[Click eStock] "KEPCO KPS Should Aim for Dividend Yield Rather Than Vague Nuclear Power Plant Orders"

Uncertain Nuclear Power Plant Orders... Revenue Recognition Also Significantly Delayed
DPS 4.7% This Year... Aim for Reliable Dividend Income

[Asia Economy Reporter Minwoo Lee] Since Korea Plant Service & Engineering's (KEPCO KPS) stock price has limited room for further increase, it is advised to focus on steadily growing profits and the resulting dividend yield rather than expectations related to nuclear power generation policies.

On the 29th, KB Securities raised KEPCO KPS's target stock price by about 10.5% to 42,000 KRW but maintained a 'Hold' investment rating. The closing price the previous day was 42,250 KRW. This essentially means there is no additional upside potential for the time being.

Researcher Hyejeong Jung of KB Securities explained, "Considering the contract modification effects of maintenance for the UAE nuclear power plant, which is entering commissioning after new overseas power plant maintenance orders, and the increased dividend payout ratio, we raised the target price by increasing shareholder returns by an average of 15.2% over five years. Nevertheless, the upside potential compared to the recent closing price remains at about -0.6%, so we maintained the Hold rating."

The third-quarter earnings this year are forecasted at 317.8 billion KRW in consolidated sales and 39.9 billion KRW in operating profit, representing decreases of 1.9% and 15.4%, respectively, compared to the same period last year. It is expected to fall short of the market consensus operating profit estimate of 42.5 billion KRW. Researcher Jung stated, "Third-quarter overseas sales are expected to decline by 5.5% due to a gap in new orders, and the number of nuclear power plants undergoing planned preventive maintenance is lower than the same period last year, resulting in a 13.0% decrease in nuclear maintenance sales during the same period. However, overseas sales will increase by 48.4% year-on-year, as revenue related to the India TSPL thermal power plant O&M, newly ordered in May, will be recorded at 20 billion KRW annually from the third quarter of this year through the second quarter of 2026."

Given this background, it was advised to focus on steadily increasing profits and the resulting dividend yield rather than expectations related to nuclear power policies. KEPCO KPS's stock price surged recently as global energy shortages have focused attention on nuclear power generation. The stock price rose about 13.9% from the 12th of this month to the previous day based on closing prices. Researcher Jung noted, "While the possibility of winning new nuclear power plant projects in Korea is increasing, the order status remains uncertain and the timing of revenue recognition is very delayed. On the other hand, this year's dividend per share (DPS) is expected to be 2,000 KRW, resulting in a high dividend yield of 4.7% relative to the current stock price."