[Click e-Stock] "KEPCO KPS Needs to Boost Overseas and External Sales... Target Price Lowered"

On April 23, Shinhan Investment Corp. lowered its target price for Korea Plant Service & Engineering (KEPCO KPS) by 1,000 won to 57,000 won, stating that the company's performance has entered a brief period of stagnation. The firm maintained its "Buy" investment rating.

On the same day, Choi Kyuhun, a researcher at Shinhan Investment Corp., said, "We have revised our profit estimates downward compared to our previous report. Although the increase in nuclear power-related orders is clear, we have lowered our sales forecasts for the nuclear and pumped-storage sectors, taking into account maintenance cycles and actual performance."

Operating profit for the first quarter is projected to be 48.3 billion won, down 7.5% year-on-year, with an operating margin of 13.7%. Due to the seasonality of revenue generation, total company revenue is expected to reach 352.7 billion won, up 2.9% year-on-year. Choi noted, "Sales from the nuclear and pumped-storage sectors, which have higher margins compared to thermal power, are expected to decline by 4.8%. The continued upward trend in labor costs will also be reflected in profits."

For this year, operating profit is estimated at 203 billion won, down 3.1% from the previous year, with an operating margin of 12.9%. Choi stated, "We have revised down the sales forecast for the nuclear and pumped-storage sectors from 662.7 billion won to 640.3 billion won. Weak performance is expected in both external (such as new orders needed from Gwangyang Unit 3 and others) and overseas sales (especially new orders related to nuclear power plants)."

He added, "Even if this year's management evaluation grade is determined as A, labor cost increases are not expected to be as significant as last year. Despite these factors, we expect the company to demonstrate solid profit strength, maintaining operating profit around the 200 billion won level."

Additionally, Choi commented, "The current 12-month forward price-to-book ratio (PBR) stands at about 1.3 times. For a revaluation of the company's valuation, additional revenue growth in overseas and external sectors is necessary."