Eugene Investment & Securities, KEPCO Technology target down… “Mid to long-term uncertainty in the nuclear power plant business”

Eugene Investment & Securities maintained its 'buy' investment opinion on the 10th, saying that KEPCO Technology [052690] is continuing to improve its performance based on the Czech nuclear power plant and Shinhanul Units 3 and 4 projects.

However, the target stock price was lowered from 200,000 won to 140,000 won, reflecting weakened investment sentiment in the industry due to mid- to long-term uncertainty in domestic and overseas nuclear power plant projects.

Seonghyeon Hwang, a researcher at Eugene Investment & Securities, said, “We adjusted the multiple downward to reflect the deterioration in industry sentiment (investment sentiment) due to the Czech nuclear power plant construction contract,” but evaluated, “Operating fundamentals (basic strength) are solid.”

In fact, KEPCO Technology's sales in the third quarter amounted to KRW 144.6 billion, an increase of 40% from the previous quarter and 22% from the same period last year, reaching an all-time quarterly record. This is due to the fact that the Dukovany nuclear power plant project in the Czech Republic is in full swing, and the demand for the design of Shinhanul Units 3 and 4 and maintenance and repair of existing nuclear power plants has increased.

On the other hand, net profit recorded a deficit of 10.3 billion won. This is due to the impact of foreign currency translation losses due to changes in the value of the euro, and Eugene Investment & Securities judged that it is difficult to view this as a deterioration in the profitability of the main business.

In the fourth quarter, performance improvement is expected to continue as additional sales from Czech nuclear power plant design services and small modular reactor (SMR)-related projects are reflected. Eugene Investment & Securities predicted KEPCO Technology's fourth quarter sales of 229 billion won and operating profit of 27 billion won.

Contrary to performance, uncertainty surrounding further stock price increases was believed to have increased. In the United States, there is a possibility that Korea-US nuclear cooperation and the pace of orders for large nuclear power plants will be slowed due to the Democratic Party's control of Congress, and in Korea, uncertainty over new orders has increased due to the failure of nuclear power plant construction contract negotiations.

Researcher Hwang said, “There is a need to focus on the performance visibility of the Czech Republic and Shin Hanul Nuclear Power Plants and seasonality in the fourth quarter rather than mid- to long-term momentum (upward driving force),” adding, “The materialization of the Korea-U.S. nuclear power agreement and the resumption of orders for domestic large-scale nuclear power plants must come first.”

As of the previous day, KEPCO Technology's closing price was 72,800 won.