DS Securities, KEPCO target price ↓… “Operating profit forecasts for this year and next year are lowered.”

DS Investment & Securities announced on the 13th that it lowered its target stock price for Korea Electric Power Corporation [015760] from 33,000 won to 31,000 won. The investment opinion was maintained at ‘neutral’.

Researchers Heo Jun-seo and Kim Hyun-ji said, “Sales in the third quarter were 26.9 trillion won, a 2.6% decrease compared to the same period last year, and operating profit was 1.64 trillion won, a 70.9% decrease, 32% below the consensus (market average forecast, 2.41 trillion won).”

He then pointed out, “On a separate basis, excluding subsidiaries, KEPCO recorded an operating loss of 99 billion won in the third quarter, turning into a deficit, confirming the structure in which the cost burden is not transferred to selling prices.”

The two researchers analyzed that "Fuel costs (KRW 6.88 trillion) increased by 25%, meeting the estimate, but recalculation of the recovery provision for Wolseong Unit 1 and greenhouse gas emission costs increased other operating expenses (KRW 700 billion), and the slowdown in the petrochemical industry due to the Middle East crisis reduced industrial power sales."

In addition, he added, “As the national power generation also decreased by 1.9%, we believe that the decrease in sales is due to a weakening of overall electricity demand, not an exodus due to direct purchases.”

Researchers Heo and Kim said, "The system limit price (SMP) in November exceeded 140 won, and the 4th quarter is a short-term sales off-season." They added, "At a conservative level, assuming an SMP of 123 won in the 4th quarter, a private purchase price premium of +15 won per kWh, and a 1.5% decrease in sales volume, we forecast an operating loss of 2.15 trillion won in the 4th quarter."

In addition, he said, “We are also lowering the operating profit forecasts for 2026 and 2027 by 34% and 29% compared to the previous level,” and added, “Compared to structurally increasing costs, there is no signal of an increase in rates. We maintain a neutral investment opinion until the institutionalization of the burden on the cause, independent cost recovery decisions, and resolution of the private loan limit are confirmed.”

Korea Electric Power Corporation's current stock price is 30,650 won based on the previous trading day's closing price.