Market: KOSPI (015760)
Brokerage : Eugene Investment & Securities
Analyst : Seong-hyun Hwang, Ph.D.
Investment Rating : BUY (Maintained)
Target Price : KRW 92,000 (Upgraded)
Core Momentum : Despite 4Q25 one-off costs, target price is upgraded based on favorable settlement coefficients, rebounding nuclear utilization from 2Q26, and structurally lower SMPs driving 2026 operating profit toward KRW 21 Trillion.
📊 1. [Valuation & Key Financial Metrics]
- Rating & Target Price: BUY (Maintained), Target Price raised by 46% to KRW 92,000 (from KRW 63,000, applying 1.0x PBR on a 10% ROIC basis as 2025 cost recovery exceeded the return on invested capital requirement and 2026 settlement coefficients remain favorable).
- Financial Estimates:
- 2024A: Revenue KRW 93.40 Trillion, Operating Profit KRW 8.37 Trillion, Pre-tax Profit KRW 5.26 Trillion, Net Profit KRW 3.62 Trillion, EPS KRW 5,439, ROE 9.2%, P/E 3.7x, P/B 0.3x, EV/EBITDA 6.5x.
- 2025E: Revenue KRW 97.43 Trillion, Operating Profit KRW 13.53 Trillion, Pre-tax Profit KRW 11.73 Trillion, Net Profit KRW 8.74 Trillion, EPS KRW 13,423 (+146.8% YoY), ROE 19.8%, P/E 4.7x, P/B 0.9x, EV/EBITDA 5.9x, Dividend Yield 2.4% (DPS KRW 1,540, dividend yield on market price 3.2%).
- 2026E: Revenue KRW 97.19 Trillion (-0% YoY), Operating Profit KRW 20.97 Trillion (+55% YoY, revised up from KRW 18.29 Trillion), Pre-tax Profit KRW 17.41 Trillion, Net Profit KRW 13.34 Trillion (+53% YoY), EPS KRW 20,586 (+53.4% YoY), ROE 24.9%, P/E 3.1x, P/B 0.7x, EV/EBITDA 4.4x.
🚀 2. [Market Opportunities & Business Outlook]
- 4Q25 Earnings Review:
- Revenue posted KRW 24.0 Trillion (-14% QoQ, +1% YoY), Operating Profit recorded KRW 2.0 Trillion (-64% QoQ, -18% YoY), and Net Profit was KRW 1.4 Trillion (-63% QoQ, +37% YoY), missing market consensus.
- Margin contraction was driven by 1) a decline in nuclear utilization (-14%p YoY) due to concentrated maintenance, and 2) a KRW 1.4 Trillion YoY increase in other expenses related to the Egypt nuclear project and nuclear decommissioning.
- Excluding one-off costs, core results met expectations; cumulative parent-level net profit reached KRW 7.2 Trillion alongside the resumption of meaningful dividend payouts (DPS KRW 1,540).
- 2026 Outlook & Fundamental Drivers:
- While power mix pressure continues through 1Q26 due to maintenance schedules, nuclear utilization is projected to climb steadily starting in 2Q26.
- Earnings forecasts are revised upward assuming frozen base electricity tariffs, supported by favorable regulatory settlement coefficients and structural declines in System Marginal Prices (SMP).
- Supported by favorable settlement coefficient settings, the growth trend in standalone net profit is expected to continue throughout 2026.
📝 Editor’s Comment (Perspective)
The analyst views KEPCO as a regulated utility navigating non-recurring fourth-quarter cost recognitions from maintenance outages and overseas projects, but one that is entering an accelerated fundamental earnings expansion phase supported by meaningful dividend resumptions, supportive regulatory settlement mechanisms, and rising nuclear utilization from 2Q26. The core perspective prioritizes multiple normalization toward 1.0x PBR driven by ROIC-backed cost recoveries and robust earnings visibility over transient quarterly expense noise.
To verify whether this investment thesis unfolds as anticipated, key tracking points include the actual rebound slope of nuclear utilization rates starting in 2Q26, the persistence of structurally lower SMP purchase costs, and the company’s progress toward achieving full-year operating profit in the KRW 20 Trillion range under supportive settlement coefficients. These developments can be monitored through KEPCO’s quarterly financial disclosures, KPX power market data, and official corporate IR 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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