[Click eStock] "KEPCO KPS: Overseas and New Nuclear Power Plant Maintenance Contracts Drive Growth"

On June 23, LS Securities raised its target price for Korea Plant Service & Engineering (KEPCO KPS) by 42%, from 52,000 won to 72,000 won, stating that securing maintenance contracts for aging overseas nuclear power plants and the potential for new nuclear power plant maintenance are key growth drivers. The firm also maintained its buy rating.

On the same day, Sung Jonghwa, a researcher at LS Securities, explained, "We took into account the upward revision of earnings forecasts, as well as the growth potential related to nuclear power plant maintenance (aging overseas plants, new domestic and overseas plants) and decommissioning."

Second-quarter consolidated operating profit is expected to be 66.8 billion won, a 10% decrease compared to the same period last year, but it is projected to slightly exceed the market consensus. Revenue is forecast to be 424.9 billion won, a 1% decrease year-on-year, which is still considered a solid performance.

The target for completed planned preventive maintenance units in the second quarter is four nuclear power units, which is two fewer than the six units in the second quarter of last year. However, the number of thermal power units is expected to be 67, a significant increase of 29 units compared to 38 units last year. Researcher Sung analyzed, "The increase in completed thermal power units far outweighs the decrease in completed nuclear power units, so the increase in thermal power revenue will offset the decrease in nuclear power revenue."

Of particular note is that the Korea Hydro & Nuclear Power (KHNP) consortium has won the contract for the equipment upgrade project for Unit 1 at Cernavoda in Romania. Of the total contract value of 2.8 trillion won, KHNP's share is 1.2 trillion won. KEPCO KPS's maintenance portion is estimated to be around 350 billion won, or about 30% of the total. Researcher Sung commented, "Maintenance will begin in 2027 and take two years and nine months. Considering that the estimated annual revenue increase for KEPCO KPS this year and next year is less than 100 billion won, this is a significantly large volume."

Securing new nuclear power plant maintenance contracts is also anticipated. KHNP and the Czech government have signed the main contract for Dukovany Units 5 and 6, with KEPCO KPS responsible for pre-operation maintenance and inspections just before completion. Researcher Sung stated, "Construction is scheduled to begin in 2029 and be completed in 2037, so revenue will be generated from a long-term perspective." He added, "In the mid- to long-term, there is potential for further contract wins, such as Temelin Units 1 and 2 in the Czech Republic and BNPP Units 5 and 6 in the UAE, which could lead to a continued increase in maintenance volume."

The decision on whether to approve the decommissioning of Kori Unit 1, which will be made on June 26, is also drawing attention. Researcher Sung noted, "If decommissioning approval is granted, it will serve as a catalyst for high growth in the domestic nuclear power plant decommissioning industry. In the mid- to long-term, there is also potential to enter the overseas nuclear decommissioning market." He added, "The global nuclear decommissioning market is projected to reach 500 trillion won by 2050."