[Click eStock] "KEPCO KPS, Attractive Dividend Yield Exceeding 5%"

Shinhan Investment Corp. maintained a buy rating and a target price of 49,000 KRW for KEPCO KPS, stating that "although it is not a low PBR stock, the dividend yield exceeding 5% is attractive."

The Q4 earnings surpassed market expectations with sales of 440.4 billion KRW and operating profit of 59.2 billion KRW. The surprise in performance was driven by sales in the thermal power sector exceeding forecasts. Thermal power sales reached 170.5 billion KRW, up 35.4% year-on-year, due to increased results from routine and planned preventive maintenance works. Nuclear and pumped storage sales recorded 142.7 billion KRW, down 9.6% year-on-year due to a decrease in nuclear refurbishment works. Large-scale sales amounted to 46.5 billion KRW, reflecting refurbishment works such as POSCO performance improvement projects.

Operating expenses exceeded expectations. Material costs decreased due to reduced overseas business and material expenses, and labor costs also fell by 2.3% due to ongoing cost-efficiency efforts. However, expenses, which account for the largest portion of operating costs, increased by 25.5% year-on-year due to higher outsourcing costs for planned preventive maintenance works, resulting in total operating expenses rising 8.9% to 381.3 billion KRW.

For 2024, sales are projected at 1.55 trillion KRW and operating profit at 198.6 billion KRW, similar to 2023 levels. The base effect from achieving earnings above market expectations for two consecutive quarters in the second half of 2023 is expected to impact 2024. Park Gwang-rae, a researcher at Shinhan Investment Corp., said, "Since the improvement in performance is not due to structural sales growth but rather cost-efficiency efforts that began in earnest in the second half of 2022, it remains to be seen whether further profitability improvements are possible."