[Click eStock] "KEPCO KPS, Clear Direction on 'Nuclear Power Expansion'... Target Price ↓"

[Asia Economy Reporter Son Sunhee] NH Investment & Securities maintained a 'Buy' rating on KEPCO KPS on the 27th but lowered the target price from 50,000 KRW to 42,000 KRW.

Researcher Minjae Lee explained the reason for lowering the target price as "a 10% downward adjustment in the 12-month moving average EBITDA used for valuation compared to the previous estimate, due to increased labor costs this year."

Regarding the maintenance of the 'Buy' rating, he added, "The mid- to long-term direction is clear due to the current government's active nuclear power expansion policy, providing sufficient room for valuation growth." The price-to-earnings ratio (PER) based on next year's target price is 16 times.

KEPCO KPS received a B grade in this year's public enterprise management evaluation, resulting in increased labor costs due to provisions for related performance bonuses, continuing from last year. Accordingly, operating profit this year is estimated to be 118.8 billion KRW, a 4% decrease from the previous year.

Although the public enterprise management evaluation results remain important next year, provisions are expected to be set based on the average B grade received this year, so cost burdens are unlikely to be significant unless an A grade is achieved. If a grade of C or lower is given, costs are expected to decrease due to the reversal of previously set provisions. NH Investment & Securities expects next year's management evaluation grade to be similar to this year's.

KEPCO KPS's operating profit for next year is forecasted to improve by 25% to 148.8 billion KRW compared to this year. Estimates may be further revised upward depending on the management evaluation results at the end of June next year. Researcher Lee stated, "The current government's domestic and international nuclear power policies are also positive for KEPCO KPS," adding, "The PER based on 2023 performance is 13 times, so valuation pressure is not significant."

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