Zacks_Analysts' Blog : Korea Electric Growing Steadily - Analyst Blog

In the quarter, Korea Electric recorded a net profit of 240 billion won ($192.8 million) beating the consensus forecast of 461.6 billion won loss, compared with a net loss of 763.61 billion won, a year ago. Last year, the company suffered due to record escalation of feedstock costs. Korea Electric absorbed a 42% and 72% rise of LNG and coal costs, respectively, in the year-ago period.

Quarterly sales increased 7.4% year over year to 7.37 trillion won. This was boosted by higher demand coupled with two regulatory rate hikes of 4.5% and 3.9% in November 2008 and June 2009, respectively. The company registered an operating income of 233.6 billion won compared with an operating loss of 908 billion won, a year ago.

We expect the positive trend to continue as Korea Electric is focused on acquiring energy entities to reduce external dependence for fuel. In July itself, it bought a 1.5% stake in Indonesia’s second-largest coal producer Adaro Energy for $56.5 million and a 17% stake in Canadian uranium producer Denison Mines Corp. for $68 million.

KEPCO is an integrated electric utility with an annual capacity of 63,529 MW. The company owns 87.6% of the total electricity generating capacity in South Korea. We reaffirm our market-neutral HOLD recommendation on the stock.