[Click eStock] "Korea Electric Power, 'Fuel Cost Linkage System' as a Trigger for Stock Price Revaluation... Target Price Up 41%"

[Asia Economy Reporter Ji-hwan Park] Kiwoom Securities evaluated that Korea Electric Power Corporation's (KEPCO) stock price, which had long suffered from undervaluation due to profit uncertainties caused by external variables such as crude oil price fluctuations, has taken the first step toward normalization. The investment opinion 'Buy' was maintained, and the target price was raised by 41% from the previous 27,000 KRW to 38,000 KRW.

Researcher Jong-hyung Lee of Kiwoom Securities stated, "Through this electricity rate system reform, KEPCO has secured a minimum structural profit capacity regardless of fuel cost fluctuations," adding, "They have separately separated climate and environmental-related costs included in electricity charges to lay the groundwork for reflecting future increases in climate and environmental fees."

KEPCO is analyzed to have secured the first link of structural profit capacity through the implementation of the fuel cost linkage system. Researcher Lee explained, "The government has confirmed the introduction of a cost-linked electricity rate system starting January next year, which reflects fuel cost fluctuations in electricity rates every quarter," and "By comparing the average fuel cost over the previous year with the average fuel cost over the past three months, changes in fuel costs such as coal and LNG will be reflected in electricity rates every three months."

Preparatory work for reflecting climate and environmental fees is also underway. Going forward, KEPCO will separately disclose to consumers the climate and environmental-related costs currently included in electricity consumption charges along with fuel cost adjustments. Additionally, in the process of calculating adjustment factors for electricity rates based on total cost, changes in climate and environmental costs will also be included to review the necessity and level of adjustments.

Researcher Lee forecasted, "From January next year, the separated and disclosed climate and environmental fee will be 5.3 KRW/kWh, accounting for about 4.9% of the total electricity rate," and "Considering the mid- to long-term reduction of coal power generation and expansion of renewable energy, the climate and environmental fee is expected to gradually increase and be reflected in electricity rates."

He projected, "Considering that the cumulative operating profit for the third quarter this year reached 3.15 trillion KRW and the annual level is expected to be around 3.7 trillion KRW, it is anticipated that an annual operating profit of up to 3 trillion KRW will be secured in the future."

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