Following a 61% decline for KEPCO (KEP) in 1st quarter 2008 net income over the previous year (when the Korean Won appreciated against the U.S. dollar, which benefited import-intensive companies such as utilities with significant dollar-denominated debt), we expect much-improved performance and modest price appreciation going forward. KEPCO is the dominant player in Korea's electricity sector.
The company continues to be well-positioned to capitalize on growth opportunities in this market and to benefit from the current industry restructuring initiated by the Korean government. However, in the scenario of volatile global energy prices, Chinese embargo on coal exports and higher fuel costs, stagnation at electricity rates, KEP continues to face risks of increasing costs.
Thus, KEPCO often reports lower operating earnings and net income. Therefore, we maintain our Hold recommendation on KEPCO common stock with a six-month target price of $17.50.
Read the full analyst report on KEP.
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