B 0.7x (2025 parent dividend payout ratio settled at 13.7%, DPS KRW 1,540).
- Financial Estimates:
- 2024A: Revenue KRW 93.40 Trillion, Operating Profit KRW 8.37 Trillion, Controlling Net Profit KRW 3.49 Trillion, EPS KRW 5,439, ROE 9.2%, P/E 3.7x, P/B 0.3x.
- 2025P: Revenue KRW 97.44 Trillion, Operating Profit KRW 13.53 Trillion, Controlling Net Profit KRW 8.62 Trillion, EPS KRW 13,423, ROE 19.5%, P/E 4.7x, P/B 0.8x.
- 2026F: Revenue KRW 97.56 Trillion (+0.1% YoY), Operating Profit KRW 18.74 Trillion (+38.6% YoY), Controlling Net Profit KRW 11.15 Trillion, EPS KRW 17,374, ROE 20.9%, P/E 3.6x, P/B 0.7x.
- 2027F: Revenue KRW 98.66 Trillion, Operating Profit KRW 19.70 Trillion, Controlling Net Profit KRW 11.81 Trillion, EPS KRW 18,403, ROE 18.6%, P/E 3.4x, P/B 0.6x.
🚀 2. [Market Opportunities & Business Outlook]
- 4Q25 Earnings Review:
- Consolidated Revenue reached KRW 23.69 Trillion (+0.7% YoY) and Operating Profit recorded KRW 1.98 Trillion (-18.0% YoY), missing market consensus (KRW 3.43 Trillion).
- Electricity ASP rose 1.0% YoY and sales volume edged up 0.2% YoY (industrial -1.0%, commercial +2.0%, residential +0.6%). Fuel costs and purchased power costs declined 5.8% and 5.0% YoY, respectively.
- Margin contraction was driven by one-off items including a ~KRW 400 Billion increase in nuclear decommissioning provisions and overseas subsidiary project losses. (4Q25 standalone cumulative Operating Profit posted KRW 8.54 Trillion (+170% YoY) and Net Profit KRW 7.24 Trillion (+773% YoY)).
- 2026 Earnings Drivers & Power Mix Normalization:
- Structural recovery in nuclear utilization to 86.1% and the commercial operation of Saeul Unit 3 (1Q26) and Unit 4 (4Q26) will improve generation mix.
- Lower LNG import prices reflecting 2H25 oil declines (5–6 month lag) and low-base effects from 2025 one-off costs.
- Operating Profit projected at KRW 18.74 Trillion (+38.6% YoY) despite higher FX assumptions (1,440 KRW/USD in 2026, +18 KRW/USD).
- Overseas Nuclear Market Expansion:
- Market concerns over ongoing overseas subsidiary losses are viewed as excessive.
- Finalization of the US-Korea Nuclear Agreement in 1H26 is expected to establish a solid foundation for expanding global nuclear construction projects.
- Revenue and profit generation potential based on participation scope in US/third-country AP1000 projects:
- Reactor & turbine building construction + BOP EPC: KRW 18.8 Trillion (65% of estimated pure construction cost of KRW 29 Trillion).
- Reactor building construction + turbine building & BOP EPC: KRW 23.1 Trillion (80%).
- Korean reactor model export to the US: KRW 29 Trillion (100%).
📝 Editor’s Comment (Perspective)
The analyst views KEPCO as an energy utility experiencing temporary consolidated margin compression due to one-off provisioning and subsidiary project losses in 4Q25, but one poised for significant fundamental earnings growth in 2026 driven by nuclear capacity expansion and generation mix normalization. The core perspective looks beyond near-term dividend payout cuts and transient subsidiary noise, prioritizing multi-year fuel cost savings from lower LNG prices and the structural upside stemming from global nuclear buildouts under the upcoming US-Korea nuclear partnership.
To verify whether this investment thesis unfolds as anticipated, key tracking points include the commercial grid connection timelines of Saeul Units 3 and 4 alongside the recovery of nuclear utilization rates to the 86% level, the pass-through of lower LNG import costs into quarterly fuel expenses, and the formal conclusion of the US-Korea Nuclear Agreement in 1H26 along with KEPCO’s contract scope in global AP1000 projects. These developments can be monitored through KEPCO’s quarterly financial disclosures, notes in periodic regulatory reports, and official overseas nuclear policy announcements from the Ministry of Trade, Industry and Energy (MOTIE).
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