Korea Electric Power Surges

Korea Electric Power saw a significant surge in its shares on Monday as investors anticipated positive impacts from the government's efforts to enhance the value of listed companies.

Rally in Shares

The state utility's stock price jumped by 10% to close at 23,200 won ($17.41), marking its most substantial daily gain in over three years. This surge outpaced the Kospi's 1.2% increase for the day, as reported by FactSet.

Government Initiative

Amid speculations, the government is set to unveil a new corporate "value-up" plan later this month. This initiative aims to combat the "Korea discount" and boost shareholder returns, ultimately making the local equities market more appealing to investors.

Analyst's Insights

According to Eugene Investment & Securities analyst Sunghyun Hwang, undervalued local stocks, including Korea Electric Power and other state utilities, have attracted investor attention following the announcement of the government's plan. Hwang forecasts Korea Electric Power to return to profitability by 2024 after three years of losses, driven by recent electricity tariff adjustments. The analyst maintains a buy rating for the stock, estimating its price-to-book ratio at 0.4 in 2023 and 0.3 in 2024. Furthermore, he raised the target price by 19% to KRW32,000.

Government's Recommendations

The Financial Services Commission (FSC) has signaled its support for local companies with a price-to-book ratio of 1.0 or below to devise strategies for enhancing their corporate valuations. Additionally, the Finance Ministry is contemplating offering tax incentives to incentivize companies to improve shareholder returns.

Market Comparison

Comparatively, the price-to-book ratio of Kospi 200-listed companies stood at an average of 0.9 in 2023, significantly lower than that of the S&P 500 in the U.S. and the Nikkei 225 in Japan, as noted by the Korea Exchange.