[Market Focus] Despite Record-High Operating Profit, Korea Electric Power Falls Over 7%

The stock price of Korea Electric Power Corporation (KEPCO), which recorded its highest-ever operating profit last year, is showing weakness. This is attributed to recent earnings that fell short of market expectations and a large amount of outstanding debt.

As of 11:01 a.m. on February 27, Korea Electric Power Corporation was trading at 58,500 won, down 4,800 won (7.58%) from the previous trading day.

The previous day, Korea Electric Power Corporation announced that on a consolidated basis, it recorded sales of 97.4345 trillion won and operating profit of 13.5248 trillion won last year. Sales increased by 4.3% year-on-year, while operating profit rose by 61.7%. Net profit for the period increased by 141.2% to 8.7372 trillion won. The improvement in performance was driven by stabilized fuel prices and the effects of electricity rate adjustments. However, on a consolidated basis, the company’s debt amounted to approximately 205.7 trillion won, while borrowings stood at around 129.8 trillion won.

On this day, KB Securities maintained its “buy” investment rating and a target price of 74,000 won for Korea Electric Power Corporation. Hyejeong Jung, a researcher at KB Securities, stated, “KEPCO’s preliminary sales for the fourth quarter of last year were 23.688 trillion won, up 0.7% from the same period a year earlier, while operating profit was 1.983 trillion won, down 18% year-on-year.” She added, “Operating profit was 42.1% below the market consensus.”

Jung explained, “Overall electricity sales volume decreased by 1.4% due to a decline in industrial power sales, while the increase in the average unit selling price of electricity was limited to 1.7%, resulting in only a 1% increase in revenue from electricity sales.” She continued, “Although cost reduction was achieved through lower fuel and purchased power unit costs, the main reason for the lower-than-expected results was the significant reflection of overseas business expenses from consolidated subsidiaries.”

The payout ratio on a separate basis for 2025 is 13.6%, down from 16.5% in the previous year. This is interpreted as reflecting financial structure improvements in consideration of the adjustment to the corporate bond issuance limit expiring at the end of next year, as well as demand for investment in the power grid.

Jung added, “Korea Electric Power Corporation’s current stock price corresponds to a 12-month forward price-to-book ratio (PBR) of 0.79. The direction of electricity rate reform and progress in Korea-US nuclear power cooperation will be key drivers for the stock going forward.”

This content was produced with the assistance of AI translation services.