Why brokerages are raising their target price for KEPCO despite earnings miss and share price plunge

[The Financial News] Brokerages have been steadily raising their target prices for Korea Electric Power Corporation (KEPCO). Quarterly results, including the fourth quarter of last year, fell short of market expectations, but analysts say the company has clearly returned to profit on an annual basis thanks to an improved cost structure and the impact of the settlement coefficient. As this view spreads, securities firms are quickly revising up their assumptions.
According to financial data provider FnGuide, seven securities firms, including Eugene Investment & Securities and IBK Securities, raised their target prices for KEPCO last month. Their targets now range from 70,000 won to 92,000 won. This suggests that, despite quarterly earnings volatility, the market is reassessing KEPCO’s medium- to long-term earnings visibility more favorably.
The short-term market reaction, however, was negative. When fourth-quarter operating profit missed the consensus forecast, the share price fell instead of rising. KEPCO’s stock, which had climbed to the mid-64,000 won range in February, dropped 1.56% on February 26, the day results were released, and then plunged a further 7.58% on the following day, the 27th. Many interpret this as profit-taking, as expectations for earnings had already been priced in and the actual results failed to meet those expectations.
Even so, brokerages are lifting their targets because they are focusing more on the annual earnings trend than on a single quarter. They view the weak fourth-quarter numbers as temporary, driven by concentrated nuclear power maintenance and the recognition of subsidiary costs, rather than as a sign of structural deterioration in profitability. With electricity tariffs now better reflecting costs, analysts believe the recovery in profit on an annual basis remains intact.
In particular, expectations for an improved generation mix and a recovery in nuclear power utilization are underpinning the medium- to long-term outlook. Since the start of this year, nuclear utilization rates have been gradually normalizing, while the burden of fuel costs and purchased power costs has eased. Analysts say this creates significant room for a larger improvement in profitability. Many in the securities industry argue that investors should pay more attention to the annual earnings trajectory than to quarter-to-quarter volatility.
The resumption of dividends has also influenced these assessments. KEPCO has confirmed a 2025 dividend of 1,540 won per share, marking the return of a meaningful payout. If the earnings recovery continues, analysts expect the company’s capacity for shareholder returns to expand gradually over the medium to long term. However, potential cuts to industrial electricity tariffs and rising costs at subsidiaries are still seen as headwinds, and some caution that the key issue is not a short-term rebound in the share price but the sustainability of profit recovery.
Kim Tae-hyun, an analyst at IBK Securities, said, "It is positive that the dividend has been sharply increased to 1,540 won per share, implying a dividend yield of about 3.2%, and this is the first meaningful dividend level we have seen since 2020." He added, "As fuel prices remain stable and KEPCO increases the share of nuclear power, which has a lower generation cost, there is still ample room for further improvement in profitability."

koreanbae@fnnews.com Bae Han-geul Reporter