[Click eStock] "Korea Electric Power, Low Oil Prices Benefit Outweighs COVID-19 Uncertainty"

[Asia Economy Reporter Park Jihwan] Korea Investment & Securities stated on the 29th that the benefits from low oil prices outweigh the uncertainties caused by the novel coronavirus infection (COVID-19) for Korea Electric Power Corporation (KEPCO). Accordingly, they maintained a buy rating and a target price of 30,000 KRW.

Choi Go-woon, a researcher at Korea Investment & Securities, said, "The outlook for all industries in 2020 is changing due to COVID-19," adding, "Although concerns about decreased electricity sales and delays in electricity rate revisions have emerged due to economic slowdown, more attention should be paid to the benefits from low oil prices, which make electricity rate hikes unnecessary."

He explained, "The average Dubai crude oil prices in March and April fell by 50% and 71%, respectively, compared to the same period last year," and "KEPCO's cost structure reflects oil price declines with a 5 to 6-month lag, and for every $1 decrease per barrel, annual operating profit increases by 110 billion KRW."

Researcher Choi emphasized, "Low oil prices are a benefit that the government cannot change through policy," and "Even considering negative external factors such as the rise in the won-dollar exchange rate, poor coal operation rates, and environmental cost burdens, the operating profit turnaround this year remains valid."

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