JPMorgan has revised its rating on Korea Electric Power Corporation (NYSE:KEP) from Overweight to Neutral, assigning a target price of KRW59,000, attributing the change to shifting macroeconomic conditions that present growing challenges for the energy provider. Despite trading at a modest price-to-earnings (P/E) ratio of 3.8, technical indicators such as the Relative Strength Index (RSI) show the stock is approaching overbought levels.
The investment bank’s analysis highlights KEPCO's exposure to commodities that have stabilized but offer limited downside risk, as well as concerns about the end of the U.S. interest rate cut cycle. Further financial scrutiny reveals a current ratio of 0.48, suggesting the company may struggle to cover its immediate liabilities with available liquid assets.
In addition to macroeconomic pressures, JPMorgan expressed doubt about categorizing KEPCO primarily as a nuclear Engineering, Procurement, and Construction (EPC) player, noting past losses stemming from the UAE Barakah nuclear power project and a lack of compelling future prospects, including the less attractive Vietnam project.
While South Korea’s pro-nuclear energy policies provide a favorable long-term backdrop for KEPCO, JPMorgan cautions that near-term earnings remain vulnerable due to external economic factors and changes in electricity tariff regulations. Notwithstanding these uncertainties, consensus forecasts from analysts indicate net income growth this year, and profitability is expected to be sustained.
The downgrade follows a robust rally in KEPCO’s stock, which has appreciated roughly 80% over the last six months and outperformed the broader KOSPI index, which climbed 56% in the same period. Currently, the shares are trading above historical peak price-to-book levels, with data pointing to a 61.16% return over six months and an impressive 210.33% gain over one year. According to InvestingPro’s Fair Value models, such gains suggest the stock is overvalued at present.
KEPCO’s third-quarter earnings report for 2025 further exemplified mixed signals. The company posted earnings per share (EPS) of $2.00, notably exceeding the $1.69 figure anticipated by analysts, representing an 18.34% positive surprise and underscoring effective cost management. However, revenues came in at $18.78 billion, falling short of the estimated $19.43 billion. These results, while mixed, appeared to support investor confidence with the firm maintaining profitability despite missing revenue expectations.
Investors and market participants will be closely monitoring KEPCO’s forthcoming earnings releases to gauge whether the company can sustain its profitability amid the ongoing macroeconomic and operational hurdles.