[Click eStock] "KEPCO, Annual Net Profit Expectations Difficult ... Target Price Down"

Mirae Asset Securities on the 15th lowered the target price for Korea Electric Power Corporation (KEPCO) from 20,000 won to 18,000 won. The investment rating was maintained at 'Neutral.'

KEPCO recorded sales of 24.47 trillion won and an operating profit of 1.9966 trillion won in the third quarter. Compared to the same period last year, sales increased by 23.8%, and operating profit turned positive for the first time in 10 quarters. The performance improved as the prices of major fuel costs such as coal and LNG significantly declined, and electricity purchase costs also fell by 16% compared to the same period last year.

However, Mirae Asset Securities judged that despite the return to profitability after a long time, there is still a long way to go to achieve sustainable profits. It is still difficult to expect net profit on an annual basis. This is due to increased interest expenses caused by rising borrowings and interest rates. Although the effect of the fuel cost decline will continue until early next year, the possibility of further decline is limited. Ultimately, additional electricity rate hikes are necessary.

Researcher Ryu Je-hyun of Mirae Asset Securities said, "Although industrial electricity rates have been raised abruptly, it is still difficult to achieve meaningful performance improvement," adding, "If expectations for oil price declines are not high, it is somewhat early to buy at the bottom."