[Click eStock] "Korea Electric Power Corporation must raise prices by more than 10 won to recover profits"

If below 5 won per kWh, stock price rebound is unlikely

NH Investment & Securities analyzed on the 30th that if the electricity rate increase is at least 10 KRW per kWh, Korea Electric Power Corporation (KEPCO) can begin to recover profits in earnest from the second half of the year. Given the government's firm intention to raise energy prices, the investment opinion 'Buy' and the target price of 30,000 KRW were maintained.

Lee Min-jae, a researcher at NH Investment & Securities, stated, "If tomorrow (the 31st) the electricity rate increase is 5 KRW or less per kWh, additional increases will be necessary in the second half, so the short-term stock price momentum will weaken."

[Image source=Yonhap News]

The researcher pointed out, "If this opportunity to raise electricity rates is missed, the remaining increase timings this year are July and October," adding, "July is the peak summer season when consumers' electricity burdens can be high, and October is a period heavily influenced by external variables, making a significant increase difficult."

If the electricity rate increase fails tomorrow, KEPCO's financial burden is expected to grow. The researcher analyzed, "If the rate is not increased, an operating loss of 12.6 trillion KRW is expected in 2023, and an operating profit of 2 trillion KRW in 2024."

He stated, "Even assuming no additional increases during the remaining quarters after a 10 KRW/kWh increase in Q2 this year, the operating profit in 2024 is estimated at 7.6 trillion KRW, and net profit at 3.3 trillion KRW." However, he evaluated that this level is insufficient for improving the financial structure, so additional rate increases are necessary.

Meanwhile, for major variables in 2024, assumptions were made as follows: KRW/USD exchange rate at 1,300 KRW, Newcastle coal price at 100 USD per ton, international oil price (WTI) at 70 USD per barrel, and Northeast Asia natural gas price at 20 USD per MMBtu.