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Restoring confidence in dividend payouts will be key

1H23 review: One-off expenses and weaker sales volume weigh on profits

In 1H23, KOGAS’s revenue grew 14% YoY to W26.06tr. Sales volume declined 10.8% YoY for city gas and 8.3% YoY for power generation. Operating profit contracted 34% YoY to W793.4bn as a result of one-off expenses, including W295.2bn related to the settlement of raw material cost differentials and W196.2bn in energy vouchers.

Lower TP to W27,000; maintain Trading Buy

We lower our target price on KOGAS from W33,000 to W27,000, as we revised down our 2023 and 2024 EPS estimates. Despite trading at a historically low P/B of 0.2x, the stock is still showing no signs of picking up. Earnings are likely to improve in 2024, but we do not expect shares to rebound until: 1) the company improves its financial structure; and 2) the stock regains its appeal as a dividend play.