Market: KOSPI (015760)
Brokerage : SK Securities
Analyst : Minsik Na
Investment Rating : Neutral (Maintained)
Target Price : KRW 40,000 (Maintained)
Core Momentum : Despite overseas nuclear export catalysts, the lagged reflection of rising oil prices from Middle East disruptions will accelerate cost burdens entering the second half, capping upside potential.
📊 1. [Valuation & Key Financial Metrics]
- Rating & Target Price: Neutral (Maintained), Target Price KRW 40,000 (Maintained, Upside -1.8%).
- Financial Estimates:
- 2026E: Revenue KRW 98.54 Trillion, Operating Profit KRW 12.85 Trillion, Controlling Net Profit KRW 8.00 Trillion, EPS KRW 12,455, ROE 15.5%, P/E 3.3x, P/B 0.5x, EV/EBITDA 6.0x, Dividend Payout Ratio 12.4%.
- 2027E: Revenue KRW 100.69 Trillion, Operating Profit KRW 16.51 Trillion, Controlling Net Profit KRW 10.24 Trillion, EPS KRW 15,956, ROE 17.1%, P/E 2.6x, P/B 0.4x, EV/EBITDA 5.4x, Dividend Payout Ratio 9.7%.
- 2028E: Revenue KRW 102.67 Trillion, Operating Profit KRW 16.46 Trillion, Controlling Net Profit KRW 10.25 Trillion, EPS KRW 15,971, ROE 14.8%, P/E 2.6x, P/B 0.4x, EV/EBITDA 5.6x, Dividend Payout Ratio 9.7%.
🚀 2. [Market Opportunities & Business Outlook]
- 1Q26 Earnings Review:
- Revenue reached KRW 24.4 Trillion (+0.7% YoY) and Operating Profit was KRW 3.8 Trillion (+0.8% YoY, OPM 15.5%), missing market consensus of KRW 4.2 Trillion.
- Electricity ASP remained flat at 170 KRW/kWh (+0.5% YoY), while total sales volume dropped to 140TWh (-0.9% YoY), driven by a 2.4% contraction in industrial power demand.
- Power generation fell to 92TWh (-3.7% YoY), while unit fuel cost increased to 57 KRW/kWh (+8.1% YoY) following geopolitical flare-ups in March. Power purchase cost increases remained limited due to lag effects.
- Lagged Fuel Cost Transmission into 2H:
- Strait of Hormuz disruptions are expected to extend through late May, with additional time needed for Gulf oil output normalization post-resumption.
- KEPCO’s fuel costs reflect Dubai crude movements with a ~2-month time lag, while the Dubai → JKM → SMP chain typically takes ~6 months.
- Oil price shocks will directly hit earnings starting in 2Q26, resulting in pronounced cost acceleration into 2H.
- Earnings Risk vs. Nuclear Pipeline Momentum:
- EPC valuation for the Dukovany nuclear project was largely priced in during 2025, and incremental export projects across Vietnam and Türkiye will only be reflected gradually as negotiations advance.
- The speed of earnings deceleration from cost pressures is expected to outweigh the pace of overseas nuclear valuation upside in the near term.
- Critical inflection catalysts: (1) Reopening timeline of the Strait of Hormuz, (2) Power tariff adjustment discussions if margins enter deficit, (3) Tangible progress on new overseas nuclear contracts.
📝 Editor’s Comment (Perspective)
The analyst views KEPCO as a utility possessing long-term overseas nuclear expansion opportunities, but one heavily exposed to near-term margin deterioration as geopolitical energy shocks flow through fuel costs with a 2-month time lag. The core perspective emphasizes that the rapid onset of raw material and SMP cost burdens will outpace the multi-year timeline of nuclear export monetization, justifying a cautious and neutral stance until energy logistics stabilize.
To evaluate whether this investment thesis unfolds as projected, key monitoring variables include the timeline for normalizing maritime transit in the Strait of Hormuz and its impact on 2Q–3Q fuel procurement costs, whether government tariff discussions emerge if quarterly deficits materialize, and tangible progress in overseas reactor negotiations across Vietnam and Türkiye. These dynamics can be verified through KEPCO’s quarterly financial statements, KPX power market data, and official MOTIE energy policy releases.
📢 Disclaimer & Source
Source: This content has been structured and newly written based on officially disclosed financial facts and data from brokerage reports.
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