Market: KOSPI (015760)
Brokerage : Shinhan Securities
Analyst : Seung-hoon Han
Investment Rating : BUY (Upgraded)
Target Price : KRW 45,000 (Upgraded)
Core Momentum : Despite near-term earnings deceleration in 3Q from delayed cost reflection, peak energy commodity prices alongside Saeul Unit 3 startup and upcoming 12th Basic Plan catalysts support a structural earnings recovery.
📊 1. [Valuation & Key Financial Metrics]
- Rating & Target Price: BUY (Upgraded), Target Price raised by 4.7% to KRW 45,000 (applying a Target P/B of 0.55x, reflecting upward revisions in earnings estimates).
- Current Valuation Support: 12-Month Forward P/B at 0.39x levels indicates favorable valuation appeal following peak oil pricing.
- Financial Estimates:
- 2025A: Revenue KRW 97.43 Trillion, Operating Profit KRW 13.49 Trillion, Controlling Net Profit KRW 8.54 Trillion, P/E 3.5x, ROE 19.4%, P/B 0.6x, Dividend Yield 3.3%.
- 2026F: Revenue KRW 98.51 Trillion, Operating Profit KRW 8.43 Trillion, Controlling Net Profit KRW 4.74 Trillion, P/E 4.6x, ROE 9.4%, P/B 0.4x, Dividend Yield 1.8%.
- 2027F: Revenue KRW 99.18 Trillion, Operating Profit KRW 9.71 Trillion, Controlling Net Profit KRW 5.90 Trillion, P/E 3.7x, ROE 10.7%, P/B 0.4x, Dividend Yield 2.4%.
- 2028F: Revenue KRW 100.13 Trillion, Operating Profit KRW 12.24 Trillion, Controlling Net Profit KRW 7.89 Trillion, P/E 2.8x, ROE 12.8%, P/B 0.3x, Dividend Yield 2.9%.
🚀 2. [Market Opportunities & Business Outlook]
- 2Q26 Earnings Preview:
- Consolidated Operating Profit is estimated at KRW 1.9 Trillion (-8.8% YoY, OPM +8.8%), matching market consensus expectations.
- 2Q generation LNG price of 768.6 KRW/Nm³ (-4.7%) and average SMP of 118.1 KRW/kWh (-3.7%) indicate that recent energy price surges have not yet been reflected in 2Q costs.
- Utilization rates by power source are estimated at 74.0% for nuclear (-9.3%p YoY) and 45.4% for coal (+7.6%p YoY), with coal substituting lower nuclear availability.
- 3Q Cost Pressure & Tariff Outlook:
- Land-based daily weighted average SMP crossed into the 140 KRW/kWh range in mid-July, commencing an upward trend.
- Commodity cost increases driven by the US-Iran conflict will be fully accounted for in 3Q, leading to temporary quarterly earnings pressure.
- Near-term electricity tariff hikes appear unlikely given the recognition of peak oil prices and the government’s stance on easing living cost burdens.
- 2H Nuclear & Policy Catalysts:
- Commercial startup of Saeul Unit 3 in 4Q is expected to increase low-cost baseload generation and alleviate overall fuel cost burdens.
- Potential order momentum from overseas nuclear projects in the US and Vietnam.
- Large-scale power loads from 3 major mega-projects and the potential inclusion of new large-scale nuclear reactors and SMRs in the 12th Basic Plan for Electricity Supply and Demand (expected late 2026).
- Policy details regarding regionally differentiated electricity tariffs expected to take shape in 2H.
📝 Editor’s Comment (Perspective)
The analyst views KEPCO as an energy utility navigating a temporary cost-driven earnings deceleration in the third quarter, but one that is passing an earnings trough and entering a fundamental recovery phase backed by peak oil prices and structural power mix improvements. The core perspective prioritizes the positive impact of stabilizing energy import prices, the commercial launch of new nuclear capacity in 4Q, and high-visibility policy catalysts—such as the 12th Basic Plan and regional tariff restructuring—over short-term quarterly margin fluctuations.
To confirm whether this investment thesis holds, key tracking variables include the impact of rising 3Q SMP on power purchase costs, the commercial operation schedule of Saeul Unit 3 in 4Q and its effect on nuclear output share, and the official targets for new large-scale nuclear/SMR builds in the upcoming 12th Basic Plan draft along with the finalized regional tariff framework. These milestones can be monitored through KEPCO’s quarterly earnings disclosures, KPX power market data, and official MOTIE policy publications.
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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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