[Click eStock] "KEPCO Engineering & Construction Maintains Sales Through Short-Term Project Orders"

Hana Financial Investment Report

[Asia Economy Reporter Minji Lee] Hana Financial Investment maintained its buy rating and target price of 25,000 KRW for KEPCO Engineering & Construction on the 12th. Although concerns persist that a temporary sales gap may occur, as in the previous quarter, due to a decrease in large project order backlogs, the company is maintaining its sales scale through short-term project orders, indicating that the environment is not extremely negative.

In the third quarter, KEPCO Engineering & Construction recorded sales of 95.4 billion KRW, an increase of about 16.2% compared to the previous year. The nuclear power and reactor design divisions achieved sales of 56 billion KRW and 19.2 billion KRW respectively, up 11.2% and 37.3% year-on-year, due to new project orders such as services related to APR100 aimed at obtaining EUR Rev.E certification. EUR Rev.E certification refers to services performed to preemptively acquire European certification during the export process of medium-sized nuclear power plants to the Czech Republic.

The new energy business division posted sales of 20.2 billion KRW, an 11.2% increase year-on-year, driven by new orders such as design technology services for environmental facility performance improvements at Dangjin Units 1 to 4. Yujeseon, a researcher at Hana Financial Investment, stated, “Although government policy aims for the natural phase-out of coal power plants due to expiration of their lifespan without performance improvements, environmental facility performance enhancements are considered necessary from the perspective of greenhouse gas regulations.”

Operating profit turned positive at 14.1 billion KRW. The improvement in performance was influenced by the recovery in sales scale. Other expenses included costs related to the Nuclear Decommissioning Research Institute and KEPCO University.

KEPCO Engineering & Construction faces concerns of sluggishness due to a decrease in large project order backlogs amid the energy transition process. However, it is maintaining its scale by securing additional short-term projects based on O&M contracts with Korea Hydro & Nuclear Power.

Researcher Yujeseon said, “If continuous orders are secured for projects such as environmental facility performance improvements at domestic coal power plants like Dangjin and the establishment of nuclear power plant design configuration management systems, it would be viewed positively from the perspective of stabilizing sales performance. There are also ample EPC business opportunities in the domestic renewable energy market, such as the Hallim offshore wind project, and the possibility of overseas nuclear power plant orders remains open.”