[Click eStock] Korea Electric Power Corporation, Rising Expectations for Electricity Rate Reform

[Asia Economy Reporter Koh Hyung-kwang] NH Investment & Securities on the 29th presented a target price of 37,500 KRW for Korea Electric Power Corporation (KEPCO), stating that it is expected to show a stable trend due to anticipation of electricity rate system reform in the first half of this year.

Lee Min-jae, a researcher at NH Investment & Securities, said, "KEPCO is currently undervalued with a price-to-book ratio (PBR) below 0.3," adding, "We maintain it as the top preferred stock in the utility sector due to improvements in base power plant utilization rates in the first half, the effect of raw material price declines, and expectations for electricity rate system reform."

Lee analyzed, "The System Marginal Price (SMP) for the first quarter of this year is expected to be 85 KRW per kWh," attributing this to "price declines with a six-month lag and the effect of the reduction in individual consumption tax." He also stated, "The coal price for the first quarter is estimated at 122,000 KRW per ton, and the price of high-calorific Newcastle coal has dropped by 40% compared to last year, but the actual decline effect is expected to be limited," adding, "This is due to dilution effects from mixing with low-calorific Indonesian coal and the effect of increased individual consumption tax."

Regarding nuclear power plant utilization rates, Lee said, "If preventive maintenance proceeds as originally scheduled, it is estimated to end in February, recovering above 80%, but maintenance delays mean that six units including Kori Unit 4, Shin-Kori Unit 3, Hanul Units 3 and 5, and Hanbit Units 3 and 4 are expected to be offline in February," and added, "Considering Hanbit Units 3 and 4, which are likely to be further delayed until the end of March, nuclear utilization rates are expected to be 67% in January, 77% in February, and 82% in March."

He also forecasted coal utilization rates, saying, "Due to emergency fine dust reduction measures in winter, it was initially expected to be 62%, but the Korea Gas Corporation announced that LNG sales for power generation in December were 1.724 million tons, which increased less than expected," concluding, "Therefore, coal utilization rates are likely to be higher than initially estimated."