MERITZ Securities noted that Korea Electric Power Corporation's first quarter earnings fell short of market expectations (consensus), but net profit improved significantly due to dividends received from subsidiaries. The target price was raised by 17% from the previous 25,750 won to 35,000 won, and the investment opinion was maintained as 'buy.'

A Korea Electric Power Corporation branch in Seoul./Courtesy of News1

KEPCO's consolidated operating profit for the first quarter was 3.75 trillion won, up 15.5% compared to the previous year. However, coal generation decreased by 22%, and the coal utilization rate also fell by 11.5%, leading to results below the consensus of 3.9 trillion won. The increase in the settlement adjustment coefficient also contributed to higher electricity purchase costs than expected.

However, net profit recorded 2.8 trillion won, a 376% surge compared to the previous year. The net profit significantly increased due to dividend revenue of 1.8 trillion won received from subsidiaries. Last year's first quarter dividend revenue remained at around 100 billion won.

Mungyeong-won, a researcher at MERITZ Securities, said, "Since dividends are based on separate net profit, this is a positive change," adding, "The completion of the 1st and 2nd phases of the Donghaean-Shingapyeong high-voltage direct current transmission (HVDC) is expected next year, easing transmission constraints."

He also noted, "Assuming KEPCO's dividend payout ratio is 20%, the anticipated dividend per share (DPS) this year is projected to be 1,900 won, with a dividend yield of 7.4%. If the visibility of dividends increases as we move into the second half of the year, a gradual increase in multiples can also be expected."