, an analyst from Bank of America Securities, has initiated a new Buy rating on Korea Electric Power (KEP).
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Merrill Lynch has given its Buy rating due to a combination of factors that highlight Korea Electric Power’s (KEPCO) strong growth potential and financial performance. The firm anticipates a significant increase in KEPCO’s earnings per share (EPS), projecting a 50% compound annual growth rate (CAGR) from 2024 to 2027, driven by expanding electricity sales margins as fuel costs decline. Additionally, KEPCO’s strategic focus on nuclear exports is expected to secure a long-term profit pipeline, contributing to a sharp rise in dividends per share (DPS) and strengthening free cash flow (FCF) over the same period.
Furthermore, Merrill Lynch points to KEPCO’s robust core electricity margins, which are expected to benefit from lower fuel costs and an increased share of nuclear energy in its mix. The firm’s price objective of 60,000 KRW reflects a justified valuation based on historical peak multiples and a strong return on equity (ROE) outlook. Despite trading at a discount compared to domestic peers, KEPCO’s potential catalysts, such as the US-Korea nuclear partnership and possible tariff hikes, further support the Buy rating. However, risks such as commodity price fluctuations and regulatory costs are noted as potential challenges.
KEP’s price has also changed dramatically for the past six months – from $10.580 to $16.730, which is a 58.13% increase.