[Click eStock] "KEPCO KPS, Q1 Earnings Expected to Decline Due to Coal Power Plant Phase-Out Impact"

Hana Financial Investment Report

[Asia Economy Reporter Minji Lee] Hana Financial Investment maintained a buy rating and a target price of 52,000 KRW for KEPCO KPS on the 19th.

KEPCO KPS's first-quarter performance is expected to fall short of market expectations. Sales are projected to decrease by 3% year-on-year to 312.1 billion KRW. This is presumed to be influenced by a decline in sales in the thermal power sector. Following the shutdowns of Samcheonpo Units 1 and 2 in May last year and Honam Units 1 and 2 in early 2022, Units 4, 5, and 6 in Ulsan were decommissioned in February.

Yoo Jae-seon, a researcher at Hana Financial Investment, stated, "From 2024, the cycle of decommissioning aging coal-fired power facilities will begin, raising concerns about mid- to long-term revenue decline," adding, "Nuclear power is expected to improve year-on-year due to reflected revenues from maintenance and new nuclear power plant commissioning despite a reduction in preventive maintenance volume." Overseas, commissioning revenues are increasing, while transmission and external sales are estimated to slightly decrease compared to the previous year.

Operating profit is forecasted to drop by 42.3% to 32.5 billion KRW. Margin decline is expected to be inevitable due to reduced scale and increased labor costs. Recovery in scale from the commercial operation of Shinhanul Unit 1 within the year and improvement in overseas performance are expected to gradually show an improving trend in the second half.

KEPCO KPS is analyzed to experience mid- to long-term expansion of sales channels as the new government aims to expand nuclear power plants. However, the full-scale decommissioning of aging coal plants starting in 2024 and the potential for further opening of the maintenance market remain concerns.

Researcher Yoo said, "Performance forecasts will be specified according to the plan to increase base facilities in the 10th Basic Plan for Electricity Supply and Demand to be announced within the year," adding, "Although there is a possibility of fluctuations in semi-annual and annual performance depending on this year's management evaluation grade, unlike the past when the average grade over the last three years surged, the pace of burden increase is expected to ease."