Eugene Investment & Securities announced on August 11 that KEPCO KPS's second-quarter operating profit fell significantly short of market expectations, prompting a target price reduction of 18% to 55,000 won. The investment firm maintained its 'Buy' rating. KEPCO KPS reported second-quarter revenue of 437.9 billion won, a 4% decrease from the same period last year, while operating profit dropped 34% to 43.6 billion won.
Expenses increased by 9% to 217.6 billion won, impacting profitability. This rise was attributed to expanded hiring of temporary workers and outsourcing costs due to increased safety management and verification procedures during planned preventive maintenance projects. Conversely, material costs decreased by 22% as the burden from materials for life extension projects from the previous year diminished.
Looking ahead, a normalization of performance is expected starting in the third quarter. Eugene Investment & Securities forecasts KEPCO KPS's third-quarter revenue and operating profit to reach 412 billion won and 51.6 billion won, respectively. The analysis suggests that many long-term planned preventive maintenance projects are nearing completion, leading to a normalization of revenue recognition from nuclear power, along with anticipated contributions from external sectors such as the Gwangyang biomass O&M project.
Hwang Seong-hyun, a researcher at Eugene Investment & Securities, noted, "The decline in revenue from external and overseas projects, along with the increased hiring of temporary workers and outsourcing costs during planned preventive maintenance, had a significant impact."
He added, "The outlook for performance normalization in the second half of the year remains valid due to the expansion of planned preventive maintenance units. Attention should also be paid to nuclear power life extension, overseas nuclear maintenance, and nuclear project orders resulting from investments in the U.S." He concluded that while the target price has been lowered due to annual performance adjustments, the stock price remains at a low level considering its dividend appeal.
* This article has been translated by AI.
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