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According to the Korea Exchange on the 20th, the stock price of KEPCO last week rose by 19% from the beginning of 20,000 won to 28,300 won. On the 18th, it recorded 350 won in the market and changed the 52-week report price. KEPCO has continued to decline since the government’s post-nuclear power plant policy was promoted. In May 2016, it rose to 63,000 won, ranking second in the market capitalization of the securities market, but fell to the mid-40,000 won at the end of the same year. Since then, it has been walking downhill all the way down to the 16,000 won mark earlier this year.
However, on the 17th, the Ministry of Trade, Industry and Energy announced a plan to reorganize electricity rates, including the fuel cost indexing system, and the stock price and transaction volume began to surge simultaneously. The fuel cost indexing system is a system that periodically reflects fluctuations in fuel costs used for electricity production in electricity rates. Until now, KEPCO’s performance has fluctuated significantly as production costs rise and fall according to changes in the price of crude oil used for power generation. With the introduction of an indexed system, rates can be calculated according to changes in production costs, so earnings can be more stable than before.
Securities companies also raised expectations for KEPCO than before. Six of the seven securities company reports released before and after the announcement by the Ministry of Industry raised the target price from the early 30,000 won to the 40,000 won level. The average target price is KRW35,142, which is about 20% higher than the current KEPCO stock price (KRW283,000).
Eugene Investment & Securities, which presented the highest target price, explained, “The mid- to long-term earnings are expected to be stable thanks to the application of the electricity rate reform plan, and the stock price will continue to rise after revaluation as stable investment and dividend funding are possible.” Researcher Seong-Hyun Hwang said, “There will be a factor of lowering electricity rates until the first half of next year, but it is expected that an increase will be made to reflect the increase in cost in the second half.”
Korea Investment & Securities Research Institute Choi Woon evaluated that with the reorganization of the electricity rate system, KEPCO has reached a turning point to escape from the frame of policy victims. In the short term, it is highly likely that rates will be cut due to low oil prices, but it is analyzed that revaluation is possible as profit stability will increase in the long term. Researcher Choi said, “The direction of energy policy is more important than short-term profit or loss for the share prices of utility companies including KEPCO. The current share price is only 9 times the expected share price-earnings ratio (PER) in 2021, so there is great room for revaluation.” did.
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