[Click eStock] "KEPCO KPS, Target Price ↓... Significant Potential for Stock Price Increase"

Attractive Factors Include Dividends and Low Valuation

Daishin Securities lowered the target price for KEPCO KPS by 5% on the 12th, reflecting this year's earnings outlook. However, it still assessed that investment opportunities remain due to stable earnings, low valuation, and dividends.

Researcher Heo Min-ho of Daishin Securities adjusted KEPCO KPS's target price down to 57,000 won on the same day. Heo explained the reason for the adjustment, saying, "KEPCO KPS's sales this year are expected to increase by 5.4% year-on-year to 1.64 trillion won, operating profit to rise by 7.6% to 225.5 billion won, and operating margin to improve by 0.4 percentage points to 13.7%. This reflects the downward revision of earnings estimates."

Regarding this year's performance, he explained, "Maintenance sales in the nuclear power sector are expected to increase by 5% year-on-year due to enhanced safety of aging nuclear power plants in operation, and maintenance sales in the thermal power sector, which had significantly decreased last year, are expected to increase by more than 7%." He added, "Transmission and distribution maintenance is expected to maintain growth of over 10% due to strengthened maintenance of aging transmission networks," and "Overseas and external maintenance is expected to stop declining thanks to efforts to secure construction orders."

However, considering the high potential for stock price appreciation, the investment opinion was maintained as 'Buy.' Researcher Heo emphasized, "Stable earnings growth is expected to continue this year due to the expansion of nuclear power and transmission network maintenance. The current dividend yield based on the stock price is 5.2%, and the price-to-earnings ratio (PER) is 11 times, which is a low valuation compared to the 2009-2023 average of 18 times, making it a key investment point." He also predicted that if KEPCO KPS succeeds in securing maintenance orders for overseas operating nuclear power plants in the future, there is a high possibility of additional stock price increases.

Meanwhile, KEPCO KPS's sales in the fourth quarter of last year decreased by 2.1% year-on-year to 431.2 billion won, and operating profit fell by 30.9% year-on-year to 40.9 billion won, missing consensus estimates (sales of 453 billion won, operating profit of 56.8 billion won). Researcher Heo analyzed, "The number of planned preventive maintenance completions in the nuclear and thermal power sectors was lower than expected, resulting in lower maintenance sales than previously estimated, and labor costs increased more than anticipated."

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