[Click e-Stock] "KEPCO Faces Tough Outlook... Target Price Cut by 25%"

On April 15, Hana Securities lowered its target price for Korea Electric Power Corporation (KEPCO) to 55,000 won, citing ongoing challenges that have prompted renewed discussions about the imposition of a System Marginal Price (SMP) cap.

Yoo Jae-seon, a research analyst at Hana Securities, stated in a report released on the same day, "Future earnings depend on the resolution of geopolitical instability in the Middle East." The newly suggested target price of 55,000 won represents a 24.7% decrease from the previous target. However, the investment rating remains at 'Buy.'

Analyst Yoo noted, "First-quarter operating results are expected to meet market expectations," adding, "The main factor is the average quarterly SMP, which fell by 7.1% year-on-year to 107 won/kWh." KEPCO's first-quarter revenue is projected to reach 24.7 trillion won, up 1.8% from a year earlier, while operating profit is expected to increase by 11.4% to 4.2 trillion won.

He also analyzed that future performance hinges on when instability in the Middle East is resolved. According to the February Electricity Statistics Monthly Report, the industrial electricity sales price entered a year-on-year decline phase for the first time in 53 months since September 2021. Analyst Yoo explained, "Depending on the extent of the decline in industrial demand, negative growth in electricity sales revenue is possible. In addition to the potential decrease in top-line revenue, costs are also rising."

Furthermore, he said, "Taking into account the surge in energy raw material prices and the won-dollar exchange rate since March, cost pressures—primarily from fuel and purchased power—will likely increase from the second half of the year." He projected, "A gradual recovery will be possible only after the Middle East energy supply crisis is resolved." He added, "Because there have been physical changes in supply chains such as for LNG, it is unlikely that cost pressures will immediately return to pre-war levels."

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