[Click eStock] "KEPCO KPS, This Year's Management Evaluation Grade Determines Performance"
[Asia Economy Reporter Minji Lee] Hana Financial Investment maintained a neutral investment opinion and a target price of 40,000 KRW for KEPCO KPS on the 12th, stating that labor costs are expected to increase significantly if the management evaluation rating normalizes.
KEPCO KPS recorded sales of 378.1 billion KRW in the fourth quarter, down 2.2% year-on-year. The nuclear sector underperformed compared to the previous year due to a decrease in sales at the Nuclear Maintenance Technology Center. Although sales from preventive maintenance and refurbishment in the thermal power sector declined, improvement was seen due to an increase in contributions from routine maintenance.
Operating profit fell 23.5% during the same period to 67.6 billion KRW. Jaeseon Yoo, a researcher at Hana Financial Investment, said, “Considering the increase in retirement allowance provisions and one-time expenses that diluted the effect of reduced labor costs, the performance was solid,” adding, “Net profit was weaker year-on-year due to the base effect of reversals related to wage lawsuits that occurred in the fourth quarter of last year.”
The company’s performance direction is expected to be determined based on the management evaluation results to be announced in June this year. KEPCO KPS has received a low grade of D for two consecutive years due to negative issues such as fatal accidents and hiring irregularities.
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Researcher Jaeseon Yoo explained, “Since the actual performance bonus payment rate determined by the management evaluation grade was lower than the provision accumulation rate calculated based on the past three years of management evaluation grades, the labor cost reduction effect appeared for two consecutive years,” and added, “If the management evaluation grade normalizes and the company receives a grade of C or higher, labor costs will increase significantly compared to before.”
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