“The downcycle is nearing its end... KEPCO Plant Service & Engineering Co., Ltd. seen as poised for medium- to long-term growth”

[Financial News] Daishin Securities maintained its “Buy” rating on KEPCO Plant Service & Engineering Co., Ltd. on the 21st, saying the downcycle appeared to be nearing its end. However, taking into account the time needed for earnings to recover, it lowered its target price from 64,000 won to 57,000 won.
Daishin Securities forecast third-quarter revenue of 399.4 billion won, operating profit of 45.7 billion won and an operating margin of 11.4% for KEPCO Plant Service & Engineering Co., Ltd. The operating profit is in line with the consensus estimate of 47.1 billion won.
Heo Min-ho, an analyst at Daishin Securities, noted, “In the nuclear maintenance segment, routine maintenance revenue is expected to be weak as nuclear plant utilization rates fall, partly due to an increase in the number of aging reactors under review for approval to continue operating. There is also some impact from revenue recognition for planned preventive maintenance contracts being spread over an extended period.”
The firm offered a positive medium- to long-term outlook. Heo said, “Earnings are expected to improve after the fourth quarter, and the appeal of the dividend is also expected to come to the fore. The 12th Basic Plan for Electricity Supply and Demand will reflect large-scale expansions by the KEPCO Group in nuclear and gas-fired power, pumped-storage generation and transmission networks.”
He added, “Expanded overseas entry for Korean-designed nuclear reactors, including into the Czech Republic, the United States and Vietnam, is expected to raise hopes for a recovery in medium- to long-term growth that could offset the closure of domestic coal-fired power plants.”
Fourth-quarter revenue is forecast at 458 billion won, with operating profit of 57.4 billion won and an operating margin of 12.5%. The analysis is that revenue from high-margin nuclear maintenance, including commissioning and routine maintenance associated with the start-up of Saeul Unit 3, will recover. In the first half of next year, revenue is expected from preliminary work for the replacement of the reactor pressure tubes and facility upgrades at Romania’s Cernavoda Unit 1, while overseas nuclear maintenance revenue is also expected to expand.

[email protected] Seo Min-ji Reporter