[Click e-Stock] "KEPCO E&C Faces Weak Q2, Needs to Expand Korean Nuclear Exports"

2Q Results Weaken Due to Completion of UAE Project
Expectations Rise for Additional Exports of Korean-type Nuclear Power Plants

Korea Hydro & Nuclear Power Engineering (KEPCO E&C) is expected to report somewhat sluggish results for the second quarter as it completes previously awarded projects. However, the company is projected to boost its performance by increasing orders for Korean-type nuclear power plants and entering the nuclear decommissioning market in the future.

On July 15, KB Securities raised its target price for KEPCO E&C by 19.5%, from 87,000 won to 104,000 won, while maintaining its 'Buy' investment rating. The previous day's closing price was 88,900 won.

This adjustment is attributed to the expectation that orders for the Dukovany nuclear power plant in the Czech Republic will begin in earnest from 2028, and there remains the possibility of additional orders for two Temel?n nuclear power units in the Czech Republic. The opening of the domestic nuclear decommissioning market, starting with the Kori Unit 1, was also seen as a positive factor.

The company's performance for the second quarter of this year is expected to be somewhat weak. KB Securities forecasts sales of 116.9 billion won and operating profit of 5 billion won, representing decreases of 8.1% and 60.1%, respectively, compared to the same period last year. The operating profit is 43.2% below the market consensus. The company expects sales to decline as most of the Saeul Units 3 and 4 and United Arab Emirates (UAE) nuclear power plant projects are completed.

KEPCO E&C, which designs Korean-type nuclear power plants, is expected to secure new orders related to the Czech nuclear power plant in the second half of this year, in addition to the Shin Hanul Units 3 and 4, which currently support its order backlog. Excluding two domestic nuclear power units scheduled for operation by 2038, there have been no additional confirmed exports of Korean-type nuclear power plants. However, there are still expectations for orders for two follow-up nuclear power units in the Czech Republic and two follow-up units in the UAE.

Jung Hyejeong, a researcher at KB Securities, stated, "The outlook for entering the overall decommissioning design and site restoration sector, following the decision to decommission Kori Unit 1, is also positive." She added, "If government support policies for the Korean-type i-SMR, which KEPCO E&C is developing, are implemented in earnest?such as the recent introduction of a special law for small modular reactors (SMRs)?this could serve as an additional growth engine."