Market: KOSPI (015760)
Brokerage : Hana Securities
Analyst : Jae-seon Yoo (RA: Woo-kyu Sung)
Investment Rating : BUY (Maintained)
Target Price : KRW 65,000 (Maintained)
Core Momentum : Despite industrial demand slowdown, sub-100 KRW/kWh SMP levels, commodity price declines, and generation mix improvements from Kori Unit 2 restart and Saeul Unit 3 grid connection support sustained cost reductions and earnings expansion through 2026.
📊 1. [Valuation & Key Financial Metrics]
- Rating & Target Price: BUY (Maintained), 12-Month Target Price KRW 65,000 (Maintained).
- Valuation Multiples: 2026F P/E 2.94x (Consensus 2.9x), P/B 0.56x (Consensus 0.6x).
- Financial Estimates:
- 2024A: Revenue KRW 93.40 Trillion, Operating Profit KRW 8.36 Trillion, Pre-tax Profit KRW 5.26 Trillion, Net Profit KRW 3.49 Trillion, EPS KRW 5,439, ROE 9.22%, P/E 3.69x, P/B 0.32x, DPS KRW 213.
- 2025F: Revenue KRW 96.90 Trillion, Operating Profit KRW 14.82 Trillion (+77.1% YoY), Pre-tax Profit KRW 12.70 Trillion, Net Profit KRW 9.06 Trillion (+159.4% YoY), EPS KRW 14,110, ROE 20.52%, P/E 3.35x, P/B 0.63x, DPS KRW 2,190.
- 2026F: Revenue KRW 97.36 Trillion (+0.5% YoY), Operating Profit KRW 17.49 Trillion (+18.0% YoY), Pre-tax Profit KRW 14.83 Trillion, Net Profit KRW 11.13 Trillion (+22.8% YoY), EPS KRW 17,331, ROE 20.69%, P/E 2.94x, P/B 0.56x, DPS KRW 2,300.
🚀 2. [Market Opportunities & Business Outlook]
- 4Q25 Earnings Preview:
- Revenue projected at KRW 23.2 Trillion (-1.6% YoY) and Operating Profit at KRW 3.3 Trillion (+35.4% YoY), meeting market expectations.
- Top-line contraction stems from diminishing base effects of past tariff hikes and sluggish industrial power sales volume.
- Power purchase costs are estimated to drop to KRW 7.1 Trillion (-10.0% YoY) as quarterly average SMP remains below 100 KRW/kWh.
- Fuel costs are projected to fall to KRW 4.3 Trillion (-11.4% YoY) supported by lower coal import prices despite FX headwinds. Coal plant utilization is estimated at 45.7% (+2.0%p YoY) and nuclear at 75.0% (-11.8%p YoY).
- The magnitude of quarterly provisioning recognized by KHNP (averaging over KRW 500 Billion per quarter in 2025) represents a key swing factor for earnings.
- Cost Structure & Power Mix Normalization (2026):
- While historical tariff hike effects ended in October 2025, falling raw material prices will drive profit growth throughout 2026.
- Power generation mix is set to normalize as the 1H restart of Kori Unit 2 and the 2H grid connection of Saeul Unit 3 offset the Taean Unit 1 coal plant retirement and offline reactors.
- A favorable dividend payout announcement in February would enhance DPS upside visibility alongside 2026 earnings growth.
- Long-Term Nuclear Export Pipeline:
- The Czech nuclear project is expected to drive simultaneous revenue and profit growth starting from its projected 2029 construction start.
- Factoring in the historical precedent of the UAE Barakah project (which turned cumulatively profitable in its 9th year of recognition), overseas nuclear projects will provide sustained multi-year contributions.
📝 Editor’s Comment (Perspective)
The analyst characterizes KEPCO as a regulated utility facing sluggish industrial demand and the expiration of past tariff hike benefits, but one positioned for robust double-digit operating profit growth through 2026 driven by sub-100 KRW/kWh SMPs, lower fuel import costs, and power mix optimization via the Kori Unit 2 restart and Saeul Unit 3 commissioning. The core perspective prioritizes variable cost containment from lower-cost nuclear baseload generation and expanding DPS flexibility from KRW 17.5 Trillion in 2026 operating profits over near-term industrial demand softness and currency volatility.
To evaluate whether this investment thesis holds true, key tracking points include the commercial restart of Kori Unit 2 in 1H and the grid connection of Saeul Unit 3 in 2H, the sustained stability of quarterly average SMP below 100 KRW/kWh, the reduction of quarterly provisioning charges recognized by KHNP compared to 2025 levels, and the finalized 2025 dividend payout ratio in February leading toward the projected 2026 DPS of KRW 2,300. These factors can be monitored through KEPCO’s quarterly financial disclosures, KPX monthly power market data, and official MOTIE regulatory releases.
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