January 18, 2021 One-Asia Morning Focus

Today’s reports Media/Entertainment (Overweight) – and dramas: Strengthening growth profile Medtech (Overweight) – Customs export data and 4Q20 preview Korea Aerospace Industries (047810 KS/Buy/TP: W36,000) Raise TP – Watch for earnings recovery BGF Retail (282330 KS/Buy/TP: W195,000) – Strong downside support Global performance monitor: Two-day change (%) Asia xJPN World EM World DM Korea Japan China Taiwan HK India Indonesia Singapore Thailand Index -0.33 -0.44 -0.91 -2.93 -0.23 0.97 -0.91 0.25 -1.05 -1.42 0.49 -1.82 Growth -0.09 0.17 -1.67 -3.42 -0.55 2.43 -1.12 0.85 -0.74 -1.34 0.47 -2.26 Value -0.43 -1.02 -0.52 -2.43 0.12 -0.56 -0.59 -0.42 -1.32 -1.49 0.51 -1.38 Semicon. & equip. -1.63 -1.69 -0.96 -4.51 0.94 -3.62 -1.23 9.60 N/A N/A N/A N/A Tech hardware & equip. -2.18 -2.19 -1.94 -2.18 0.32 -3.51 1.48 -2.24 2.12 N/A -0.24 N/A Comm. & prof. services -1.92 -1.92 -1.24 -0.96 0.70 -0.19 -0.22 N/A -0.25 0.29 N/A N/A Software & services -0.76 -0.81 -1.69 -1.41 0.42 -0.61 -0.56 1.43 -1.92 N/A -3.62 N/A Media & entertainment 4.91 4.54 -0.02 -2.92 0.55 -1.53 -2.81 1.16 -3.40 N/A N/A N/A Consumer goods -1.08 -1.06 -1.67 -0.94 -0.83 -1.38 -2.08 N/A -1.79 0.63 N/A 2.39 Consumer services -1.69 -1.17 -1.00 0.81 -0.93 -3.43 -1.30 -3.77 -2.16 -2.21 0.85 -2.18 F&B & tobacco -1.98 -1.78 -0.58 -0.49 1.25 -4.92 -1.65 -2.32 0.07 1.28 3.06 1.10 Food & staples retailing -0.42 0.22 -0.56 -3.07 0.43 -4.16 -1.22 N/A -3.48 N/A -0.93 3.20 Retailing 2.06 2.29 -0.33 -2.40 0.15 -6.03 -0.87 0.20 -3.62 -0.85 N/A 0.36 HH & personal products -0.34 -0.63 -0.83 0.32 0.67 -4.77 -1.41 N/A -0.45 -0.79 N/A N/A Pharma & life sciences -1.04 -1.00 0.91 -9.00 -0.26 -2.63 -2.05 N/A -0.79 5.41 N/A N/A Autos & parts -5.23 -5.22 -2.63 -5.36 -1.52 -4.90 -0.68 12.47 -0.18 -2.68 N/A N/A Transportation -1.73 -1.49 -0.89 -0.02 1.25 -3.43 -5.49 -0.56 -1.07 N/A 0.62 -1.22 Capital goods -1.34 -0.97 -1.28 1.15 -0.90 -3.38 0.34 -2.90 -0.37 N/A -0.28 -0.43 Materials -1.71 -1.50 -1.73 -2.05 -2.12 -1.78 -2.68 N/A -1.98 -0.11 N/A -0.62 Real estate -0.26 -0.75 1.07 -1.03 0.05 0.51 -1.48 -0.15 -0.24 N/A 1.21 -1.21 Energy -0.61 -0.88 -0.86 -5.93 0.09 -0.27 -2.94 N/A -0.15 -1.03 2.43 -2.36 Banks -0.16 -0.52 -0.95 -4.01 0.10 2.36 -1.12 -0.17 -1.58 -2.87 0.29 -2.12 Diversified financials -0.52 -1.61 -1.09 -1.87 -0.31 -3.11 -1.61 1.10 -0.11 N/A -1.79 -0.62 Telecom services 0.12 -0.42 0.28 -1.81 1.59 N/A -0.82 -0.47 4.06 0.17 0.11 -0.46 Utilities -1.07 -0.85 -0.33 -1.46 -1.46 -1.27 -0.88 -0.51 -0.71 10.22 N/A -4.63 Key thematic ETFs: Change (%) Market movers Mkt cap US dollar total returns (%) Robotics & AI (Global X) Name Ctry Sector (US$mn) 1D 1M 3M 6M 1Y 3Y Cloud Computing (Global X) Top seven performers Lithium & Battery (Global X) Guangzhou Auto. HK Consumer disc. 17,770 19.5 13.0 32.2 54.5 3.0 -16.3 Internet of Things (Global X) Postal Savings Bank HK Financials 114,988 10.0 23.1 44.3 16.3 4.2 31.3 Digitalisation (iShares) ASM Pacific Technology HK Information tech. 5,807 8.9 9.6 25.1 19.4 -4.6 6.8 FinTech (Global X) Smoore International HK Consumer staples 55,219 8.1 41.0 90.5 135.1 NA NA Genomics & Biotech (Global X) China Youzan HK Information tech. 7,880 7.3 60.1 64.6 115.9 522.2 749.9 Health & Wellness (Global X) China Merchants Bank HK Financials 199,002 6.6 26.7 48.6 61.3 53.5 90.2 Ageing Population (iShares) Tata Motors IN Consumer disc. 11,715 6.2 44.4 104.7 151.3 28.4 -46.2 EM Consum Growth (iShares) Bottom seven performers Clean Energy (iShares) Kingsoft ADR CN Information tech. 9,268 -6.9 -14.1 36.2 19.0 NA NA Water Resources (Invesco) NIO ADR A CN Consumer disc. 88,294 -7.6 22.3 97.6 407.4 1,105 NA Agribusiness (iShares) Delta Electronics Thai TH Information tech. 24,082 -8.1 61.9 227.1 684.9 1,053 788.5 Global Infrastructure (iShares) Celltrion Healthcare KR Healthcare 20,196 -8.1 -8.4 73.9 50.5 181.0 16.7 ESG US Leaders (iShares) Celltrion Pharm KR Healthcare 6,226 -9.6 -18.8 84.2 56.4 367.2 94.2 2D 10D Evergreen Marine TW Industrials 5,891 -10.0 16.7 99.4 232.6 181.8 115.7 (9) (6) (3) 0 3 6 9 12 15

Xiaomi B HK Information tech. 95,178 -10.3 0.0 26.5 89.0 121.7 NA

This publication contains summaries of reports prepared by Mirae Asset Daewoo Co., Ltd. and/or its non-US affiliates (“Mirae Asset Daewoo”). Please review the compliance notices contained in the original reports. Information and opinions contained herein have been compiled in good faith from sources deemed to be reliable. However, the information has not been independently verified. Mirae Asset Daewoo makes no guarantee, representation, or warranty, express or implied, as to the fairness, accuracy, or completeness of the information and opinions contained in this document. Mirae Asset Daewoo accepts no responsibility or liability whatsoever for any loss arising from the use of this document or its contents or otherwise arising in connection therewith. Information and opinion s contained herein are subject to change without notice. This document is for informational purposes only. It is not and should not be construed as an offer or solicitation of an offer to purchase or sell any securities or other financial instruments. This document may not be reproduced, further distributed, or published in whole or in part for any purpose.

January 18, 2021 One-Asia Morning Focus

MSCI valuations (DM, EM, Asia ex-JP)

18 12M forward P/E (x) 25 2.4 12M trailing P/B (x) 3.4 24 17 3.2 23 2.2 16 22 3.0 21 2.0 15 20 2.8 14 19 1.8 2.6 18 13 17 1.6 2.4 16 12 2.2 15 1.4 11 14 2.0 13 1.2 10 1.8 12 9 11 1.0 1.6 01/20 04/20 07/20 10/20 01/20 04/20 07/20 10/20 MSCI Asia ex-JP (L) MSCI World EM (L) MSCI World DM (R) MSCI Asia ex-JP (L) MSCI World EM (L) MSCI World DM (R)

MSCI 12M forward P/E (x) Currencies (vs. USD) Value Change (%) Korea Vietnam 1D 3M YTD

13 19 KRW 1,099.5 0.13 -4.17 -4.93 CNY 6.5 0.10 -3.34 -7.05 11 16 JPY 103.9 0.05 -1.46 -4.42 IDR 14,020.0 -0.25 -4.63 0.99 9 13 HKD 7.8 0.00 0.05 -0.49 TWD 28.0 0.06 -2.67 -6.66 7 10 01/20 04/20 07/20 10/20 01/20 04/20 07/20 10/20 SGD 1.3 0.33 -2.08 -1.07 THB 30.0 0.15 -3.63 0.30 Indonesia India 19 24 INR 73.1 0.03 -0.38 2.37 22 PHP 48.1 0.02 -1.17 -5.10 17 20 MYR 4.0 0.01 -2.72 -1.32 15 18 VND 23,066.0 0.01 -0.48 -0.46 13 16 Commodities 11 14 Latest Change (%) 9 12 01/20 04/20 07/20 10/20 01/20 04/20 07/20 10/20 close 1D 3M YTD Crude oil (US$/bbl) 55.1 -2.3 43.0 -18.7

Hong Kong China Thermal coal (US$/tonne) 83.0 0.0 65.6 23.9 19 16 Iron ore (US$/tonne) 170.0 0.1 32.8 85.7 15 17 Copper (US$/tonne) 7,979.5 -0.3 17.9 29.6 14 Nickel (US$/tonne) 17,970.0 0.1 19.1 28.4 15 13 Tin (US$/tonne) 21,495.0 0.9 18.0 27.6 12 Gold (US$/ozt) 1,829.3 -1.1 -5.4 20.4 13 11 Palm oil (INR/tonne) 1,075.0 0.0 28.5 23.5

11 10 Soybean oil (c/lb) 43.0 -2.8 27.3 25.2 01/20 04/20 07/20 10/20 01/20 04/20 07/20 10/20 Corn (US$/bu) 5.4 0.0 51.4 35.9 Wheat (US$/bu) 6.8 0.8 26.7 20.9

Source: FactSet, Mirae Asset Daewoo Research (updated on 1/18/21 at 06:00 KST)

[Korea] January 18, 2021

Media/Entertainment (Overweight/Maintain) Webtoons and dramas: Strengthening growth profile

INDUSTRY ANALYSIS INDUSTRY Mirae Asset Daewoo Co., Ltd. Jeong-yeob Park [email protected]

Power of K-content Global market share of K-content to expand on the back of strong brand identity  Korea has emerged as a cultural powerhouse, winning Academy Awards and topping Billboard charts.  A strong brand identity has grown around K-content, aided by Korea’s economic development and success in films/music/webtoons/dramas.  In the space, high-quality platforms have expanded their global footprint and helped to increase the overall market size, partly driven by the appeal of the format itself.  Competition among global OTTs has fueled spending on drama content, leading to increasing contracts for production companies.

Korean players are poised to Directly benefiting from market expansion amid growing popularity of K-content benefit  K-content, once thought of as “niche” or “Asia-oriented,” has expanded its reach to global audiences.  Korean players have: 1) raised their profile as video/music content providers; and 2) secured an early lead across the webtoon value chain (platforms and content providers).  Simply put, once-small players have grown into formidable content providers and platform operators.  We expect the webtoon and drama markets to continue to expand for quite some time, backed by: 1) the unique characteristics of each market; and 2) synergies between the two markets.  Webtoons: Webtoons have quickly taken hold as a distinct mobile-based market (separate from paper comics). We expect user inflow to accelerate, spurred by the success of adaptations.  Dramas: Steady replacement demand (new titles), proven sources (webtoons), and the marketing needs of OTTs should support the growth of the drama market.

Investment strategy Major drama studios and webtoon platform/content providers to undergo re-ratings  Webtoon platform/content providers: Globally, the number of webtoon users and webtoon transaction volume are continuing to grow. Discussions on profit sharing for copyright holders are getting underway for screen adaptations of titles released in the past two to three years.  Drama content producers: Global contracts for big-budget titles tend to precede or accompany the growth of global OTT platforms. We expect the value of content producers to rise, as recently launched domestic and global OTT platforms should lead to increased competition.  Our top pick is Kidari Studio (webtoon platform/content provider): We present a target price of W17,000. Kidari Studio’s acquisition of Lezhin Entertainment has given it a dominant position in niche genres. We expect the company to benefit from acquisition synergies (distribution leverage) and see increasing market opportunities from drama adaptations of niche genres.  : We raise our target price to W120,000. We believe Studio Dragon has the best accessibility to webtoons (source) and OTTs (downstream) among video content producers.  D&C Media: We maintain our target price of W45,000. We expect D&C Media to benefit from growth not only in Korea and Japan but also in China and the US.

[Korea] Media/Entertainment January 18, 2021

Kidari Studio Buy (020120 KS) (Initiate)

Lezhin acquisition to solidify dominance in niche TP: W17,000 genres Upside: 42.9%

Mirae Asset Daewoo Co., Ltd. Jeong-yeob Park [email protected]

Company overview A leader in niche genres engaged in both content production and platform operation  Value chain exposure: Kidari Studio operates two webtoon platforms—Bomtoon (Korea) and Delitoon (France)—and also owns a production studio.  The company is part of the Daou Kiwoom Group. Its major shareholders include Daou Data (52.7%), e-Money (4.3%), and specially related parties (3.8%). The company produces around 80 webtoon titles per year and distributes them on its own platforms as well as third-party platforms (Kakao, , Lezhin Comics, etc.).

Advancing to the next level with Set to become no. 3 webtoon operator with Korea/Japan/North America/Europe exposure Lezhin acquisition  Kidari Studio will acquire a 100% stake in Lezhin Entertainment. Under the deal, the company will issue roughly 13.47mn new shares (73% stock increase) to Lezhin Entertainment’s existing shareholders.  We believe the tie-up of Kidari Studio, which has exposure to Korea and France, and Lezhin Entertainment, which has exposure to the US and Japan, will lead to production-distribution synergies through regional expansion. We also think the deal is a smart move in the sense that both companies are leaders in niche genres. We expect the companies’ existing partnership to strengthen further.  With the exchange price (W123bn) implying 2020-21F P/S ratios of 2.3x and 1.7x, respectively, we believe the deal undervalues Lezhin Entertainment.

The potential of niche genres Dominant market position, limited competition; upside from potential drama adaptations  Kidari Studio is strongly positioned in niche genres (e.g., romance, boys’ love, girls’ love). Its platforms act as steady cash cows, helped by higher average spending and low defection rates.  The company faces limited competition from NAVER and Kakao, and its popular titles make it well-positioned to benefit from market expansion.  We also see potential for expansion into dramas, given the recent drama adaptation of the boys’ love webtoon Color Rush by another company.

Recommendation Initiate coverage with Buy and TP of W17,000  Our target price of W17,000 corresponds to a 2021F P/S of 4.1x and 2021F P/E of 40x, assuming the closing of the Lezhin Entertainment acquisition. In deriving our target price, we applied a 30% discount to NAVER Webtoon’s P/S and a 15% premium to D&C Media’s P/E.  For 2021, we forecast consolidated revenue of W134.2bn (+31.1%) and operating profit of W17.1bn (+148.9%). After turning to profit in 2020, we expect the firm to benefit from operating leverage effects. Key variables include Delitoon’s geographical expansion and Lezhin’s US traffic. Key data Current price (1/15/21, W) 11,900 Market cap (Wbn) 220 350 KidariStudio KOSPI 300 OP (20F, Wbn) 6 Shares outstanding (mn) 32 250 Consensus OP (20F, Wbn) 5 Free float (%) 39.3 200 EPS growth (20F, %) -47.3 Foreign ownership (%) 2.5 150 P/E (20F, x) 112.3 Beta (12M) 1.54 100 Market P/E (20F, x) 21.4 52-week low (W) 2,190 50 1.20 5.20 9.20 1.21 KOSPI 3,085.90 52-week high (W) 11,900

Share performance Earnings and valuation metrics (%) 1M 6M 12M (Dec.) 2017 2018 2019 2020F 2021F 2022F Absolute 30.5 74.7 205.9 Revenue (Wbn) 14 20 27 48 60 74 Relative 16.6 24.7 121.2 OP (Wbn) 0 0 1 6 8 13 OP margin (%) 0.0 0.0 3.7 12.5 13.3 17.6 NP (Wbn) -2 0 3 2 7 10 EPS (W) -142 10 166 87 220 311 ROE (%) -13.5 0.9 14.5 6.3 20.9 25.0 P/E (x) - 235.4 24.3 112.3 54.0 38.3 P/B (x) 2.6 2.1 3.3 6.4 10.9 8.5 Div. yield (%) 0.0 0.0 0.0 0.0 0.0 0.0 Shareholders’ equity (Wbn) Notes: Under consolidated K-IFRS; NP is attributable to owners of the parent Source: Company data, Mirae Asset Daewoo Research estimates Analysts who prepared this report are registered as research analysts in Korea but not in any other jurisdiction, including the US. PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES AND DISCLAIMERS IN APPENDIX 1 AT THE END OF REPORT. [Korea] Media/Entertainment January 18, 2021

Studio Dragon Buy (253450 KQ) (Maintain)

OTTs’ big bets are coming TP: W120,000 ▲ Upside: 20.4%

Mirae Asset Daewoo Co., Ltd. Jeong-yeob Park [email protected]

Proven production Playing a central role in the brand-making of Korean dramas and webtoons competitiveness  Studio Dragon has demonstrated its competitiveness through the big-budget original drama (which cost W3bn per episode).  At the height of its popularity, the drama was the third most popular show on Netflix (current rank: 15).  Korea has the second-highest number of dramas in Netflix’s top 50 list, behind only the US.

Production capacity to increase Distribution channels and production capacity to expand in 2021 through utilization of webtoon  In 2021, both global (Disney+ and Apple TV) and domestic (Tving and Wavve) OTTs are expected IPs to spend aggressively.  We believe Studio Dragon will be one of the most sought-after production companies, given its experience in making big-budget titles and extensive pool of hit-making writers.  Distribution channel expansion: We believe the company’s distribution channel mix will expand beyond broadcast networks and Netflix to China (margins) and domestic/global OTTs (top ).  Production capacity expansion: The stock swap with NAVER (preferential rights to webtoon IP) and the rollout of Tving-NAVER bundled packages should allow Studio Dragon to diversify its offerings to include short/mid-form content and lift its current capacity limitations (writer pool).

4Q20 preview Revenue of W128.9bn (+32.4% YoY) and OP of W10.6bn (turn to profit YoY)  Despite a decline in programming revenue (-29.5% YoY) due to fewer dramas being aired, the company likely turned to a profit in 4Q20, thanks to the sale of a big-budget original title.  We believe revenue from the licensing of older titles to China, which was partially recognized in 3Q20 (W6bn), was not booked in 4Q20.

Recommendation Maintain Buy and raise TP by 12% to W120,000  We believe the simultaneous expansion of licensing sales and production capacity will support top-line growth and margin improvements over the long term.  Our target valuation of W3.6tr is based on a 2022F P/E of 40x.  In our view, Studio Dragon is best-positioned to take advantage of NAVER Webtoon’s IP and global OTTs’ demand for big-budget titles.

Key data Current price (1/15/21, W) 99,700 Market cap (Wbn) 2,991 170 Studio Dragon KOSDAQ 150 OP (20F, Wbn) 55 Shares outstanding (mn) 30 130 Consensus OP (20F, Wbn) 56 Free float (%) 43.1 110 EPS growth (20F, %) 53.8 Foreign ownership (%) 11.9 90 P/E (20F, x) 63.9 Beta (12M) 0.37 70 Market P/E (20F, x) 21.4 52-week low (W) 69,100 50 1.20 5.20 9.20 1.21 KOSDAQ 964.44 52-week high (W) 103,700

Share performance Earnings and valuation metrics (%) 1M 6M 12M (Dec.) 2017 2018 2019 2020F 2021F 2022F Absolute 17.4 12.7 15.4 Revenue (Wbn) 287 380 469 517 601 711 Relative 13.4 -8.7 -18.7 OP (Wbn) 33 40 29 55 82 117 OP margin (%) 11.5 10.5 6.2 10.6 13.6 16.5 NP (Wbn) 24 36 26 41 65 91 EPS (W) 1,050 1,278 941 1,448 2,169 3,024 ROE (%) 12.9 9.3 6.4 9.2 13.0 15.7 P/E (x) 61.9 72.3 85.9 63.9 46.0 33.0 P/B (x) 4.9 6.5 5.3 5.9 5.6 4.8 Div. yield (%) 0.0 0.0 0.0 0.0 0.0 0.0 Shareholders’ equity (Wbn) Notes: Under consolidated K-IFRS; NP is attributable to owners of the parent Source: Company data, Mirae Asset Daewoo Research estimates Analysts who prepared this report are registered as research analysts in Korea but not in any other jurisdiction, including the US. PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES AND DISCLAIMERS IN APPENDIX 1 AT THE END OF REPORT. [Korea] Media/Entertainment January 18, 2021

D&C Media Buy (263720 KQ) (Maintain)

Waiting for the next big hit TP: W45,000 Upside: 19.4%

Mirae Asset Daewoo Co., Ltd. Jeong-yeob Park [email protected]

4Q20 preview Revenue of W17bn (+95.7% YoY) and OP of W4.1bn (+59.7% YoY); likely to be in line with consensus  We believe D&C Media saw continued top-line growth in 4Q20, supported by an expanded content lineup and increased exports. We estimate overseas webtoon revenue continued strong growth, increasing to W5.7bn (+240% YoY, +20% QoQ).  We estimate OP margin gained 1.0%p QoQ to 24.2%, driven by operating leverage effects from domestic and overseas transaction volume growth.  Piccoma’s strong performance in Japan likely translated into increased payments for D&C Media’s titles. We believe the company will continue to serve as a proxy of the webtoon industry.

Waiting for the next big hit Strong earnings power: 1) Piccoma’s traffic; and 2) return of popular title/new title launch  In Japan, webtoon user count and ARPU are simultaneously increasing. Piccoma and LINE Manga are among the country’s top five grossing apps.  The growth of Japan’s webtoon market is accelerating, spurred by Piccoma’s promotions and the overhaul of rival LINE Manga.  Piccoma’s revenue and downloads continued to grow sharply in 4Q20 (+360% YoY and +124% YoY, respectively, based on our estimates).  D&C Media’s hit titles Solo Leveling and The Story of How I Became a Duke's Maid are still among the most-viewed webtoons. That said, a series of newly released titles are threatening their status, suggesting the company needs to come up with a new hit.

Recommendation Retain Buy and TP of W45,000  Our target price is based on a P/E of 35x and our 2021 net profit estimate of W15.7bn. For reference, China Literature, China’s top web novel platform/content provider, has traded at a P/E of 40-70x since service monetization.  We expect D&C Media’s earnings power to continue to strengthen on the back of Japan’s rapidly growing webtoon market.  Korean webtoons make up 5% of Piccoma’s content but generate 40% of transaction volume. We see potential for more hit titles beyond Solo Leveling.  IPO/investment events regarding e-book platform operators (KakaoPage, NAVER Webtoon, Ridibooks, etc.) could help drive a re-rating in D&C Media’s shares.  Additional growth drivers: 1) Kakao’s global expansion (China, Taiwan, Thailand, and the US); and 2) increased utilization of webtoon/web novel IP (dramas, games, etc.)

Key data Current price (1/15/21, W) 37,700 Market cap (Wbn) 463 250 D&C Media KOSDAQ OP (20F, Wbn) 14 Shares outstanding (mn) 12 200 Consensus OP (20F, Wbn) 14 Free float (%) 52.0 150 EPS growth (20F, %) 126.7 Foreign ownership (%) 1.1

100 P/E (20F, x) 40.3 Beta (12M) 0.89 Market P/E (20F, x) 21.4 52-week low (W) 14,800 50 1.20 5.20 9.20 1.21 KOSDAQ 964.44 52-week high (W) 43,800

Share performance Earnings and valuation metrics (%) 1M 6M 12M (Dec.) 2017 2018 2019 2020F 2021F 2022F Absolute 9.8 14.8 84.8 Revenue (Wbn) 27 32 42 59 76 102 Relative 6.0 -7.0 30.1 OP (Wbn) 5 6 8 14 19 28 OP margin (%) 18.5 18.8 19.0 23.7 25.0 27.5 NP (Wbn) 5 5 5 11 16 23 EPS (W) 442 408 403 913 1,274 1,888 ROE (%) 14.2 14.4 12.4 23.8 25.9 29.0 P/E (x) 16.0 34.6 48.3 40.3 29.6 20.0 P/B (x) 2.6 4.6 5.6 8.4 6.7 5.0 Div. yield (%) 0.0 0.0 0.0 0.0 0.0 0.0 Shareholders’ equity (Wbn) Notes: Under consolidated K-IFRS; NP is attributable to owners of the parent Source: Company data, Mirae Asset Daewoo Research estimates Analysts who prepared this report are registered as research analysts in Korea but not in any other jurisdiction, including the US. PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES AND DISCLAIMERS IN APPENDIX 1 AT THE END OF REPORT. [Korea] January 18, 2021

Medtech (Overweight/Maintain) Customs export data and 4Q20 preview

Mirae Asset Daewoo Co., Ltd. Choong-hyun Kim, CFA [email protected]

IVD kits Exports again break records  In-vitro diagnostic (IVD) kit exports totaled US$310mn (+941% YoY) in December and US$850mn (+1,056% YoY) in 4Q20.  IVD kit exports from Songpa-gu, Seoul surged to US$100mn (+1,974% YoY) in December and US$360mn (+2,519% YoY) in 4Q20.

Dental implants Exports reach new record  Dental implant exports totaled US$52mn (+2.6% YoY) in December and US$130mn (+13.5% YoY) in 4Q20.  Exports to China jumped to US$22.5mn (+104% YoY) in December and US$53mn (+62.9% YoY) in 4Q20.

Investment strategy Our top pick is Osstem Implant; Lutronic and L&K Biomed also merit attention  We recommend Osstem Implant as our top pick. We expect the company to see strong revenue growth, especially in China. Recent improvements in the company’s financial soundness (cash flow, cost control, etc.) are also encouraging.  We believe Lutronic and L&K Biomed also merit attention. Lutronic, which turned an operating profit in 3Q20 for the first time in 14 quarters, should continue to deliver robust earnings.  It was recently reported that L&K Biomed signed a major out-licensing deal with a large global company. We view the deal as a smart move, given that distribution and marketing are among the biggest challenges for medtech companies.  For IVD names, we advise a Trading Buy approach. Recent comments from global companies at this year’s JP Morgan Healthcare Conference suggest that demand for diagnostic kits will remain robust through 1H21 (conservatively speaking).  While any sharp decline in IVD kit demand seems unlikely, domestic companies’ high exposure to COVID-19 kits (relative to global companies) could serve as a source of share price volatility.  Meanwhile, some signs point to a potential pickup in Classys’s exports in 2021. Among global aesthetic firms, breast implant maker Establishment Labs recorded a 281% QoQ surge in Latin America revenue in 3Q20 and said that it continued to see strong revenue in the region in 4Q20. While the two companies operate in different categories, we think Establishment Labs can be used as a proxy in estimating Classys’s earnings, given that: 1) both companies serve the aesthetic market; and 2) Classys’s revenue exposure to Brazil has increased significantly.

Analysts who prepared this report are registered as research analysts in Korea but not in any other jurisdiction, including the US. PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES AND DISCLAIMERS IN APPENDIX 1 AT THE END OF REPORT. [Korea] Aerospace/Defense January 18, 2021

Korea Aerospace Industries Buy (047810 KS) (Maintain)

Watch for earnings recovery and share price TP: W36,000 ▲ momentum Upside: 31.9%

Mirae Asset Daewoo Co., Ltd. Jaekwang Rhee [email protected]

2020 earnings Despite growth in domestic defense, earnings declined on weakness in aircraft parts  For 2020, we estimate Korea Aerospace Industries (KAI) recorded revenue of W2.8tr (-10%) and operating profit of W177bn (-36%).  Despite the strong growth of the defense business (+35%), we believe earnings declined on a slump in aircraft parts revenue (-40%) due to COVID-19.  Order backlog for aircraft exports has continued to shrink, as new orders have been pushed back as a result of the pandemic.

2021 outlook Earnings recovery and share price momentum  Aircraft parts revenue is likely to improve in 2021, given the production plans of Boeing and Airbus.  The company should also win new orders for aircraft exports, following the resumption of the US Air Force’s RFX program in 1H21.  We also think the company will play a leading role in the government-led launch of an integrated maintenance, repair, and overhaul (MRO) company.

Valuation and recommendation Maintain Buy and raise TP  KAI’s stock is currently trading at its cheapest level (P/B of 1.8-2.0x) since its IPO.  We maintain our Buy rating on the stock, given our expectation of earnings improvements and positive share price momentum (US Air Force contract and launch of integrated MRO company).  We raise our target price to W36,000 (from W30,000), as we revised up our sustainable ROIC estimate due to our expectation of an earnings recovery beginning in 2021. Our EV/IC-ROIC- based target price corresponds to a 2021 P/E of 24x.

Key data Current price (1/14/21, W) 27,300 Market cap (Wbn) 2,661 160 Korea Aerospace KOSPI 140 OP (20F, Wbn) 177 Shares outstanding (mn) 97 120 Consensus OP (20F, Wbn) 179 Free float (%) 72.0 100 EPS growth (20F, %) -10.2 Foreign ownership (%) 14.6 80 P/E (20F, x) 16.4 Beta (12M) 1.18 60 40 Market P/E (20F, x) 21.9 52-week low (W) 16,350 1.20 5.20 9.20 1.21 KOSPI 3,149.93 52-week high (W) 33,300

Share performance Earnings and valuation metrics (%) 1M 6M 12M (Dec.) 2017 2018 2019 2020F 2021F 2022F Absolute 10.1 13.3 -17.8 Revenue (Wbn) 2,072 2,786 3,110 2,813 3,137 3,429 Relative -3.5 -21.5 -41.6 OP (Wbn) -209 146 276 177 204 223 OP margin (%) -10.1 5.2 8.9 6.3 6.5 6.5 NP (Wbn) -235 57 170 153 143 158 EPS (W) -2,413 587 1,748 1,570 1,470 1,619 ROE (%) -18.2 5.3 15.8 12.8 10.9 11.1 P/E (x) - 54.4 19.5 16.4 18.6 16.9 P/B (x) 4.1 3.1 2.9 2.0 2.0 1.8 Div. yield (%) 0.0 0.6 1.2 1.6 1.5 1.5 Notes: Under consolidated K-IFRS; NP is attributable to owners of the parent Source: Company data, Mirae Asset Daewoo Research estimates Analysts who prepared this report are registered as research analysts in Korea but not in any other jurisdiction, including the US. PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES AND DISCLAIMERS IN APPENDIX 1 AT THE END OF REPORT. January 18, 2021 Korea Aerospace

Table 1. Earnings forecasts (Wbn,%) 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20F 2019 2020F 2021F Revenue 631 805 568 1,106 828 721 515 750 3,110 2,813 3,137 Defense 320 332 228 517 421 522 362 580 1,397 1,886 2,074 Aircraft exports 49 211 78 315 166 53 31 50 652 299 308 Aircraft parts 261 259 262 274 241 146 122 120 1,055 628 754 OP 33 117 48 78 66 61 23 26 276 177 204 OP margin 5.3 14.5 8.4 7.0 8.0 8.5 4.5 3.5 8.9 6.3 6.5 Pretax profit 35 121 45 (71) 101 49 10 23 129 184 189 NP attributable to 43 93 37 (3) 80 42 13 18 170 153 143 owners Source: Mirae Asset Daewoo Research estimates

Table 2. New orders and order backlog (Wbn) 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20F 2018 2019 2020F New orders 53 664 152 476 32 803 996 2,305 2,860 1,345 4,136 Defense 44 7 18 67 10 764 60 1,355 349 135 2,189 Aircraft exports 6 60 0 24 9 26 0 0 152 90 35 Aircraft parts 3 598 134 385 13 13 936 950 2,359 1,120 1,912 Order backlog 17,978 17,704 17,311 16,541 15,891 16,071 16,595 18,510 16,541 Defense 9,692 9,352 9,150 8,698 8,304 8,629 8,360 9,943 8,698 Aircraft exports 790 781 708 513 470 447 422 826 513 Aircraft parts 7,497 7,570 7,454 7,330 7,117 6,995 7,813 7,742 7,330 Source: Mirae Asset Daewoo Research estimates

Table 3. TP calculation Unit Value Sustainable ROIC % 13.5 WACC % 7.2 Target EV/IC x 1.9 IC Wbn 2,200 EV Wbn 4,125 Net debt Wbn 500 Minority interests Wbn 40 Target market cap Wbn 3,585 Share count mn shares 97 Target price W 36,000 Source: Mirae Asset Daewoo Research estimates

Mirae Asset Daewoo Research [Korea] Retail January 18, 2021

BGF Retail Buy (282330 KS) (Maintain)

Strong downside support TP: W195,000 Upside: 34.5%

Mirae Asset Daewoo Co., Ltd. Myoungjoo Kim [email protected] Minjeong Kyeong [email protected]

4Q20 preview Unfavorable environment likely continued due to COVID-19  For 4Q20, we anticipate BGF Retail to deliver consolidated revenue of W1.59tr (+6% YoY) and operating profit of W37.5bn (-16% YoY).  Traffic and same-store sales (SSS) likely remained subdued due to the pandemic. We expect SSS growth to range between -1.5% and -2%.  While the COVID-19 situation worsened compared to 3Q20, we do not think traffic/SSS weakness intensified further.  CU is enhancing its private label competitiveness through its central kitchen facility. (The number of items produced at the facility increased from 10 in 1Q20 to 45 in 3Q20.)

Likely to get better Additional headwinds are limited  Aside from the pandemic, we do not see any additional headwinds in the convenience store sector.  While the COVID-19 situation is worsening, demand for store rollouts remains robust. We believe the channel’s competitive position remains intact, despite the pandemic.  Traffic should fully recover once life returns to normal.  The spread of quick commerce and two-wheeled vehicle delivery (which the pandemic has accelerated) may cause traffic to decline in some areas, but at the same time can enhance the value of nearby offline stores.  As such, we view the trend as neutral to the convenience store sector.  As the most accessible retail channel for consumers, convenience stores are best-positioned to respond to quick commerce, in our view.

Valuation and recommendation Reiterate Buy and TP of W195,000  At a 2021F P/E of 16x, BGF Retail’s valuation looks inexpensive.  While it is hard to predict when life will return to normal, we believe additional headwinds in the convenience store sector are limited.  We see strong downside support to share prices. We expect EPS to quickly recover once life returns to normal.  We recommend BGF Retail as a defensive retail play.

Key data Current price (1/15/21, W) 145,000 Market cap (Wbn) 2,506 150 BGF Retail KOSPI OP (20F, Wbn) 164 Shares outstanding (mn) 17 130

110 Consensus OP (20F, Wbn) 170 Free float (%) 44.7

90 EPS growth (20F, %) -17.1 Foreign ownership (%) 31.3

70 P/E (20F, x) 18.7 Beta (12M) 0.76

50 Market P/E (20F, x) 21.4 52-week low (W) 109,000 1.20 5.20 9.20 1.21 KOSPI 3,085.90 52-week high (W) 174,000

Share performance Earnings and valuation metrics (%) 1M 6M 12M (Dec.) 2017 2018 2019 2020F 2021F 2022F Absolute 13.7 12.4 -14.5 Revenue (Wbn) 939 5,776 5,946 6,213 6,641 6,947 Relative 1.6 -19.8 -38.2 OP (Wbn) 27 190 197 164 201 243 OP margin (%) 2.9 3.3 3.3 2.6 3.0 3.5 NP (Wbn) 28 154 151 126 157 189 EPS (W) 9,688 8,921 8,758 7,263 9,063 10,950 ROE (%) 7.2 33.9 26.5 19.0 20.7 21.4 P/E (x) 21.7 22.9 19.4 18.7 16.0 13.2 P/B (x) 9.3 6.7 4.7 3.3 3.1 2.6 Div. yield (%) 0.5 1.3 1.6 2.0 1.9 1.9 Notes: Under consolidated K-IFRS; NP is attributable to owners of the parent Source: Company data, Mirae Asset Daewoo Research estimates Analysts who prepared this report are registered as research analysts in Korea but not in any other jurisdiction, including the US. PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES AND DISCLAIMERS IN APPENDIX 1 AT THE END OF REPORT.