[Click eStock] "KEPCO Target Price Raised on Expectations of Electricity Rate Hike"

On November 14, KB Securities raised its target price for Korea Electric Power Corporation (KEPCO), reflecting factors such as a lower-than-expected electricity purchase cost and the potential for an electricity rate hike.

KB Securities analyst Jung Hyejeong maintained a 'Buy' investment rating for KEPCO in a report released on this day and raised the target price by 10.7% to 62,000 won. This represents an upside potential of 25.9% compared to the previous closing price.

KEPCO posted strong results in the third quarter, exceeding market consensus. Provisional sales for the third quarter reached 27.6 trillion won, up 5.6% year-on-year, while operating profit rose 66.4% to 5.7 trillion won. Net profit attributable to controlling shareholders increased by 103.1% to 3.8 trillion won. Notably, operating profit surpassed market consensus by 10.7%.

The main driver of this earnings improvement was the stabilization and decline of electricity purchase costs. Analyst Jung explained, "While the electricity sales price remained at the previous quarter's level, up 5.1%, the coal and LNG generation costs of KEPCO’s power generation subsidiaries, as well as the IPP electricity purchase cost, each fell by 11.3%, 9.1%, and 12.1% thanks to stabilized energy prices, which contributed to maintaining margin improvements."

KEPCO’s earnings improvement is expected to continue next year. In 2026, sales are projected to reach 99.2 trillion won (up 2.3%), and operating profit is expected to be 20.6 trillion won (up 34.8%). Analyst Jung commented, "Given the growing need for investment in transmission and distribution networks, including the so-called 'energy highways,' an electricity rate hike appears inevitable."

She added, "Even if there is no adjustment to electricity rates at the end of this year or for next year, it is highly likely that the regional differential pricing system, scheduled to be introduced in 2026, will reflect such changes." She also noted that the global oil price outlook is declining, creating a favorable external environment for KEPCO’s stable earnings improvement.

Analyst Jung pointed out that, in the past, KEPCO’s share price faced downward pressure when surging energy prices could not be passed on to electricity rates, but with this issue being resolved, a valuation rerating is expected to gain momentum. She emphasized, "Given that KEPCO’s valuation is still undervalued compared to the global peer average, a full-fledged rerating of the share price is anticipated going forward."

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