[Click eStock] "Korea Electric Power Corporation, Profit Turnaround in Sight for Second Half"

Meritz Securities Report

[Asia Economy Reporter Kwangho Lee] Meritz Securities analyzed on the 2nd that Korea Electric Power Corporation (KEPCO) is within sight of turning a profit in the second half of the year as both price increases and cost improvements occur simultaneously. The investment opinion was maintained as Buy, with a target price of 28,000 KRW.

Moon Kyungwon, a researcher at Meritz Securities, stated, “KEPCO decided on a total tariff increase of 13.1 KRW/kWh on December 30 last year,” adding, “The expected sales price increase rate this year is 22%, which is double last year’s record high increase rate of 11.6%.”

Researcher Moon noted, “The noteworthy point is that this is not the last increase,” and said, “Although there is no guideline given for increases within this year, considering the policy direction to eliminate KEPCO’s accumulated deficit by 2026 and the expiration of the KEPCO bond issuance limit expansion law by the end of 2027, there is a high possibility of additional increases to guarantee appropriate profits.”

He forecasted, “KEPCO’s operating loss this year is expected to significantly decrease to 4.95 trillion KRW,” and added, “The tariff increase will have an operating profit improvement effect of about 550 billion KRW, which is expected to result in an operating profit improvement of approximately 14.5 trillion KRW.”

He continued, “In addition, cost indicators such as the System Marginal Price (SMP) in the electricity market are also expected to improve from the first quarter of this year,” explaining, “This is because the decline in global raw material prices and exchange rates will be reflected with a lag of one to two quarters.” He added, “In the third quarter, seasonal factors overlap, making the turnaround to profitability also within sight.”

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