Have KEPCO shares hit rock bottom?

By Jhoo Dong-chan

The share price of Korea Electric Power Corp. (KEPCO) is collapsing due to disappointing earnings so far this year, with the state-run electricity provider's price-to-book ratio (PBR) plunging below 0.25 percent.

Some investors claim KEPCO's current stock price is too low and will eventually display signs of a recovery, but market analysts say this is a false hope and the price won't turn around anytime soon.

According to the Korea Exchange, KEPCO closed at 25,450 won ($22.08) per share Friday, down 300 won, or 1.17 percent, from the previous session.

The firm's stock price has fallen over 20 percent so far this year, with the firm's disappointing quarterly performance adding fuel to the fire.

KEPCO said in a regulatory filing that it had a 629.9 billion won operating loss in the first quarter of the year, which is 15 times higher than the market consensus of 41.9 billion won.

The firm has continued a series of losses every quarter except the third quarter of last year since it marked a 129.4 billion won operating loss in the fourth quarter of 2017.

Analysts said the government's push to reduce its dependence on nuclear power has driven the state-run company to spend extra on opportunity costs in generating electricity from conventional power plants.

The relatively warm winter was another reason behind the KEPCO's disappointing quarterly earnings.

Mirae Asset Daewoo researcher Jay Ryu said the share price is likely to continue its downtrend throughout the year.

“There's no way out,” Ryu said.

“KEPCO should immediately raise electric prices if it wants to halt the deficit. I believe the firm is really undervalued at the moment considering its PBR of 0.24, but this isn't the right time to buy KEPCO shares.”

Shinhan Investment analyst Huh Min-ho said, however, the firm's stock price is now at its lowest level so this may be right time to buy.

“I think KEPCO's stock price just hit rock bottom,” he said.

“The firm's valuation is at an all-time low. It could rest on oil prices and the exchange rate, but KEPCO will turn a profit in the third quarter of the year.”