KEPCO Faces Increased Earnings Pressure Due to Middle East War... Target Price Lowered

[Financial News] LS Securities Co., Ltd. lowered its target price for Korea Electric Power Corporation (KEPCO) from 52,000 won to 48,000 won, stating that "short-term earnings pressure has increased due to rising energy raw material prices resulting from the prolonged Middle East war." However, it maintained its "buy" rating, noting that mid-to-long-term growth potential remains valid due to increased power demand from the artificial intelligence (AI) and semiconductor industries, as well as the expansion of nuclear power plants both domestically and internationally.
On the 8th, Sung Jong-hwan, an analyst at LS Securities Co., Ltd., explained, "As the Middle East war continues, all investment momentum, including fundamental improvements in the earnings structure and nuclear power momentum, is not free," adding, "With Dubai crude recently surpassing $100 per barrel again, the impact of deteriorating operating profit due to soaring energy raw material prices will begin in earnest from the third quarter."
Korea Electric Power Corporation (KEPCO) projected this year's estimated revenue at 98.888 trillion won and operating profit at 8.131 trillion won. This represents a 1.5% increase in revenue compared to the previous year, but a 39.7% decrease in operating profit. For the third quarter, estimated revenue is projected at 28.13 trillion won, a 2% increase year-on-year, while operating profit is expected to fall by 66.3% to 1.906 trillion won.
Unlike the burden of short-term earnings, the mid-to-long-term growth outlook was assessed positively. In particular, it was predicted that investment in new power generation facilities and power grids would be inevitable as domestic electricity demand increases significantly due to the expansion of AI data centers and semiconductor clusters.
Researcher Sung stated, "The total power required for the three major mega-projects, including the Yongin Semiconductor Cluster (15GW), AI Data Center (18.4GW), and Honam Semiconductor Cluster (6.3GW), is 39.7GW," adding, "It is necessary to secure a significant amount of new power generation capacity and build a large-scale power grid."
He added, "As the expansion of power generation capacity and the power grid is inevitable for the expansion of semiconductor factories and AI data centers, this is significant for KEPCO in terms of mid-to-long-term investment momentum as it leads this initiative."
The nuclear power business was also cited as a long-term growth engine. Analysis suggests that while opportunities for large-scale nuclear power plant orders continue overseas, centered on Europe, the Middle East, and the United States, there is also potential to expand new power generation capacity centered on nuclear power domestically to meet surging electricity demand.
Researcher Sung predicted, "While the Middle East war is a burden on earnings and investor sentiment in the short term, the expansion of domestic power generation capacity and grids driven by increased power demand from the AI and semiconductor industries, along with domestic and international nuclear power momentum, remains valid in the long term."

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