Market: KOSPI (015760)
Brokerage : Hana Securities
Analyst : Jae-seon Yoo (RA: Woo-kyu Sung)
Investment Rating : Neutral (Maintained)
Target Price : KRW 45,000 (Maintained)
Core Momentum : With 1Q representing the full-year earnings peak, upward SMP trends and intensifying raw material and policy-driven cost burdens in 2H warrant a conservative wait-and-see approach.
📊 1. [Valuation & Key Financial Metrics]
- Rating & Target Price: Neutral (Maintained), Target Price KRW 45,000 (Maintained, 12M Horizon).
- Valuation Multiples: 2026F P/E 11.50x (Consensus 11.5x), P/B 0.53x (Consensus 0.5x).
- Financial Estimates:
- 2025A: Revenue KRW 97.43 Trillion, Operating Profit KRW 13.49 Trillion, Pre-tax Profit KRW 11.59 Trillion, Net Profit KRW 8.54 Trillion, EPS KRW 13,311, ROE 19.40%, DPS KRW 1,542.
- 2026F: Revenue KRW 97.55 Trillion, Operating Profit KRW 5.60 Trillion (-58.5% YoY), Pre-tax Profit KRW 3.11 Trillion, Net Profit KRW 2.28 Trillion (-73.4% YoY), EPS KRW 3,544, ROE 4.66%, DPS KRW 190.
- 2027F: Revenue KRW 97.71 Trillion, Operating Profit KRW 5.21 Trillion (-6.9% YoY), Pre-tax Profit KRW 2.76 Trillion, Net Profit KRW 2.07 Trillion (-9.0% YoY), EPS KRW 3,225, ROE 4.11%, DPS KRW 0.
🚀 2. [Market Opportunities & Business Outlook]
- 1Q26 Earnings Review:
- Revenue posted KRW 24.4 Trillion (+0.7% YoY) and Operating Profit reached KRW 3.8 Trillion (+0.8% YoY), falling short of market consensus.
- Electricity sales volume dropped 0.9% YoY on weaker industrial demand, while ASP rose 1.0% YoY (tariff cut effects to take effect starting 2Q).
- Fuel costs decreased to KRW 5.2 Trillion (-4.1% YoY); however, a decline in nuclear utilization (71.0%, -21.4%p YoY) due to maintenance led to higher coal utilization of 52.4% (+11.7%p YoY), worsening the power generation mix.
- Power purchase costs settled at KRW 8.7 Trillion (-0.4% YoY) as softer SMPs mitigated higher external power procurement volumes.
- Cost Drivers & Second-Half Outlook:
- Nuclear utilization is projected to bottom out in 1Q and gradually recover through 3Q, averaging in the high-70% range for the full year.
- The expiration of coal consumption tax cuts and tariff restructuring effects from mid-April will coincide with FX headwinds and commodity price pressures to accelerate cost increases from 2H.
- System Marginal Prices (SMP) are expected to trend upward from their 1Q trough, placing continuous pressure on margins.
- While cumulative historical tariff hikes prevent massive deficit risks seen in 2022, quarterly operating losses during off-peak seasons remain possible depending on the duration of Middle East geopolitical tensions.
📝 Editor’s Comment (Perspective)
The analyst characterizes KEPCO as a utility that has avoided catastrophic deficit risks thanks to historical tariff revisions, but one where 1Q marks the annual earnings peak ahead of an inevitable margin compression phase driven by rising SMPs, FX headwinds, and policy cost build-ups. The core perspective prioritizes upcoming second-half cost pressures and potential off-peak operating losses over backward-looking 1Q profitability, recommending a prudent wait-and-see approach until Middle East energy disruptions subside and earnings directionality improves.
To verify whether this investment thesis unfolds as expected, key monitoring metrics include the upward slope of SMPs and power purchase costs following their 1Q trough, the recovery trajectory of nuclear utilization toward the high-70% target, and the degree of margin defense against elevated commodity and FX pressures entering 2H. These dynamics can be tracked through KEPCO’s quarterly financial disclosures, KPX power market data, and official MOTIE energy policy updates.
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