[Click eStock] "Korea Electric Power Corporation, Rate Hike Urgently Needed to Improve Profitability"

On the 15th, Kiwoom Securities pointed out that a rate increase is still necessary for Korea Electric Power Corporation (KEPCO) to improve profitability. Accordingly, it maintained its investment opinion as 'Outperform' and the target stock price at 22,000 KRW.

Jonghyung Lee, a researcher at Kiwoom Securities, stated, "KEPCO's operating loss in the first quarter was 6.2 trillion KRW, which was somewhat insufficient compared to the market consensus of 5.3 trillion KRW." This was affected by the utilization rates of nuclear and coal power plants, which fell to 80.2% and 54.8%, respectively, compared to last year.

Lee explained, "Despite the implementation of the electricity wholesale price (SMP) cap in January and February, contrary to expectations, the cost of purchased power increased compared to the fourth quarter, and the input unit costs of fuel such as coal and LNG did not decline as much as expected."

Lee anticipated that profitability would improve starting from the first quarter. However, considering the accumulated large-scale losses and deterioration of the financial structure, he emphasized that additional electricity rate hikes are urgently needed.

He explained, "The electricity rate increase scheduled for the 15th of this month is likely to be 7 KRW/kWh. Considering an annual electricity sales volume of 560 TWh, the annual revenue increase from a 7 KRW hike would be approximately 3.9 trillion KRW."

Lee added, "Unless there are unexpected variables, an operating profit is expected in the third quarter and an operating loss in the fourth quarter, with the overall operating profit for the second half of the year turning slightly positive. Even if the operating profit turns positive in the second half, additional rate hikes will be necessary in the second half to normalize profitability."

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