[Click eStock] "KEPCO KPS, Positive External Growth... Potential for Additional Dividend Appeal Expansion"

KB Securities Report

[Asia Economy Reporter Minji Lee] KB Securities forecasted that if KEPCO KPS signs a change contract for the UAE nuclear power plant commissioning-related service work within this year, the sales scale will increase, potentially enhancing its dividend appeal.

According to KB Securities on the 16th, KEPCO KPS recorded sales of 324 billion KRW in the third quarter, an 8.9% increase compared to the same period last year. Operating profit for the same period decreased by 11% to 47.1 billion KRW but exceeded expectations by about 18%. However, the decline in operating profit compared to last year was due to an increased proportion of external sales, which have relatively lower margins, in total sales, resulting in a reduced operating profit margin. The operating profit margin decreased from 17.8% in Q3 last year to 14.5%.

Although sales increased compared to last year, the main revenue sources?maintenance sales for nuclear and thermal power plants?increased by 5.1 billion KRW and 2.6 billion KRW respectively, rising approximately 4.3% and 2.8%, showing a favorable level.

During the same period, overseas sales decreased by 7.9 billion KRW, down 20.7% from a year earlier. This was due to a delay in recognizing sales related to the UAE nuclear power plant. External sales increased by 106.7% year-on-year to 26.9 billion KRW, reflecting orders for performance improvement work at some nuclear and thermal power plants.

Labor costs increased by 5.1% to 120.4 billion KRW compared to the same period last year, reflecting a rise in performance bonuses following the previous quarter. Expenses increased by 13.1% during the same period due to increased outsourcing costs as external sales grew. Non-operating income and expenses decreased by 43.3 billion KRW compared to the same period last year due to the inclusion of contributions to the Nuclear Decommissioning Research Institute.

KEPCO KPS is currently pursuing the signing of a change contract for commissioning-related service work for the UAE nuclear power plant within this year. Upon contract signing, it is expected that commissioning-related sales will be reflected, enabling further recovery of overseas sales. KB Securities researcher Hyejeong Jung said, “If new contracts are secured in the fourth quarter, it will contribute to maintaining the sales scale,” adding, “Given KEPCO KPS’s business structure, which has a high proportion of fixed costs centered on labor costs, external growth will be the key to improving operating profit margins.”

The dividend appeal is expected to further expand upon signing the UAE nuclear power plant change contract. Researcher Jung stated, “Although dividend appeal has somewhat decreased due to one-time operating expenses, it is still considered to remain,” and added, “The annual DPS for this year is forecasted at 1,300 KRW, which corresponds to a dividend yield of 4.5%.”

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