[Click eStock] "Korea Electric Power, Fuel Cost Reduction Due to Oil Price Drop... Target Price Up 24%"

[Asia Economy Reporter Minji Lee] Hana Financial Investment maintained its buy rating on Korea Electric Power Corporation (KEPCO) on the 14th, citing expected cost improvements due to falling oil prices, and raised the target price by 24% from the previous level to 27,000 won.

Yoo Jae-sun, a researcher at Hana Financial Investment, said, “With the decline in thermal coal futures prices, the weak oil price trend is expected to be reflected in costs in the second half of the year,” adding, “If the policy to supply reserve greenhouse gas emission permits is realized, the cost burden in the fourth quarter will decrease.”

Korea Electric Power’s sales in the first quarter are expected to decrease by 2.3% year-on-year to 14.9 trillion won. This is due to sluggish sales performance caused by warm weather during the winter peak season and a continued decline in peak demand due to the impact of the novel coronavirus disease (COVID-19). On the other hand, operating profit is expected to turn positive at 567.2 billion won, based on anticipated fuel cost savings from falling coal and oil prices.

Although OPEC+ (the Organization of the Petroleum Exporting Countries (OPEC) member countries and non-OPEC consultative group) recently agreed on production cuts, the possibility of prolonged low oil prices remains high due to concerns over weak demand. The exchange rate is volatile but shows signs of stabilization.

Researcher Yoo said, “Considering a 4 to 5 month lag, the recent sharp drop in raw material prices will be reflected in improved earnings from the third quarter,” and explained, “Additional consensus upgrades will occur depending on the decline in coal prices and the continuation of low oil prices.”

He added, “Although regulations and earnings are improving, highlighting KEPCO as a defensive stock, the valuation is at its bottom, so the stock price will trend upward until demand concerns are resolved.”

This content was produced with the assistance of AI translation services.