KEPCO’s profit reduction to be better than average in Q423

[Photo by Yonhap]

South Korea’s Meritz Securities Co. said on Friday that the country’s state utility Korea Electric Power Corp. (KEPCO)’s profit reduction in the fourth quarter of 2023 was not significantly greater than usual, considering the seasonal characteristics.

KEPCO’s operating profit for the fourth quarter of 2023 was estimated at 1.29 trillion won ($966.14 million), which marks a return to profitability compared to the same period a year earlier, Meritz Securities analyst Moon Kyung-won said in a report released on Friday. This figure significantly exceeds the market consensus average of 416 billion won.

“KEPCO’s fourth-quarter operating profit has averaged about 2 trillion won less than the third quarter since the 2000s,” he said, attributing the trend to the seasonal increase in fixed costs and the decrease in sales prices.

But the reduction in profit in the fourth quarter of 2023 was estimated to be only 700 billion won, thanks to an increase in industrial electricity rates in November of the year alongside a decline in the wholesale power purchase price (SMP) and coal power unit price.

“If the company posts an operating profit of around 1 trillion won to exceed market expectations in its fourth-quarter earnings announcement, the full-year operating profit consensus, currently at around 4.8 trillion won, is bound to be revised upward,” Moon said.

“While expectations of a rate hike are limited before the general elections, an upward revision to the company’s earnings outlook could become a significant factor in driving up its stock price.”

Meritz Securities maintained its target stock price for KEPCO at 28,000 won as well as its buy recommendation on the stock.