Market: KOSPI (015760)
Brokerage : iM Securities
Analyst : Yujin Jeon (RA: Ho Jang)
Investment Rating : BUY (Maintained)
Target Price : KRW 48,000 (Downgraded)
Core Momentum : While higher fuel and power purchase costs are set to pressure second-half earnings, the mid-to-long term structural thesis remains intact backed by power mix normalization from Saeul Units 3 & 4 and rising AIDC-driven electricity demand.
📊 1. [Valuation & Key Financial Metrics]
- Rating & Target Price: BUY (Maintained), Target Price lowered by 9.4% to KRW 48,000 (applying a Target P/B of 0.60x to 2026F BPS of KRW 80,504).
- Financial Forecasts:
- 2025A: Revenue KRW 97.43 Trillion, Operating Profit KRW 13.49 Trillion, Pre-tax Profit KRW 11.59 Trillion, Net Profit KRW 8.55 Trillion, EPS KRW 13,311, ROE 19.4%, P/E 3.5x, P/B 0.6x, DPS KRW 1,542 (Dividend Yield 3.3%).
- 2026E: Revenue KRW 97.55 Trillion, Operating Profit KRW 6.24 Trillion (1H KRW 4.9 Trillion, 2H KRW 1.3 Trillion), Net Profit KRW 3.78 Trillion, EPS KRW 5,895, ROE 7.6%, P/E 6.0x, P/B 0.4x, Dividend Yield 2.0%.
- 2027E: Revenue KRW 102.24 Trillion, Operating Profit KRW 8.39 Trillion, Net Profit KRW 5.14 Trillion, EPS KRW 8,004, ROE 9.5%, P/E 4.4x, P/B 0.4x, Dividend Yield 2.8%.
- 2028E: Revenue KRW 103.63 Trillion, Operating Profit KRW 12.60 Trillion, Net Profit KRW 8.41 Trillion, EPS KRW 13,099, ROE 14.0%, P/E 2.7x, P/B 0.4x, Dividend Yield 4.5%.
🚀 2. [Market Opportunities & Business Outlook]
- 2Q26 Earnings Review:
- Revenue came in at KRW 21.9 Trillion (in line with market expectations of KRW 22.2 Trillion), while Operating Profit recorded KRW 1.13 Trillion (-47% YoY), missing the market consensus of KRW 1.96 Trillion by 42%.
- Electricity sales volume fell 0.9% YoY led by industrial demand, but top-line held firm due to a 0.2% YoY increase in average selling price.
- Extended nuclear maintenance lowered utilization and increased reliance on thermal generation, which combined with higher oil and LNG prices pushed fuel costs up to KRW 4.93 Trillion (+14.1% YoY).
- Power purchase costs settled at KRW 8.49 Trillion (-1.3% YoY) as lower purchase volumes from IPPs offset rising SMPs.
- 2H26 Cost Headwinds & Outlook:
- Completion of nuclear maintenance and the potential commercial operation of Saeul Unit 3 in 2H will lower generation unit costs, but may not fully offset rising fuel and power purchase costs.
- Driven by upward SMP revisions and higher JKM (Northeast Asian LNG) pricing, 2H26 Operating Profit is projected at KRW 1.3 Trillion (-73% compared to 1H26), limiting full-year operating profit to KRW 6.24 Trillion.
- Near-term electricity tariff hikes remain unlikely given the government’s inflation stabilization policy.
- Long-Term Demand & Growth Drivers:
- Power mix improvement expected in 2027 with the full operation of Saeul Units 3 & 4.
- Surge in baseload demand driven by AI Data Centers (AIDC) and the southwestern semiconductor cluster (estimated at ~25GW) supports the need for additional large-scale nuclear power plant additions beyond the 2.8GW targeted in the 11th Basic Plan for Electricity Supply and Demand.
📝 Editor’s Comment (Perspective)
The analyst views KEPCO as an energy utility facing near-term profitability headwinds in the second half of 2026 due to raw material cost pressure and elevated SMP levels, but one that possesses strong mid-to-long term structural growth potential supported by generation mix recovery and secular electricity demand from AI data centers and mega semiconductor clusters. The perspective places greater significance on multi-year baseload additions and transmission investments than on temporary tariff freezes and quarterly margin volatility.
To evaluate whether this investment thesis unfolds as projected, key tracking variables include the commercial operation timeline of Saeul Unit 3, the movement of SMP and power purchase costs throughout 2H26, and the final nuclear capacity targets stipulated in the 12th Basic Plan for Electricity Supply and Demand alongside actual power sales growth to AIDC facilities. These developments can be verified through KEPCO’s quarterly earnings announcements, KPX market data, and official MOTIE energy master plan publications.
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