Meritz Securities said on the 14th that although overseas business expenses rose for Korea Electric Power Corporation, industrial sales volume increased, and operating profit beat the market consensus.
It also raised its target price to 62,000 won from 57,000 won and maintained a buy rating. The previous day's closing price of Korea Electric Power Corporation was 49,250 won.
Korea Electric Power Corporation disclosed on the 14th that in the third quarter this year, operating profit on a consolidation basis was 5.6519 trillion won and revenue was 27.5724 trillion won. Compared with the same period last year, operating profit rose 66.4% and revenue increased 5.6%. Net profit was 3.79 trillion won, up 101.6%.
Moon Kyung-won, an analyst at Meritz Securities, said, "It is a good sign that after 12 quarters, industrial sales volume has turned to year-over-year growth," noting, "Industrial contracts are more profitable than other businesses." Regarding the fourth quarter, the analyst said nuclear utilization would be sluggish, but falling system marginal price (SMP) and coal fuel costs would deliver earnings above market expectations.
Meritz Securities said that despite solid earnings, the need to raise electricity rates remains. Moon said, "To expand AI data centers and semiconductor clusters, capital expenditure (CAPEX) expenses totaling 20 trillion won on a consolidation basis will be needed by 2027." The analyst noted that for industry to develop, electricity rate hikes are unavoidable and attention should be paid to the possibility of a hike at the end of December.
The outlook for KEPCO's stock price and business viability was assessed positively. Moon went on to say, "KEPCO remains our top pick in the utilities sector," adding, "Beyond rate hikes, there are still catalysts such as a higher dividend payout ratio and nuclear export." Regarding nuclear exports, the analyst said business with Vietnam next year is anticipated.
The Vietnamese government plans to build the "Ninh Thuan-1 and -2" nuclear power plants by 2035. In September, KEPCO also said it held a workshop with PVN, the client for Ninh Thuan-2, to cooperate on training personnel in Vietnam's nuclear power sector. The Vietnamese government also plans to build additional nuclear power plants totaling 8 GW (gigawatts) by 2050.
Moon said, "KEPCO's target market is expected to expand to the United States," adding, "Before that, revisions to the U.S.-Korea nuclear agreement and adjustments to the nuclear export governance between KEPCO and KHNP are needed." The analyst added, "If the U.S.-Korea nuclear agreement passes, it is estimated that more than 500 billion won in annual uranium enrichment expenses could be internalized."