[Click eStock] "KEPCO KPS, Nuclear and Hydropower Sales Expected to Increase... Target Price Up 18%"

NH Investment & Securities Report

[Asia Economy Reporter Minji Lee] NH Investment & Securities maintained a buy rating on KEPCO KPS on the 22nd and raised the target price by 18% to 52,000 KRW.

KEPCO KPS's second-quarter sales are expected to reach 358.4 billion KRW, and operating profit 52.1 billion KRW, representing growth of 8% and 49% respectively compared to the same period last year, slightly surpassing market expectations. Sales in the nuclear and hydroelectric sectors are expected to increase by 124.4 billion KRW, approximately a 30% rise.

Minjae Lee, a researcher at NH Investment & Securities, stated, "This is because the number of nuclear power plants that started or completed planned preventive maintenance in the second quarter increased to 13 units, up 9 units from the previous year," adding, "Regarding maintenance of nuclear power plants, there are routine maintenance and planned preventive maintenance, and most revenue recognition occurs at the start and completion of planned preventive maintenance."

In the second half of the year, new orders related to projects in Poland, the Czech Republic, and Saudi Arabia are expected to arise starting next year, beginning with the construction project of a nuclear power plant in Egypt. Additionally, the supply reserve rate, expected to be in the single digits due to the heatwaves in July and August, is likely to increase interest in nuclear power. Maintenance revenue of around 20 billion KRW per nuclear power plant unit is generated.

The level of provisions is also expected to decrease. Although a provision is required due to receiving a B rating in this year's management evaluation, following last year's B rating, provisions related to last year's management evaluation B rating have already been set, so it is estimated to be around 20 billion KRW, less than last year's 45 billion KRW.

Researcher Minjae Lee explained, "Despite the stock price increase, the dividend yield is at a sufficient level of 3.9%, making the dividend attractive," and added, "The target price and the 12-month moving average performance-based price-to-earnings ratio (PER) are at about 15 times."