[Edaily Reporter Kwon Oh Seok ] IBK Investment & Securities announced on the 13th that it is maintaining its “Buy” rating on KoreaElectricPower(015760)but lowering its target price from 77,000 won to 39,000 won.

Kim Tae-hyun, an analyst at IBK Investment & Securities, stated, “Amid growing cost pressures due to rising international fuel prices and the System Marginal Price (SMP), concerns over short-term profitability are expected to persist, as costs related to the Renewable Energy Supply Obligation (RPS) and carbon emissions are also likely to continue increasing.”
Previously, third-quarter consolidated revenue and operating profit came in at 26.8518 trillion won (-2.6% year-over-year) and 1.6441 trillion won (-70.9%), respectively, falling short of the consensus estimates (revenue of 27.4963 trillion won and operating profit of 2.4143 trillion won). This was due to rising international energy prices following the war in the Middle East, which increased the burden of power generation fuel costs and purchased electricity costs. In fact, fuel costs and purchased electricity costs rose by 25.1% and 11.4%, respectively.
Analyst Kim explained, “Furthermore, amid a decline in nuclear power plant utilization rates, the deterioration in profitability widened due to factors such as increased costs related to greenhouse gas emissions (+545.6 billion won) and an increase in provisions for liabilities resulting from the recalculation of decommissioning costs for Wolseong Unit 1 (+544.7 billion won).” He added, “Net income also decreased to 835.9 billion won (-77.9%).”
This was attributed to a decline in industrial electricity demand caused by imbalances in the supply and demand of raw materials resulting from the war in the Middle East and a slump in the petrochemical sector. Analysts projected that the downward trend in electricity sales would continue into the fourth quarter as industrial demand remained weak due to a decline in manufacturing capacity utilization rates.
Nevertheless, Analyst Kim added, “It is positive that the share of nuclear power—which has a low generation cost—is expected to increase starting next year with the sequential restart of Kori Units 3 and 4 and Hanbit Units 1 and 2, as well as the new commissioning of Saeul Units 3 and 4,” and noted, “We believe that market concerns regarding the deterioration in earnings have already been largely factored into the stock price.”