[Click eStock] "KEPCO KPS, Overseas Sales-Driven Performance Improvement Expected"

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 16th. Although there is potential for performance fluctuations depending on this year's management evaluation grade to be announced in late next month, there is optimism that sales will increase, mainly overseas.

First-quarter sales recorded 303 billion KRW, a 5.8% decrease compared to the same period last year. Sales declines were significant in the thermal power and external sectors. Overseas, orders from India, South Africa, and others were reflected as positive momentum this year, showing an improving trend. The nuclear power sector saw an increase in scale due to a rise in the number of nuclear power plants scheduled for maintenance, and considering the regular inspection (O/H) of the UAE's first nuclear power plant, it is expected to contribute to sales growth in the future.

Operating profit was 22.5 billion KRW, down 60.1% year-on-year. This was due to the decrease in scale and an increase in labor costs, with a base effect from annual leave-related expenses. After the commercial operation of Shinhanul Unit 1, recovery in scale and improvement in overseas performance are possible, and it is predicted that the trend will gradually improve from the first quarter low toward the second half of the year.

Yoo Jae-seon, a researcher at Hana Financial Investment, explained, "The scale has decreased due to the closure of some aging coal-fired and heavy oil power plants," adding, "On an annual basis, since the planned thermal power O/H volume is expected to increase compared to the previous year, concerns about additional scale reduction after the second quarter will be limited."

Considering the construction period after the groundbreaking of Shinhanul Units 3 and 4 in 2025, it seems that it will take some time to benefit from the increase in maintenance volume due to the completion of new nuclear power plants. Researcher Yoo Jae-seon analyzed, "Although coal and nuclear power plants previously planned for introduction are gradually expected to be completed, considering the aging coal facility closure cycle starting in 2024, growth centered on overseas markets will emerge."