Market: KOSPI (015760)
Brokerage : Kyobo Securities
Analyst : Sang-ho Lee
Investment Rating : TRADING BUY (Downgraded)
Target Price : KRW 43,000 (Downgraded)
Core Momentum : While rating is revised down due to short-term fuel cost pressures from scheduled nuclear maintenance and rising commodity prices, potential generation mix recovery and large-scale nuclear export catalysts remain intact.
📊 1. [Valuation & Key Financial Metrics]
- Rating & Target Price: TRADING BUY (Downgraded), Target Price lowered to KRW 43,000 (applying a target P/E of 4.6x, the mid-point of its 10-year historical average).
- Financial Estimates:
- 2025.12: Revenue KRW 97.43 Trillion, Operating Profit KRW 13.49 Trillion, Net Profit KRW 8.67 Trillion, EPS KRW 13,311, ROE 19.4%, P/E 3.5x, P/B 0.6x.
- 2026.12E: Revenue KRW 98.99 Trillion, Operating Profit KRW 8.70 Trillion (-35.5% YoY), Net Profit KRW 6.37 Trillion (-26.5% YoY), EPS KRW 9,702, ROE 12.3%, P/E 4.0x, P/B 0.5x.
- 2027.12E: Revenue KRW 99.73 Trillion, Operating Profit KRW 15.30 Trillion (+75.9% YoY), Net Profit KRW 8.61 Trillion (+35.2% YoY), EPS KRW 13,118, ROE 14.7%, P/E 3.0x, P/B 0.4x.
- 2028.12E: Revenue KRW 101.88 Trillion, Operating Profit KRW 19.05 Trillion, Net Profit KRW 11.82 Trillion, EPS KRW 17,999, ROE 17.4%, P/E 2.2x, P/B 0.3x.
🚀 2. [Market Opportunities & Business Outlook]
- 1Q26 Earnings Review:
- Consolidated Revenue came in at KRW 24.4 Trillion (+0.7% YoY), meeting consensus, but Operating Profit posted KRW 2.1 Trillion (-44.4% YoY), missing market consensus (KRW 4.2 Trillion) by 50.8%.
- Maintenance at Shin-Wolseong Unit 1 and Hanul Units 3 and 5 lowered nuclear utilization, while geopolitical tensions disrupted gas supplies.
- Generation fuel mix among the six generation subsidiaries showed nuclear dropping to 43.7% (vs. 54.7% prior year), while higher-cost coal rose to 39.6% (vs. 30.1%) and LNG to 13.4% (vs. 11%), lifting fuel costs by 4.1%.
- Cost Dynamics & H2 Outlook:
- Ongoing Middle East conflicts continue to drive up Dubai crude, coal, and LNG prices, which will place upward pressure on fuel expenses and System Marginal Prices (SMP) with a 4–6 month time lag.
- Raising nuclear utilization is vital for cost control, requiring the restart of Hanul Unit 5 post-maintenance and the swift return of idle nuclear units.
- Long-Term Growth Catalysts:
- Successful overseas project wins by Team Korea present substantial valuation multiple expansion potential.
- Verification of fuel cost improvements via nuclear restarts would unlock upward revisions in earnings estimates and multiples.
📝 Editor’s Comment (Perspective)
The analyst views KEPCO as a regulated utility experiencing a temporary margin squeeze and entering an earnings estimate reset period, driven by concentrated nuclear maintenance outages and the lagged reflection of higher energy commodity prices. While adopting a conservative valuation multiple in the near term to account for nuclear downtime and cost burdens, the core perspective highlights the recovery potential of unit generation costs once idle reactors return, alongside the long-term enterprise value upside from Team Korea’s overseas nuclear power plant bids.
To verify whether this investment thesis unfolds as anticipated, key tracking points include the commercial restart of Hanul Unit 5 and the recovery trajectory of total nuclear generation share from its 43.7% level, the company’s ability to contain fuel and purchase costs against rising commodity prices over the next 4–6 months, and concrete milestone announcements regarding Team Korea’s overseas nuclear project pipeline. These developments can be monitored through KEPCO’s quarterly earnings disclosures, KPX power market data, and official MOTIE announcements regarding overseas energy projects.
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