[Click e-Stock] "KEPCO Expected to Expand Presence and Benefit from Electricity Rate Hikes...Buy Rating"

On November 7, KB Securities upgraded its investment rating on Korea Electric Power Corporation (KEPCO) from Hold to Buy. The target price was also raised by 19.1% to 56,000 won.

On the same day, KB Securities analyst Jung Hyejeong stated, "We have raised our mid- to long-term earnings estimates to reflect the increased likelihood of electricity rate hikes, the strengthened role of Korea Hydro & Nuclear Power (KHNP) due to reinforced nuclear cooperation between South Korea and the United States, and the potential for KEPCO subsidiaries to contribute more to the nuclear power sector following the expected revision of the nuclear agreement."

She first highlighted the potential for KEPCO and its subsidiaries to strengthen their position in the nuclear power market. Jung noted, "A new large-scale nuclear power plant construction project is underway in the United States by Fermi America, which has signed a memorandum of understanding (MOU) with KHNP, a wholly owned subsidiary of KEPCO." She added, "The establishment of a joint venture (JV) with Westinghouse is still under review, further increasing the visibility of KHNP's entry into the U.S. market."

The fact sheet for the upcoming South Korea-U.S. summit is also expected to include details on the revision of the nuclear agreement. Under the agreement revised in 2015, South Korea can only enrich uranium to below 20% with U.S. consent, and reprocessing of spent nuclear fuel is prohibited. Jung commented, "Discussions are underway to secure the right to enrich uranium to below 20% and to reprocess spent fuel, similar to Japan," expressing expectations for the expansion of business scope for KHNP and KEPCO Nuclear Fuel, among others.

The potential for electricity rate hikes is another investment point. Jung explained, "Large-scale domestic power grid investments are needed, such as the operation of the Yongin semiconductor cluster in 2028 and the opening of the West Coast Energy Expressway in 2030." She predicted, "Electricity rates will be raised through a regional differential pricing system in the future." She added, "We foresee performance improvement and a structural revaluation of nuclear power assets," and stated, "After nine years of share price declines, a new phase of growth in both performance and value is expected."