[Click eStock] "Korea Electric Power to Return to Profit Next Year... Investment Opinion is Neutral"

Hana Securities stated on the 3rd that Korea Electric Power Corporation (KEPCO) is expected to return to operating profit next year, but they adjusted the target stock price down by 5.3% to 18,000 KRW. The investment rating was maintained as neutral.

On the same day, researchers Yoo Jae-seon and Chae Un-saem from Kiwoom Securities said, "The third quarter of this year is very likely to record a profit considering key indicators. Whether the continuous profit trend is maintained in the fourth quarter will depend on the scale of other costs reflected," and "Considering that macroeconomic indicators typically lead operating performance by about 5 to 6 months, the burden of raw material costs from the fourth quarter to the first quarter of next year may be limited," they added.

Annual sales for next year are expected to increase by 4.1% year-on-year to 90.5 trillion KRW. Researcher Yoo explained, "Considering the impact of the climate environment charge of 13.1 KRW per kWh (kilowatt-hour) including the adjustment made on May 16th of 8 KRW per kWh earlier this year, the trend of external growth may slow somewhat compared to the past but can continue," adding, "Additional sales growth is possible depending on the adjustment range of the climate environment charge next year, but the reasons for increase and decrease are mixed. Operating profit is expected to turn positive to 4 trillion KRW for the first time since 2020," he explained.

Researcher Yoo said, "Although the price directions of Australian coal and Indonesian coal have diverged recently, they have generally stabilized. International oil prices around the mid-to-high 80-dollar range can maintain a profit trend," and added, "Unless there are unexpected sudden variables, a profit growth trend is expected to be confirmed thereafter due to improvements in the mix of energy sources." Fuel costs and purchased power costs are estimated to decrease by 13.2% and 12.6% year-on-year to 24.5 trillion KRW and 33.2 trillion KRW, respectively.

He said, "Last year recorded the largest operating loss in history, and capital must be restored to previous levels by 2027, but the direction of electricity rates does not differ significantly from before," adding, "If the situation becomes urgent like last year's sharp cost increase, quick countermeasures can be taken."

Nevertheless, he added, "Since an operating profit trend is expected next year and the pace of decrease in separate net income is slowing, the impact seems to come down slowly around the knees rather than the feet," and "Excess earnings must accumulate for capital normalization, but under the current situation where rate increases are restricted, it is more likely to be achieved through raw material price fluctuations rather than sales growth."

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