Take a bottom-up approach Monthly InsighT 6 2015
Wonjae Park +822-768-3372 [email protected]
Jonathan Hwang +822-768-4140 [email protected]
Young Ryu +822-768-4138 [email protected] [email protected] Will Lee +822-768-4168 [email protected]
Joon-ho Jang +822-768-3241 [email protected]
Chuljoong Kim +822-768-4162 [email protected] Contents
I. Key charts ...... 3 II. Investment strategy ...... 4 III. Sector view ...... 9 IV. Think big ...... 17 V. Global IT navigation ...... 25 Spotlight stocks & other notable stocks ...... 27 I. Key charts
Share performances & OP consensus revision rates PC DRAM (DDR3 4Gb 1,600MHz) spot and contract Semiconductor equipment book-to-bill ratios for the for Korean IT large caps (1M) prices have decreased US and Japan (%) Share performance (1M, L) (%) (US$)Spread (R) (%) US semiconductor Spot price (L) KDB Daewoo 20 2Q15 OP consensus revision rate (R) 5 5 60 3.0 Japan semiconductor April Contract price (L) forecasts Japan display US semiconductor: 1.04 10 3 50 Japan semiconductor: 0.96 4 Japan display 1.81 40 0 0 2.0 30 -20 3 -10 -3 20 1.0 -20 -5 10 2 0
1 -10 0.0 2012 2013 2014 2015 2012 2013 2014 2015
Source: WISEfn, KDB Daewoo Securities Research Source: DRAMeXchange, KDB Daewoo Securities Research Source: SEMI, SEAJ, KDB Daewoo Securities Research
Panel inventories SEC smartphone shipments MSCI IT index performance by country (1/1/12=100) (weeks) (mn units) Galaxy Galaxy Galaxy Galaxy 1.5 IT 100 Note 2 Galaxy Note 3 S5 S6/Edge 220 MSCI US IT S4 Galaxy TV Note 4 MSCI Korea IT Galaxy 200 1.0 S3 80 MSCI Japan IT Galaxy 180 MSCI Taiwan IT 0.5 Note 60 160 0.0 Galaxy 140 40 S2 -0.5 Galaxy S 120 -1.0 20 100
-1.5 0 80 1/13 4/13 7/13 10/13 1/14 4/14 7/14 10/14 1/15 4/15 1Q09 1Q10 1Q11 1Q12 1Q13 1Q14 1Q15 1/12 7/12 1/13 7/13 1/14 7/14 1/15
Source: IHS, KDB Daewoo Securities Research Source: Company data, KDB Daewoo Securities Research Source: Bloomberg, KDB Daewoo Securities Research
Monthly InsighT 3 Monthly InsighT
II. Investment strategy
• Focus on companies boasting competitive edges II. Investment strategy
KDB Daewoo IT universe share performance May: +3.2% for spotlight stocks vs. -6.3% for other notable stocks Monthly InsighT cumulative returns
Avg. of spotlight stocks 3.2 Cumulative returns
Wonik IPS 20.7 Avg. of spotlight stocks 28.1
Soulbrain 11.1 Avg. of other notable stocks -35.1 KOSPI 2.2 SK Hynix 10.7 KOSDAQ 24.8 (%) Sekonix 8.3 -50 -30 -10 10 30 50 Amotech 4.1 Note: September 2014-May 2015 Spotlight Koh Young 1.1 Apr. stocks LGD -2.0 Avg. of spotlight stocks 3.2 Avg. of other notable stocks -6.3 Innox -5.8 KOSPI -0.6 SSC -7.7 KOSDAQ 3.2 (%)
LGE -8.4 -10 -5 0 5 10 Avg. of other notable stocks -6.3 Mar. Samsung SDI 2.1 Avg. of spotlight stocks -4.6 Samsung Techwin -3.1 Other Avg. of other notable stocks -6.4 notable LG Innotek -4.9 stocks KOSPI 4.2 SEC -7.3 KOSDAQ 5.9 (%)
SEMCO -18.2 (%) -10 -5 0 5 10
-25 -20 -15 -10 -5 0 5 10 15 20 25
Monthly InsighT 5 II. Investment strategy
Focus on companies boasting competitive edges ■ IT market update - Semiconductor: DRAM contract price decline is showing signs of slowing, but Share performance & OP consensus revision rates for Korean IT large caps (1M) soft PC demand and elevated channel inventory levels point to further downside ahead; for NAND, the rise in spot prices is slowing amid narrowing spreads (%) Share performance (1M, L) (%) - Display: Panel prices have remained steady despite sluggish TV sales during 20 2Q15 OP consensus revision rate (R) 5 China’s Labor Day holidays, but sentiment seems to have worsened - Mobile: SEC’s Galaxy S6 and the S6 Edge are doing well, but market 10 3 expectations appear to have been too bullish - Demand: IT demand to rise on US economic recovery; Chinese demand, which 0 0 has been weak, is likely to improve gradually; new product/technology launches, Apple Watch, IoT, and FinTech, are positive for demand -10 -20 -3 -20 -5 ■ Strategy 1) Expectations for the Galaxy S6 and the S6 Edge need to be lowered; a more selective approach with regard to relevant beneficiaries is warranted 2) Focus on large caps with attractive valuations, small/mid-caps showing earnings growth
■ Spotlight stocks Source: WISEfn, KDB Daewoo Securities Research - Large caps: Samsung SDI, LGD, LGE, Samsung Techwin - Small/mid-caps: Wonik IPS, Humax, Amotech, IDIS, ABCO
KDB Daewoo IT large-cap universe (W, %, x) Current Upside Share performance P/E P/B ROE Company Rating TP price (5/29) potential 1W 1M 15F 16F 15F 16F 15F 16F LGD Buy 43,000 29,250 47.0 -5.3 -2.0 6.0 9.1 0.8 0.7 14.3 8.5 LGE Buy 84,000 55,300 51.9 -2.8 -8.4 11.4 7.5 0.8 0.7 7.3 10.2 Samsung SDI Buy 175,000 122,500 42.9 0.4 2.1 23.9 20.7 0.7 0.7 3.1 3.5 Samsung Techwin Buy 33,000 26,850 22.9 4.1 -3.1 16.5 14.5 0.8 0.8 5.1 5.5 SEC Buy 1,850,000 1,307,000 41.5 -3.2 -7.3 9.5 8.6 1.2 1.0 13.6 13.2 SK Hynix Buy 64,000 51,100 25.2 6.8 10.7 7.6 6.7 1.6 1.3 24.0 21.9 SEMCO Buy 82,000 55,200 48.6 -13.8 -18.2 19.1 13.7 0.9 0.9 4.8 6.5 LG Inntek Buy 136,000 95,100 43.0 -6.3 -4.9 12.0 8.7 1.2 1.1 10.5 12.9 SSC Buy 23,500 17,900 31.3 -2.7 -7.7 54.1 18.4 1.8 1.7 3.4 9.5 Source: WISEfn, KDB Daewoo Securities Research
Monthly InsighT 6 II. Investment strategy
Earnings forecast revisions for large caps in the KDB Daewoo IT universe (Wbn, %) Previous Revised % chg. Notes 2Q15F 2015F 2016F 2Q15F 2015F 2016F 2Q15F 2015F 2016F LGD Revenue 6,773 29,080 27,483 6,773 29,080 27,483 0.0 0.0 0.0 OP 567 2,413 1,569 567 2,413 1,569 0.0 0.0 0.0 NP 457 1,750 1,151 457 1,750 1,151 0.0 0.0 0.0 LGE Revenue 15,277 59,794 63,632 15,277 59,794 63,632 0.0 0.0 0.0 OP 467 1,579 2,026 422 1,534 1,974 -9.7 -2.9 -2.5 TV business sluggishness NP 301 880 1,340 272 850 1,308 -9.6 -3.3 -2.4 Samsung SDIRevenue 2,009 8,231 8,968 2,009 8,231 8,968 0.0 0.0 0.0 OP 33 138 281 33 138 281 0.0 0.0 0.0 NP 116 361 417 116 361 417 0.0 0.0 0.0 Samsung Revenue 643 2,647 2,860 643 2,647 2,860 0.0 0.0 0.0 Techwin OP 13 69 91 13 69 91 0.0 0.0 0.0 NP 16 87 98 16 87 98 0.0 0.0 0.0 SEC Revenue 54,049 210,646 218,775 54,049 210,646 218,775 0.0 0.0 0.0 OP 7,206 28,239 31,149 7,206 28,239 31,149 0.0 0.0 0.0 NP 6,265 23,511 25,713 6,265 23,511 25,713 0.0 0.0 0.0 SK Hynix Revenue 4,947 19,590 20,784 4,947 19,590 20,784 0.0 0.0 0.0 OP 1,523 6,207 6,850 1,523 6,207 6,850 0.0 0.0 0.0 NP 1,163 4,881 5,550 1,163 4,881 5,550 0.0 0.0 0.0 SEMCO Revenue 1,918 7,801 8,519 1,896 7,535 7,830 -1.2 -3.4 -8.1 OP 99 330 458 89 305 415 -10.1 -7.7 -9.4 Decrease in utilization NP 62 224 314 55 207 286 -10.8 -7.6 -8.9 LG Innotek Revenue 1,555 6,784 7,228 1,555 6,784 7,228 0.0 0.0 0.0 OP 69 343 417 69 343 417 0.0 0.0 0.0 NP 36 188 259 36 188 259 0.0 0.0 0.0 SSC Revenue 251 1,052 1,236 251 1,052 1,236 0.0 0.0 0.0 OP 8 43 87 8 43 87 0.0 0.0 0.0 NP 3 19 57 3 19 57 0.0 0.0 0.0
Source: KDB Daewoo Securities Research
Monthly InsighT 7 II. Investment strategy
Consensus vs. KDB Daewoo estimates (Wbn, %) KDB Daewoo Consensus % diff. Notes 2Q15F 2015F 2016F 2Q15F 2015F 2016F 2Q15F 2015F 2016F LGD Revenue 6,773 29,080 27,483 6,856 28,617 28,874 -1.2 1.6 -4.8 OP 567 2,413 1,569 521 2,322 2,091 8.8 3.9 -24.9 Stable panel prices expected NP 457 1,750 1,151 374 1,600 1,503 22.3 9.4 -23.4 LGE Revenue 15,277 59,794 63,632 15,546 60,885 63,607 -1.7 -1.8 0.0 OP 422 1,534 1,974 475 1,548 1,842 -11.2 -0.9 7.2 TV business sluggishness NP 272 850 1,308 254 700 984 7.1 21.5 32.9 Samsung SDIRevenue 2,009 8,231 8,968 1,981 8,067 8,846 1.4 2.0 1.4 OP 33 138 281 30 156 319 9.2 -11.2 -12.0 NP 116 361 417 81 344 468 43.3 5.0 -11.1 Reflecting sale of Samsung General Chemicals Samsung Revenue 643 2,647 2,860 648 2,614 2,711 -0.8 1.3 5.5 Techwin OP 13 69 91 11 41 69 15.5 70.0 31.2 Defenseearnings expected to improve NP 16 87 98 11 49 66 47.3 78.2 49.2 SEC Revenue 54,049 210,646 218,775 54,161 214,143 223,431 -0.2 -1.6 -2.1 OP 7,206 28,239 31,149 7,374 28,516 30,467 -2.3 -1.0 2.2 NP 6,265 23,511 25,713 6,359 24,429 26,488 -1.5 -3.8 -2.9 SK Hynix Revenue 4,947 19,590 20,784 4,794 19,577 20,274 3.2 0.1 2.5 Margins of NAND business expected to improve OP 1,523 6,207 6,850 1,509 6,286 6,373 0.9 -1.3 7.5 starting in 2H15 NP 1,163 4,881 5,550 1,169 5,076 5,172 -0.5 -3.8 7.3 SEMCO Revenue 1,896 7,535 7,830 2,013 7,780 8,239 -5.8 -3.2 -5.0 OP 89 305 415 97 310 360 -8.0 -1.9 15.3 NP 55 207 286 67 219 264 -17.5 -5.6 8.2 LG Innotek Revenue 1,555 6,784 7,228 1,578 6,702 7,204 -1.4 1.2 0.3 OP 69 343 417 76 340 402 -8.6 0.9 3.7 Sluggish sales by keycustomer NP 36 188 259 45 196 253 -19.8 -4.0 2.1 SSC Revenue 251 1,052 1,236 246 992 1,074 2.3 6.0 15.2 OP 8 43 87 7 31 48 7.1 41.5 81.1 Gradual increase inlighting revenue NP 3 19 57 3 14 26 10.9 42.3 119.0
Source: WISEfn, KDB Daewoo Securities Research Monthly InsighT 8 MonthlyMonthly InsighTTECH
III. Sector view
• Semiconductor: DRAM price decline continuing on slow PC demand
• Display: Weak investor sentiment
• Handsets/components: Lower expectations for S6 Edge; Focus on shift from devices to components Semiconductor III. Sector view
DRAM price decline continuing on slow PC demand
■ Key issues PC DRAM (DDR3 4Gb 1,600MHz) spot and contract prices continuing to decrease - Decline in DRAM contract prices slowed in May (DDR3 4Gb: US$2.75, -4.4% MoM) (US$)Spread (R) (%) - NAND flash contract prices stabilized in May (64Gb MLC: US$2.61, 0% MoM) 5 Spot price (L) 60 Contract price (L) - Prices continued to fall amid sluggish PC sales and PC-use DRAM inventory KDB Daewoo forecasts clearance 50 - NAND contract prices stabilized, while spot prices climbed; spreads turned 4 40 positive for the first time this year - Mobile and server DRAM prices remained stable 30 3 20 ■ Implications - Slow PC shipments of 6,829 units (-15% QoQ, -7% YoY) in 1Q 2 10 - Weak PC demand: PC demand likely to recover upon the release of Windows 0 10 (end-July) - Share of PC DRAM production to fall due to rise of mobile DRAM (2Q) 1 -10 - Mobile DRAM and NAND demand to rise on releases of new smartphones 2012 2013 2014 2015 - SK Hynix to start mass producing 3D NAND in 2H, fueling market growth Source: DRAMeXchange, KDB Daewoo Securities Research
■ Strategy NAND spot and contract prices stabilized with the spread turning positive - 2Q DRAM bit growth of 5%; NAND bit growth of 12% - PC DRAM prices may fall further, but mobile and server DRAM prices are (US$)Spread (R) (%) anticipated to remain stable 8 Spot price (L) 50 KDB Daewoo forecasts - Semiconductor equipment makers to see massive order momentum in 2H Contract price (L) 7 40 6 30 5 20 4 10 3 0 Check point 2 -10 June semiconductor sector investment hierarchy: 1 -20 Equipment makers > SK Hynix > SEC 12 13 14 15
Source: DRAMeXchange, KDB Daewoo Securities Research
Monthly InsighT 10 Semiconductor III. Sector view
Key charts
Global memory players’ share performances have weakened this year Semiconductor equipment book-to-bill ratios for US and Japan (-1Y=100) SEC SK Hynix US semiconductor 140 Micron Toshiba 3.0 Japan semiconductor April SanDisk Japan display US semiconductor: 1.04 Japan semiconductor: 0.96 Japan display 1.81 100 2.0
60 1.0
20 0.0 5/13 11/13 5/14 11/14 5/15 2012 2013 2014 2015 Source: Gartner, KDB Daewoo Securities Research Source: SEMI, SEAJ, KDB Daewoo Securities Research
Global DRAM supply/demand forecasts Global NAND supply/demand forecasts
(1Gb eq., bn units) Supply (L) (%) (8Gb eq., bn units) (%) Demand (L) 25 15 35 Supply (L) 15 Oversupply ratio (R) Demand (L) 30 20 10 Oversupply ratio (R) 10 25 15 5 20 5
10 0 15 0 10 5 -5 -5 5 0 -10 0 -10 1Q09 1Q10 1Q11 1Q12 1Q13 1Q14 1Q15 1Q16F 1Q09 1Q10 1Q11 1Q12 1Q13 1Q14 1Q15 1Q16F Source: Gartner, IDC, WSTS, KDB Daewoo Securities Research Source: Gartner, IDC, WSTS, KDB Daewoo Securities Research
Monthly InsighT 11 Display III. Sector view
Weak investor sentiment
■ Key issues Share performances of major panel makers (May 2015) - Panel prices have remained steady despite sluggish TV sales during (5/1/15=100) China’s Labor Day holiday 130 LGD - Small- and mid-sized panel prices have continued to decline Innolux - Possibility of SEC commercializing 8K TVs instead of OLED TVs has 120 AUO emerged BOE - An M&A was expected after the resignation of AUO’s CEO, but company officials have brushed aside such rumors 110 - Japanese and Taiwanese makers have expanded OLED capacity for Apple supply 100
90 ■ Implications - Panel prices have remained steady despite sluggish TV sales during 80 China’s Labor Day holidays, backed by large-sized TV (48-49’’) and 4K TV sales growth 5/1 5/8 5/15 5/22 5/29
- Panel prices could fall during low-demand season in June, but the decline Source: Bloomberg, KDB Daewoo Securities Research would be limited - Samsung Display’s potential investments (10G/OLED) could weaken overall panel sector investor sentiment 1Q15 panel shipments by size - Apple’s supplier diversification could dent investor sentiment on Korean makers (mn units) 35 1Q14 1Q15 ■ Strategy 30 - Steady price falls have weakened investor sentiment 25 - Increased shipments of larger panels to limit price declines in 2H 20 - Supply/demand in balance, but downward pricing pressures may build - Shares of LGD have recently underperformed; shares appear excessively 15 undervalued 10 Check point CSOT 32” panel production is decreasing, while 55’’ panel production is 5 increasing; keep an eye on the impact of this change; fall in TV demand needs 0 to be closely monitored 30-39" 40-49" 50"- Source: IHS, KDB Daewoo Securities Research
Monthly InsighT 12 Display III. Sector view
Key charts
LCD panel price changes Monthly LCD panel shipment area (by application) (%) TV (open-cell) (mn m2) TV panel (L) Tablet panel (L) (%) 2 Notebook 16 Notebook panel (L) Monitor panel (L) 30 Monitor MoM growth (R) 1 TV (4K x 2K) 20 12
0 10 8 -1 0
-2 4 -10 -3 1/14 4/14 7/14 10/14 1/15 4/15 7/15 0 -20 1/13 4/13 7/13 10/13 1/14 4/14 7/14 10/14 1/15 4/15 Source: WitsView, KDB Daewoo Securities Research Source: IHS, KDB Daewoo Securities Research
Monthly LCD TV shipments Panel inventories (vs. normal level)
(mn units) LCD TV shipments (L) (%) (weeks) 28 MoM growth (R) 40 1.5 IT TV Overall 1.0 21 20 0.5
14 0 0.0 -0.5 7 -20 -1.0
0 -40 -1.5 1/13 4/13 7/13 10/13 1/14 4/14 7/14 10/14 1/15 4/15 1/13 4/13 7/13 10/13 1/14 4/14 7/14 10/14 1/15 4/15
Source: IHS, KDB Daewoo Securities Research Source: IHS, KDB Daewoo Securities Research
Monthly InsighT 13 Display III. Sector view
Key charts
14.0” notebook panel price performance 21.5” monitor panel price performance (US$) (1/13=100) (US$) (1/13=100) 42 105 Notebook 14.0" 80 Monitor 21.5" 105 40 Panel price index (R) 100 Panel price index (R) 100 75 38 95 95 36 90 70 90 34 85 65 32 80 85
30 75 60 80 1/13 7/13 1/14 7/14 1/15 7/15 1/13 7/13 1/14 7/14 1/15 7/15
Source: WitsView, KDB Daewoo Securities Research Source: WitsView, KDB Daewoo Securities Research
32” TV (open-cell) panel price performance 42” TV (open-cell) panel price performance
(US$) (1/13=100) (US$) (1/13=100) 105 105 250 105 TV 32" (open-cell) TV 42" (open-cell) 100 Panel price index (R) Panel price index (R) 100 200 100 95 90 95 150 95
85 90 100 90 80 85 50 85 75 70 80 0 80 1/13 7/13 1/14 7/14 1/15 7/15 1/13 7/13 1/14 7/14 1/15 7/15
Source: WitsView, KDB Daewoo Securities Research Source: WitsView, KDB Daewoo Securities Research
Monthly InsighT 14 Handsets/ components III. Sector view
Lower expectations for S6 Edge; Focus on the shift from devices to components
■ Key issues SEC smartphone shipments - SEC holds market leadership by smartphone sales volume but needs to (mn units) Galaxy Galaxy Galaxy Galaxy Galaxy improve margins (IM OP margin of 10.6%, vs. 31.5% for Apple) 100 Note 2 Note 3 S5 Galaxy S6/Edge S4 - We expect SEC earnings to find a strong boost from the Galaxy S6/S6 Edge Galaxy Note 4 in 2Q; but it remains to be seen if actual sales will meet the market’s high 80 S3 expectations; on a positive note, growing interest in new models is boosting Galaxy brand value 60 Note - Chinese and Indian markets are likely to slow; it remains to be seen if Galaxy Chinese firms can find success in overseas markets. 40 S2 Galaxy S ■ Implications 20 - To maintain leadership of the now-mature market, SEC needs to improve its brand reputation and market share; this will require high-end smartphones 0 with attractive functions and features (e.g., metal casings, OIS) as well as 1Q09 1Q10 1Q11 1Q12 1Q13 1Q14 1Q15 price-competitive low- to mid-end models (e.g., cost savings through Source: Company data, KDB Daewoo Securities Research utilization of second Vietnam factory, etc.)
Apple smartphone shipments ■ Strategy - SEC failed to rebound in 2014; however, SEC could find opportunities in (mn units) 2015 (e.g., high-end hardware innovations; delayed overseas expansion by 84 iPhone Chinese makers) 6/Plus 72 iPhone 5 - Parts producers are showing diverging performances; we advise investors to iPhone 60 iPhone consider buying stocks of companies boasting solid medium- to long- term 5S/5C growth prospects iPhone 4 4S 48 iPhone 36 iPhone 3GS 24 3G Check point iPhone 12 2015 to be a year of rebound for SEC; Galaxy S6/S6 Edge has captured the attention of consumers and market watchers; stable production of Galaxy S6 0 Edge will be a key issue 3Q07 2Q08 1Q09 4Q09 3Q10 2Q11 1Q12 4Q12 3Q13 2Q14 1Q15 Source: Company data, KDB Daewoo Securities Research
Monthly InsighT 15 Handsets/ components III. Sector view
Key charts
Smartphone shipments by region Smartphone ASP by market
(%) Western Europe US (%) (US$) Developed country average Middle East & Africa Latin America 25 120.0 Emerging country average Japan Central & Eastern Europe 600 Canada Asia/Pacific (ex-Japan) 20 Emerging market growth (R) 90.0 450 15 60.0 10 300 30.0 5 150 0 0.0 0 2007 2009 2011 2013 2015F 2017F 2019F
Source: IDC, KDB Daewoo Securities Research Source: IDC, KDB Daewoo Securities Research
Smartphone shipments by price Tablet PC shipments by region
(%) Premium (>US$700) High-end (US$300-$700) (mn units) Mid-end (US$150-299) Low-end ( 0 0 1Q07 1Q08 1Q09 1Q10 1Q11 1Q12 1Q13 1Q14 1Q15 2010 2011 2012 2013 2014 2015F 2016F 2017F 2018F Source: IDC, KDB Daewoo Securities Research Source: IDC, KDB Daewoo Securities Research Monthly InsighT 16 Monthly InsighT IV. Think big • Rechargeable batteries and the rise of EVs V. Global IT navigation IV. Think big: Rechargeable batteries and the rise of EVs China’s EV market at an inflection point ■ Chinese EV sales have surged since 2014 Sales volume in China increased threefold YoY during the first four months of 2015 - China’s EV sales: 18,000 units in 2013 75,000 units in 2014 200,000 units in 2015F (K&C Consulting); Chinese EV sales tripled YoY to 34,000 (units) 18,000 units during the first four months of 2015 2014 2015 - If China’s annual EV sales indeed reach 200,000 units, the country will 15,000 become the world’s largest EV market, overtaking the US 12,000 - The Chinese government plans to put 500,000 units on the road by 2015 and 5mn units by 2020 9,000 6,000 ■ Policy support 3,000 - PHEVs and pure EVs in China are sold at around RMB200,000 and RMB300,000, respectively, making them three to four times more expensive 0 than comparable gasoline vehicles (RMB70,000); however, the central EV PHEV EV PHEV government provides RMB35,000-65,000 in subsidies, and local authorities Passenger car Commercial vehicle offer subsidies; taking into account tax benefits and fuel costs over a 10- year period, owning a PHEV does not cost much more than driving a Source: China MIIT, KDB Daewoo Securities Research conventional vehicle - In Beijing, getting a license plate is costly and difficult, as only 150,000 are Price comparison: Gasoline vehicles vs. EVs in China issued each year; however, there are plans to raise the annual quota for environmentally-friendly vehicles in Beijing from 20,000 in 2014 to 30,000 in (RMB) Gasoline EV PHEV 2015 and 60,000 in 2016; other cities, including Shanghai and Tianjin, are following suit MSRP 70,000 300,000 200,000 Purchase tax 7,000 - - ■ Charging infrastructure is quickly improving - By end-2015, China plans to have 2,000 charging stations and 400,000 Consumption tax 3,500 - 10,000 charging poles installed in major cities. (current: 723 charging stations and 28,000 poles ) Vehicle tax 5,000 - - Check point Subsidy from central government - 50,000 35,000 - Chinese EV market is rapidly growing on the back of policy support Subsidy from local government - 50,000 35,000 - Government efforts to nurture the EV market likely to continue Actual purchase price 85,500 200,000 130,000 Source: KDB Daewoo Securities Research Monthly InsighT 18 IV. Think big: Rechargeable batteries and the rise of EVs EVs becoming more attractive ■ BYD’s PHEV Qin BYD’s Qin PHEV - BYD’s PHEV Qin accounted for 26% of China’s EV sales in Jan.-Apr. 2015 - Launched at end-2013; 13,000 units sold in 2014, 9,000 units in Jan.-Apr. 2015 - BYD’s 2015F sales guidance: 70,000 units (KDB Daewoo estimate : 50,000 (+400% YoY) - 13kWh battery pack; all-electric range of 70km - MSRP of RMB190,000; actual price of RMB120,000 (RMB70,000 after subsidies) ■ Batteries are getting cheaper and better - Cylindrical batteries are driving performance improvements and cost cuts - Tesla plans to lower its battery costs from US$250/kWh to US$150/kWh by 2017, and to US$100/kWh by 2020 Source: Press release - Polymer battery makers are also lowering costs steadily Battery price of GM’s first-generation EV: US$500/kWh US$300/kWh Cost of polymer battery vs. Tesla’s cylindrical battery for second-generation (US$/kWh) - The battery price has already fallen to US$300/kWh, a level that the IEA 600 Tesla (cylinder) forecast in 2013 for 2020 Polymer 500 ■ New model releases 400 - The number of EV models released in China to rise to 40 in 2015 (vs. 10 in 2010) 300 - BYD plans to release 4-5 new models in 2H15 200 - SAIC and BAIC to launch EV businesses 100 0 2013 2015 2017F 2020F Source: KDB Daewoo Securities Research Monthly InsighT 19 IV. Think big: Rechargeable batteries and the rise of EVs Monthly sales of BYD’s Qin PHEV Major Chinese EV models (units) Year Manufacturer Model Price (RMB) Release date 3,000 Qin 2010 BYD e6 300,000 2010 BYD K9 2,000,000 (est.) Oct.2010 2,500 Chery Riich M1 149,800- 229,800 Nov.2010 Zotye 5008 (Nomad II) EV 210,000 2010 2,000 Zotye M300 EV 250,000 2010 2012 Changan E30 100,000 after subsidies Feb. 2012 1,500 JAC iEV 169,800 Sep.2012 SAIC Roewe E50 234,900 Nov. 2012 1,000 Shanghai GM Springo EV 258,000 Nov. 2012 2013 BAIC E150 EV 249,800 2013 500 Dongfeng Nissan Venucia E30 Sep. 2013 SAIC Roewe 550 PHEV 248,800-259,800 Nov. 2013 0 BYD Qin 189,800-209,800 Dec. 2013 1/14 4/14 7/14 10/14 1/15 4/15 2014 BMW Brilliance Zinoro 1E 400,000 Mar. 2014 Daimler-BYD Denza EV Source: Company data, KDB Daewoo Securities Research 369,000/399,000 Apr. 2014 GAC Trumpchi GA5 REV 199,300-219,300 Oct. 2014 Number of EV models released by Chinese automakers Chery eQ EV 159,000- 164,900 End-2014 (units) SAIC Maxus EV80 179,000- 499,000 Nov. 2014 50 BAIC ES 210 346,900 Dec. 2014 40 BAIC EV 200 210,000 Dec. 2014 40 Dongfeng E30L End-2014 Kandi K11 (Panda EV) 2014 30 Zotye Zhidou (ZD) 108,800 2014 2015 BMW Brilliance 30Le 698,900 Jan. 2015 Volvo S60L PHEV 505,900-559,900 Apr. 2015 20 13 Changan Eado EV Approximately 200,000 1Q15 BYD Shang 139,800-169,800 (est.) 2Q15 10 BYD Song 250,000 (est.) 2Q15 0 BYD Tang 300,000 (est.) 2Q15 2013 2015F BYD Yuan 200,000 (est.) 2Q15 Chery Arrizo 7 PHEV End-2015 Source: Industry data, KDB Daewoo Securities Research Source:2016 KDB FAW-Volkswagen Daewoo Securities AudiResearch A6L e-tron 2016 Monthly InsighT 20 IV. Think big: Rechargeable batteries and the rise of EVs 2G EVs: Priced around US$30,000 with ranges of around 300km ■ 2G EVs to hit the market in 2016-17 Reasons customers hesitate to buy EVs - Tesla’s Model 3, Nissan’s next-generation Leaf, and the new Chevy Volt to be released around 2016-17 at prices below US$40,000 Safety Reliability 1% - Model 3 to have the same range as existing smaller models 10% - 2 Range European auto giants to launch new EV models ahead of tightening CO Other 33% emissions regulations 12% - EV market to expand sharply after 2G models are released ■ EVs gearing up for a new phase of rapid growth - Global EV market size: 530,000 in 2015F, and 1.27mn in 2017F Charging infrastructure - China to lead EV market growth in 2015-16 (570,000 units in 2017F) 17% Cost - Development stages: government support technological advances/cost cuts 27% market growth Source: Press release EV market forecasts by region 2014 2015F 2016F 2017F 2020F 2025F Auto sales US 16,124 16,446 16,775 17,111 18,158 20,048 Europe 14,194 14,478 14,767 15,063 15,985 17,648 China 23,442 25,083 26,839 28,717 35,180 49,342 Other 32,236 33,203 34,199 35,225 38,491 44,622 Total 85,996 89,210 92,581 96,116 107,815 131,661 EV market share US 0.7% 1.0% 1.3% 2.0% 5.0% 10.0% Europe 0.6% 0.7% 1.0% 1.2% 4.0% 8.0% China 0.3% 0.8% 1.3% 2.0% 5.0% 10.0% Other 0.0% 0.2% 0.3% 0.5% 2.0% 8.0% Total 0.3% 0.6% 0.9% 1.3% 3.8% 9.1% EV sales US 120 164 218 342 908 2,005 Europe 90 101 148 181 639 1,412 China 70 201 349 574 1,759 4,934 Other 3 66 103 176 770 3,570 Total 283 533 817 1,273 4,076 11,921 Source: KDB Daewoo Securities Research Monthly InsighT 21 IV. Think big: Rechargeable batteries and the rise of EVs ESS, another growth driver ■ Tesla’s Powerwall sparking ESS interest Tesla Powerwall - On April 30th, Tesla unveiled two ESS batteries—the household-use Powerwall and the industrial-use Powerpack - Powerwall comes in 7kWh (US$3,000) and 10kWh (US$3,500) models - These prices appear reasonable; however, considering inverter and installation expenses as well as rental expenses of solar PV systems, the battery’s cost competiveness is weak - Consumer response was positive with Powerwall advance orders reaching 38,000 in the one week following introduction - If this order trend continues, quarterly battery revenue would be as high as EV revenue - Tesla’s entry into the ESS market to serve as a catalyst for the battery market’s expansion to benefit Korean ESS makers Source: Tesla ■ ESS market trends and outlook - Payback period is long however, due to the long product lives (over 20 Tesla Powerwall details years) of ESSs, the industry is insensitive to new technologies. - Market growth to be led at first by the government, then by the private sector, and later by individuals. - ESS market to be driven by LIB ESS and countries with high electricity consumption Check point - Consumer response to Tesla Powerwall was positive - Tesla’s entry into the ESS market to spark the battery market’s growth Source: Washington Post Monthly InsighT 22 IV. Think big: Rechargeable batteries and the rise of EVs ESS-related government policies Country Policy Notes - Self-Generation Incentive Program US$0.5-2/Wh for ESS–based PV Led by state of California US - Mandatory installation 2.25% of power supply from 2014; 5% from 2020 - Testing and supply handled by the Department of Energy Led by federal government - Subsidization of one-third of ESS installation cost up to JPY1mn for households (JPY100mn for corporations) Led by Ministry of Economy, Trade and Industry Japan - (Tokyo) Subsidization of two-thirds of ESS installation cost (up to JPY20mn) for SMEs headquartered or operating in Tokyo Led by municipalities - (Saitama) JPY50,000/kWh ESS (households) Germany - Subsidization of 30% of ESS-based PV systems Target: 390GW ESS by 2020 in Europe UK - Department of Energy & Climate Change allocates GBP17mn for dissemination of ESS Target: 390GW ESS by 2020 in Europe - Terna’s grid development plan and grid defense plan up to 75MW in total Italy Target: 390GW ESS by 2020 in Europe contracts with total capacity of 45MW (US$336mn) as of May 2014 (2MW by Samsung SDI, valued at US$5.2mn) - Subsidization of ESS installation at public institutions (budget: W2.7bn) installation of 100kW-or-greater ESS by public From 2014 institutions with power contracts greater than 1,000kW Korea - Mandatory installation under review (newly-built buildings with power consumption of 1000kWh or higher) From 2015 - ESS master plan KEPCO to invest W650bn in ESS (for frequency regulation) Led by KEPCO China State-led projects; proportion of rechargeable batteries on a gradual rise Source: Korea Energy Economics Institute, Korea Electrotechnology Research Institute ESS-use LIB market forecast Breakdown of ESS in the US (MWh/year) (MW) 1,000 944 40 LIB 778 35 Lead-acid 800 Sodium sulfur 30 Flow 600 25 Other 448 20 400 275 15 209 10 200 28 5 0 0 10 11 12 13 14 15F 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 Source: B3, KDB Daewoo Securities Research Source: GTM Research Monthly InsighT 23 IV. Think big: Rechargeable batteries and the rise of EVs Korean battery makers to be major beneficiaries ■ Among battery makers, only Korean firms lack ties to specific automakers Korean battery producers’ expansion into China - In 2014, Panasonic (Tesla), AESC (Nissan Leaf), and BYD (in-house EVs) Current situation LG Chem -Slated to complete a battery fab in Nanjing with capacity of 100,000 units by end-2015 sold the most EV batteries in the world Integrated production (from cells to modules and packs) - Korean battery makers are receiving orders from Chinese, and European, - Ownership: 50% held by LG Chem, the remaining 50% by Nanjing government and and US EV makers Nanjing New Industrial Investment Group - Signed contracts with SAIC, DFM, Qoros, CCAG, Great Wall Motors, Chery, Chinese - LG Chem has signed supply contracts with 13 global automakers and four of Audi subsidiary, etc. the top Chinese players - Took orders for 100,000 units in June 2014; cumulative orders of 200,000 units as of May 2015 - Samsung SDI has forged supply deals with eight automakers, while SK Samsung SDI - Slated to complete battery factory in Xi'an with capacity of 40,000 units by end-2015 Innovation has signed contracts with five Ownership: 50% owned by Anqing Ring New Group and real estate investor Xian, re - Only Korean battery producers (among non-local players) are building EV maining 50% by Samsung SDI - Ownership: 40% owned by SK Innovation, 41% by Beijing Electric Industries, 19% by battery factories in China LG Chem and Samsung SDI to launch SK Innovation operations at factories with annual capacity of 100,000 and 40,000 units, BAIC - Built battery factory with annual capacity of 10,000 units in 2014; plans to expand cap respectively, this year acity by 10,000 units by 2017 Source: Press release, KDB Daewoo Securities Research ■ Chinese firms’ expansion into the EV battery market to be limited 1) Producing EV batteries requires substantial capex because of strict EV battery market share breakdown (2014) safety standards Samsung Other 2) Achieving economies of scale is important 5% 3% 3) Technological gap between Chinese and Korean players is significant LG Chem 13% Panasonic Mitsubishi/ 41% GS Yuasa 7 Check point BYD 7% - Domestic battery makers have established diversified customer bases - Chinese companies’ expansion into the EV battery market to be limited AESC Source: Industry data, KDB Daewoo Securities24% Research Monthly InsighT 24 V. Global IT Navigation Japan’s IT stocks bullish on yen depreciation ■ Global industry performance Global IT index performance table (5/29) - MSCl IT (+0.8% in May): Japanese IT companies’ earnings growth on the Performance (%) back of yen depreciation pushed up the index Index 1W 1M 3M 6M 12M - Chinese IT stocks corrected sharply on regulatory concerns Dow Jones 18,011 -1.5 -0.1 -0.7 1.3 7.7 - In Korea, the KOSDAQ remained strong amid weak performance of large- cap IT stocks, namely SEC NASDAQ 5,070 -0.4 1.3 2.1 7.2 19.5 ■ Sector performance KOSPI 2,115 -0.4 -0.6 6.5 7.6 6.0 KOSDAQ 711 -0.6 3.2 13.9 31.9 30.2 - Global IT equipment makers: TEL (+20%), Daifuku (+18%), Dainippon World 149 -0.5 0.8 1.1 4.6 16.0 Screen (+17%) US 167 -0.5 0.6 0.6 4.1 17.0 - SEC parts suppliers: SEMCO (-18%), Partron (-16%), Anapass (-20%) Korea 730 -0.2 -3.3 -1.9 -0.3 -7.8 MSCI IT ■ Company performance Japan 137 1.7 6.2 12.3 14.2 44.6 - Avago and Broadcom both rallied on their merger deal Taiwan 173 1.2 1.5 -0.2 4.9 13.1 China 370 -1.9 -6.6 12.1 28.7 40.4 - Korean semiconductor equipment makers: KC Tech (+54%), Wonik IPS (+21%), TES (+19%) Source: Bloomberg, KDB Daewoo Securities Research May sector performances (MoM) May share performances (MoM) (%) (%) 30 75 20 50 10 25 0 0 -25 -10 -50 LED TSP TEL ZTE HTC UDC Battery Sharp Memory Foundry Avago Melfas O-Film Materials S-MAC Partron Toshiba Lumens SEMCO EMS/ODM Anapass KC Tech Automation Device - PC Device Broadcom Wonik IPS Display parts Non-memory Display glass Display panel Nitto Denko Electronic parts Electronic Tera Semicon Semi. equipment - handset Device Home appliances Device distribution Device Display equipment Duksan Hi-Metal Source: Bloomberg, KDB Daewoo Securities Research Source: Bloomberg, KDB Daewoo Securities Research Monthly InsighT 25 V. Global IT Navigation Key charts MSCI World and MSCI World IT MSCI IT performance by country (1/1/12=100) (1/1/12=100) 180 MSCI World 220 MSCI US IT MSCI World IT 200 MSCI Korea IT 160 MSCI Japan IT 180 MSCI Taiwan IT 140 160 120 140 120 100 100 80 80 1/12 7/12 1/13 7/13 1/14 7/14 1/15 1/12 7/12 1/13 7/13 1/14 7/14 1/15 Source: Bloomberg, KDB Daewoo Securities Research Source: Bloomberg, KDB Daewoo Securities Research P/E comparison by country (2015F) IT sector P/B-ROE comparison (2015F) (x) P/B (x) 25 23.1 6 China 5 20 17.2 16.1 15.8 4 15 US 11.6 3 10 8.7 World 2 Japan Taiwan 5 1 Korea ROE (%) 0 0 China Japan World US Taiwan Korea 0 5 10 15 20 25 30 Source: Bloomberg, KDB Daewoo Securities Research Source: Bloomberg, KDB Daewoo Securities Research Monthly InsighT 26 Monthly InsighT Spotlight stocks & other notable stocks • Large caps: Samsung SDI, LGD, LGE, Samsung Techwin • Small/mid-caps: Wonik IPS, Humax, Amotech, IDIS, ABCO Spotlight stocks Samsung SDI (006400 KS) Take a long-term view ■ What’s new: Take a long-term view (Maintain) Buy - Small batteries: revenue to expand on robust Galaxy S6 sales, but costs related to production conversion should limit Target Price (12M, W) 175,000 margin improvement - Medium/large batteries: ESS sales to Japanese households should pick up, but any sharp recovery is unlikely due to Share Price (5/29/15, W) 122,500 increasing fixed costs - Electronic materials and chemicals to continue strong growth in 2Q Expected Return 43% ■ Catalysts: Stability of electronic materials/chemicals and growth potential of batteries OP (15F, Wbn) 138 - Semiconductor materials revenue to grow on process migration; polarizer revenue to continue to expand, benefiting from increasing size of TV screens Consensus OP (15F, Wbn) 156 - Chemicals earnings to remain robust, buoyed by wider spreads EPS Growth (15F, %) - - China’s EV market growing faster than expected; EV battery earnings to gradually grow following operation of new Market EPS Growth (15F, %) 36.9 plant in 2015 P/E (15F, x) 23.9 ■ Valuation: Reiterate Buy and TP of W175,000 Market P/E (15F, x) 10.5 - Operating value (W8.3tr) + asset value (W3.8tr) KOSPI 2,114.80 - Limited momentum in the short term, but rechargeable batteries present high growth potential over the long term Market Cap (Wbn) 8,424 Shares Outstanding (mn) 70 Free Float (%) 79.4 120 Samsung SDI KOSPI FY (Dec.) 12/12 12/13 12/14 12/15F 12/16F 12/17F Revenue (Wbn) 5,771 3,428 5,474 8,231 8,968 9,417 Foreign Ownership (%) 29.1 110 OP (Wbn) 187 -11 71 138 281 295 Beta (12M) 2.09 100 OP margin (%) 3.2 -0.3 1.3 1.7 3.1 3.1 52-Week Low 103,500 90 NP (Wbn) 1,472 131 -84 361 417 438 52-Week High 173,000 80 EPS (W) 31,192 2,768 -1,426 5,134 5,919 6,217 (%) 1M 6M 12M 70 ROE (%) 21.8 1.8 -0.9 3.1 3.5 3.5 Absolute 3.8 -8.6 -20.5 P/E (x) 4.8 58.5 - 23.9 20.7 19.7 60 Relative 5.2 -14.4 -24.3 5.14 9.14 1.15 5.15 P/B (x) 0.9 1.0 0.7 0.7 0.7 0.7 Notes: All figures are based on consolidated K-IFRS; NP refers to net profit attributable to controlling interests Source: KDB Daewoo Securities Research Monthly InsighT 28 Spotlight stocks Samsung SDI (006400 KS) Key charts Consolidated revenue Consolidated operating profit (Wbn) LIB (Wbn) LIB Chemicals 2,500 Chemicals 150 EM EM 2,000 100 1,500 50 1,000 0 500 -50 0 -100 3Q14 4Q14 1Q15 2Q15F 3Q15F 4Q15F 3Q14 4Q14 1Q15 2Q15F 3Q15F 4Q15F Source: KDB Daewoo Securities Research Source: KDB Daewoo Securities Research ABS spread (-1.5M) 12-month forward P/B band (US$/tonne) (W) 700 ABS spread (-1.5M) 250,000 1.5x 1.3x 600 200,000 500 1.1x 400 0.9x 150,000 300 0.7x 200 100,000 100 0 50,000 1/13 7/13 1/14 7/14 1/15 7/15 10 11 12 13 14 15 16 Source: KDB Daewoo Securities Research Source: KDB Daewoo Securities Research Monthly InsighT 29 Spotlight stocks Samsung SDI (006400 KS) Earnings table (Wbn, %) 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15F 3Q15F 4Q15F 2013 2014 2015F Revenue 2,184 2,109 1,892 1,910 1,866 2,009 2,164 2,192 9,399 8,122 8,231 LIB 837 833 794 859 795 884 1,013 1,071 3,343 3,324 3,764 Small-sized (IT) 773 743 721 750 707 779 855 841 3,200 2,987 3,183 Mid-large sized (EV, ESS) 64 90 73 109 88 105 158 230 143 337 581 Materials 1,347 1,276 1,098 1,051 1,071 1,125 1,151 1,121 6,056 4,799 4,467 Chemicals 684 695 702 645 666 700 702 683 2,795 2,752 2,752 Electronic materials 365 366 394 405 404 424 448 437 1,590 1,530 1,712 Others 299 216 2 1 0 0 0 0 1,672 517 3 Operating profit -14 30 33 37 7 33 51 47 168 86 138 LIB -5 20 -5 -5 -78 -51 -24 -21 42 6 -174 Small-sized (IT) 55 60 46 45 12 23 38 34 239 207 107 Mid-large sized (EV, ESS) -60 -40 -51 -50 -90 -74 -63 -55 -198 -201 -282 Materials -9 10 38 42 84 84 76 69 126 81 312 Chemicals 6 12 7 3 34 31 20 16 41 29 101 Electronic materials 18 17 29 40 50 53 55 53 156 104 211 Other -34 -19 2 -1 0 0 0 0 -71 -52 0 OP margin -0.6 1.4 1.7 1.9 0.4 1.6 2.4 2.2 1.8 1.1 1.7 LIB -0.5 2.4 -0.6 -0.6 -9.8 -5.8 -2.4 -2.0 1.2 0.2 -4.6 Materials -0.7 0.8 3.5 4.0 7.9 7.4 6.6 6.1 2.1 1.7 7.0 Source: KDB Daewoo Securities Research Monthly InsighT 30 Spotlight stocks LG Display (034220 KS) Overblown concerns, excessive correction ■ What’s new: 2Q15F revenue of W6.77tr (+27.8% YoY) and OP of W567bn (+466.3% YoY) (Maintain) Buy - OP to slide QoQ but remain healthy thanks to favorable product mix and flexible production system Target Price (12M, W) 43,000 - TV panel prices to stay stable; iPhone sales to be healthier than expected Share Price (5/29/15, W) 29,250 ■ Catalyst: Panel prices to remain more resilient than market projections Expected Return 47% - Downside pricing pressures less severe than before due to reduced exposure to group affiliates (i.e., customer diversification) OP (15F, Wbn) 2,413 - Earnings are likely to remain stable on the back of product mix improvements Consensus OP (15F, Wbn) 2,299 - Earnings performance in 2H will be critical to dispelling market worries EPS Growth (15F, %) 93.5 Market EPS Growth (15F, %) 36.9 ■ Valuation: Keep Buy and TP of W43,000 P/E (15F, x) 6.0 - Market P/E (15F, x) 10.5 Recent concerns are justifiable, but valuation looks attractive at P/B of 0.8x (vs. 0.75x during loss-making years) - KOSPI 2,114.80 In the long term, a differentiated OLED strategy will be key to structural re-rating Market Cap (Wbn) 10,466 Shares Outstanding (mn) 358 Free Float (%) 62.1 140 LG Display KOSPI FY (Dec.) 12/12 12/13 12/14 12/15F 12/16F 12/17F Revenue (Wbn) 29,430 27,033 26,456 29,080 27,483 29,132 Foreign Ownership (%) 33.9 130 OP (Wbn) 912 1,163 1,357 2,413 1,569 1,689 Beta (12M) 0.60 120 OP margin (%) 3.1 4.3 5.1 8.3 5.7 5.8 52-Week Low 26,800 110 NP (Wbn) 233 426 904 1,750 1,151 1,274 52-Week High 36,900 100 EPS (W) 652 1,191 2,527 4,891 3,217 3,561 (%) 1M 6M 12M ROE (%) 2.3 4.1 8.2 14.3 8.5 8.8 90 Absolute -3.9 -13.8 3.5 P/E (x) 47.6 21.3 13.3 6.0 9.1 8.2 80 Relative -2.7 -19.3 -1.5 5.14 9.14 1.15 5.15 P/B (x) 1.1 0.9 1.1 0.8 0.7 0.7 Notes: All figures are based on consolidated K-IFRS; NP refers to net profit attributable to controlling interests Source: KDB Daewoo Securities Research Monthly InsighT 31 Spotlight stocks LG Display (034220 KS) Key charts Consolidated revenue and OP margin Shipment area and ASP (Wtr) (%) (mn m2) (USD) 10 Revenue (L) OP margin (R) 15 14 Shipment area (L) ASP (R) 900 12 8 10 10 800 5 6 8 0 700 4 6 -5 4 600 2 -10 2 0 -15 0 500 1Q09 1Q10 1Q11 1Q12 1Q13 1Q14 1Q15 1Q09 1Q10 1Q11 1Q12 1Q13 1Q14 1Q15 Source: KDB Daewoo Securities Research Source: KDB Daewoo Securities Research 40~49” TV panel market share 12-month forward P/B band CSOT BOE Sharp Innolux AUO SDC LGD (W) 1.8x 1.5x 100% 60,000 80% 50,000 1.2x 40,000 60% 0.9x 40% 30,000 0.6x 20% 20,000 0% 10,000 40" 42" 43" 46" 47" 48" 49" 10 11 12 13 14 15 16 Source: KDB Daewoo Securities Research Source: KDB Daewoo Securities Research Monthly InsighT 32 Spotlight stocks LG Display (034220 KS) Earnings table (Wbn, %) 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15F 3Q15F 4Q15F 2014 2015F 2016F Shipment area ('000m2) 8,182 8,890 8,784 9,583 8,325 9,360 9,654 10,060 9,801 10,295 10,860 11,281 37,400 42,237 44,094 Notebook 798 947 952 1,081 940 987 899 818 801 817 834 825 3,644 3,278 3,275 Monitor 1,456 1,439 1,387 1,347 1,266 1,418 1,290 1,261 1,299 1,312 1,338 1,311 5,236 5,259 5,204 TV 4,989 5,898 5,586 5,797 5,171 6,031 6,393 6,489 6,814 7,359 7,800 8,034 24,085 30,007 32,149 Small/mid-sized 910 606 859 1,328 947 923 1,072 1,493 887 808 888 1,110 4,435 3,693 3,466 panels ASP (US$/m2) 770 657 678 697 628 615 658 773 652 609 624 665 668 638 576 Revenue 6,803 6,571 6,579 7,079 5,588 5,979 6,547 8,342 7,022 6,773 7,253 8,033 26,456 29,080 27,483 Notebook 612 723 724 779 671 717 655 667 616 612 612 600 2,710 2,439 2,321 Monitor 1,429 1,380 1,316 1,203 1,118 1,256 1,113 1,168 1,194 1,185 1,185 1,139 4,654 4,703 4,564 TV 2,925 3,352 2,895 2,619 2,290 2,511 2,750 3,003 2,879 2,994 3,145 3,174 10,554 12,192 12,477 Small/mid-sized 1,837 1,117 1,645 2,478 1,509 1,495 2,030 3,504 2,333 1,982 2,311 3,120 8,538 9,747 8,121 panels COGS 6,099 5,607 5,591 6,228 4,924 5,270 5,463 7,010 5,661 5,577 6,009 6,879 22,667 24,126 23,389 Raw material 4,387 4,051 4,104 4,880 3,357 3,815 4,003 5,449 4,219 4,069 4,474 5,328 16,625 18,090 17,154 costs Depreciation 1,093 935 868 843 898 823 799 882 829 847 847 847 3,402 3,370 3,389 SG&A 553 599 599 594 570 545 610 707 617 629 642 654 2,431 2,542 2,524 Operating profit 151 365 390 257 94 163 474 626 744 567 602 499 1,358 2,413 1,569 OP margin 2.2 5.6 5.9 3.6 1.7 2.7 7.2 7.5 10.6 8.4 8.3 6.2 5.1 8.3 5.7 EBITDA 1,269 1,324 1,282 1,124 1,015 1,008 1,295 1,532 1,595 1,437 1,472 1,369 4,850 5,874 5,049 EBITDA margin 18.6 20.1 19.5 15.9 18.2 16.9 19.8 18.4 22.7 21.2 20.3 17.0 18.3 20.2 18.4 Source: KDB Daewoo Securities Research Monthly InsighT 33 Spotlight stocks LG Electronics (066570 KS) Bottom-fishing (Maintain) Buy ■ What’s new: What’s new: Revising down 2Q15F OP to W421.6bn (-30.9% YoY, +38.1% QoQ) - MC (smartphone) unit’s 2Q OP margin should be around 2.0%, supported by cost control effects Target Price (12M, W) 84,000 - HE (TV) division’s margin is likely to remain muted, but the worst appears to be over Release of new models and the euro’s rebound should serve as positive catalysts Share Price (5/29/15, W) 55,300 Expected Return 52% ■ Catalyst: Low market expectations, arrival of peak season, and undervaluation - Low market expectations OP (15F, Wbn) 1,534 1) Intensifying competition and strong panel prices are squeezing TV margins Consensus OP (15F, Wbn) 1,529 2) Low anticipation for the G4 (vs. the Galaxy S6, iPhone 6, and Apple Watch) EPS Growth (15F, %) 112.9 - Time for bottom-fishing 1) Favorable seasonality (air conditioners in 2Q) Market EPS Growth (15F, %) 36.9 2) G4 has potential to surprise P/E (15F, x) 11.8 3) Gradual improvement of TV margins Market P/E (15F, x) 10.5 4) Vehicle components (VC) business warrants attention in the long term KOSPI 2,114.80 Market Cap (Wbn) 9,050 ■ Valuation: Lower TP to W84,000; Reiterate Buy Shares Outstanding (mn) 181 - Lower TP to W84,000 from W87,000; Our target price equals 1.17x 12-month forward BPS of W72,118 FY (Dec.) 12/12 12/13 12/14 12/15F 12/16F 12/17F Free Float (%) 64.7 120 LG Electronics KOSPI Foreign Ownership (%) 22.5 115 Revenue (Wbn) 55,123 56,772 59,041 59,794 63,632 70,389 110 OP (Wbn) 1,217 1,249 1,829 1,534 1,974 2,406 Beta (12M) 0.73 105 OP margin (%) 2.2 2.2 3.1 2.6 3.1 3.4 52-Week Low 55,300 100 95 NP (Wbn) 92 177 399 850 1,308 1,574 52-Week High 79,200 90 EPS (W) 511 978 2,208 4,703 7,231 8,705 (%) 1M 6M 12M 85 80 ROE (%) 0.7 1.5 3.4 7.0 10.0 10.9 Absolute -9.6 -13.1 -25.4 75 P/E (x) 144.1 69.7 26.8 11.8 7.6 6.4 70 Relative -8.5 -18.6 -29.0 5.14 9.14 1.15 5.15 P/B (x) 1.1 1.0 0.9 0.8 0.7 0.7 Notes: All figures are based on consolidated K-IFRS; NP refers to net profit attributable to controlling interests Source: KDB Daewoo Securities Research Monthly InsighT 34 Spotlight stocks LG Electronics (066570 KS) Key charts Quarterly earnings Quarterly HE earnings (Wbn)Revenue (L) (%) (Wbn)Revenue (L) (%) 20,000 OP margin (R) 9 8,000 OP margin (R) 6 Margin gradually stabilized Expected to TTB in 2Q15 15,000 6 6,000 4 10,000 3 4,000 2 5,000 0 2,000 0 0 -3 0 -2 1Q06 2Q07 3Q08 4Q09 1Q11 2Q12 3Q13 4Q14 1Q16F 1Q08 1Q09 1Q10 1Q11 1Q12 1Q13 1Q14 1Q15 1Q16F Source: Company data, KDB Daewoo Securities Research Source: Company data, KDB Daewoo Securities Research Quarterly MC earnings Annual MC earnings (Wbn)Revenue (L) (%) (Wbn)Revenue (L) (%) 6,000 OP margin (R) 14 21,000 OP margin (R) 12 1Q14 OP margin of 2.0% Earnings have slowly stabilized despite weak seasonality 8.4 9.6 4,500 7 7.4 14,000 6 2.4 2.8 3,000 0 2.1 1.6 0.6 0.5 7,000 0 1,500 -7 -2.4 -5.0 0 -14 0 -6 1Q06 2Q07 3Q08 4Q09 1Q11 2Q12 3Q13 4Q14 1Q16F 2006 2008 2010 2012 2014 2016F Source: Company data, KDB Daewoo Securities Research Source: Company data, KDB Daewoo Securities Research Monthly InsighT 35 Spotlight stocks LG Electronics (066570 KS) Key charts Quarterly earnings Previous Revised % chg. (Wbn, W, %, %p) 15F 16F 17F 15F 16F 17F 15F 16F 17F Revenue 63,979 68,901 79,217 59,794 63,632 70,389 -6.5 -7.6 -11.1 Operating profit 1,850 2,336 2,749 1,534 1,974 2,406 -17.1 -15.5 -12.5 Pretax profit 1,927 2,460 2,949 1,379 2,137 2,572 -28.4 -13.2 -12.8 Net profit 1,098 1,401 1,679 850 1,308 1,574 -22.5 -6.7 -6.3 EPS 6,070 7,748 9,287 4,703 7,231 8,705 -22.5 -6.7 -6.3 OP margin 2.9 3.4 3.5 2.6 3.1 3.4 -0.3 -0.3 -0.1 Pretax margin 3.0 3.6 3.7 2.3 3.4 3.7 -0.7 -0.2 -0.1 Net margin 1.7 2.0 2.1 1.4 2.1 2.2 -0.3 0.0 0.1 Source: Company data, KDB Daewoo Securities Research 12-month forward P/B (W) 140,000 1.8x 120,000 1.6x 100,000 1.3x 80,000 1.1x 60,000 0.8x 40,000 10 11 12 13 14 15 Source: Company data, KDB Daewoo Securities Research Monthly InsighT 36 Spotlight stocks LG Electronics (066570 KS) Earnings table 2014 2015F 2Q15F (Wbn, ‘000 units, %, %p) 1Q 2Q 3Q 4Q Annual 1Q 2QF 3QF 4QF Annual YoY QoQ KDB Daewoo % diff. MC Revenue 3,422.6 3,631.2 4,257.7 3,793.8 15,105.3 3,596.5 3,811.1 3,986.0 3,840.5 15,234.1 5.0 6.0 3,811.1 0.0 (Mobile OP -7.3 86.7 168.6 68.1 316.1 72.9 76.2 139.5 73.0 361.6 -12.1 4.6 95.3 -20.0 Communications) OP margin -0.2 2.4 4.0 1.8 2.1 2.0 2.0 3.5 1.9 2.4 -0.4 0.0 2.5 -0.5 HE Revenue 4,661.4 4,783.2 4,507.0 5,427.0 19,378.6 4,436.7 4,604.7 4,591.8 5,638.3 19,271.5 -3.7 3.8 4,604.7 0.0 (Home OP 216.1 158.6 134.5 2.1 511.3 -6.2 23.0 91.8 84.6 193.2 -85.5 -471.3 36.8 -37.5 Entertainment) OP margin 4.6 3.3 3.0 0.0 2.6 -0.1 0.5 2.0 1.5 1.0 -2.8 0.6 0.8 -0.3 H&A Revenue 4,129.7 4,870.1 3,981.0 3,790.7 16,771.5 4,064.4 4,954.8 4,057.2 3,856.0 16,932.4 1.7 21.9 4,954.8 0.0 (Home Appliance OP 211.0 275.4 47.2 92.4 626.0 229.3 280.2 113.6 105.6 728.6 1.7 22.2 280.2 0.0 & Air Solution) OP margin 5.1 5.7 1.2 2.4 3.7 5.6 5.7 2.8 2.7 4.3 0.0 0.0 5.7 0.0 VC Revenue 382.6 401.7 421.8 421.8 1,628.0 - 5.0 401.7 0.0 (Vehicle OP -2.4 -4.0 -4.2 -4.2 -14.9 - 67.4 -4.0 0.0 Components) OP margin -0.6 -1.0 -1.0 -1.0 -0.9 - -0.4 -1.0 0.0 Internal Revenue 1,012.5 1,013.1 1,157.6 1,166.3 4,349.5 652.7 676.7 753.9 768.4 2,851.6 -33.2 3.7 676.7 0.0 & other OP 2.7 4.5 12.7 48.2 68.1 -54.8 -20.8 -0.4 -2.3 -78.2 -561.6 -62.1 -8.2 151.9 OP margin 0.3 0.4 1.1 4.1 1.6 -8.4 -3.1 0.0 -0.3 -2.7 -3.5 5.3 -1.2 -1.9 LG Innotek Revenue 1,458.8 1,542.9 1,649.3 1,815.1 6,466.1 1,541.3 1,554.9 1,730.1 1,958.2 6,784.5 0.8 0.9 1,554.9 0.0 OP 63.1 89.9 102.9 58.1 314.0 69.0 69.2 104.9 100.1 343.3 -23.0 0.3 69.2 0.0 Total Revenue 13,988.8 15,066.9 14,713.0 15,272.1 59,040.8 13,994.4 15,276.9 14,770.8 15,752.3 59,794.4 1.4 9.2 15,276.9 0.0 OP 478.8 609.7 465.1 275.1 1,828.7 305.2 421.6 446.0 361.3 1,534.1 -30.9 38.1 467.0 -9.7 OP margin 3.4 4.0 3.2 1.8 3.1 2.2 2.8 3.0 2.3 2.6 -1.3 0.6 3.1 -0.3 Total Revenue 12,530.0 13,524.0 13,063.7 13,457.0 52,574.7 12,453.1 13,722.0 13,040.7 13,794.1 53,009.9 1.5 10.2 13,722.0 0.0 (excluding OP 415.7 519.8 362.2 217.0 1,514.7 236.2 352.3 341.1 261.2 1,190.8 -32.2 49.2 397.7 -11.4 LG Innotek) OP margin 3.3 3.8 2.8 1.6 2.9 1.9 2.6 2.6 1.9 2.2 -1.3 0.7 2.9 -0.3 Pretax profit 289.0 606.0 249.7 -103.6 1,041.1 49.0 427.2 476.1 427.2 1,379.4 -29.5 772.5 472.7 -9.6 Pretax margin 2.1 4.0 1.7 -0.7 1.8 0.3 2.8 3.2 2.7 2.3 -1.2 2.4 3.1 -0.3 12,116. Net profit 74.9 369.1 159.7 -204.3 399.4 2.2 272.3 303.5 272.3 850.4 -26.2 301.4 -9.6 0 Net margin 0.5 2.4 1.1 -1.3 0.7 0.0 1.8 2.1 1.7 1.4 -0.7 1.8 2.0 -0.2 Handset sales volume 16,400 19,000 21,800 20,900 78,100 19,900 20,975 22,573 21,968 85,416 10.4 5.4 20,975 0.0 - Smartphones 12,300 14,500 16,800 15,600 59,200 15,400 16,700 18,511 18,110 68,721 15.2 8.4 16,700 0.0 TV sales volume 7,500 7,800 7,500 9,500 32,300 7,473 7,791 7,915 9,718 32,896 -0.1 4.3 7,791 0.0 - LCD TV sales volume 7,000 7,200 7,100 9,000 30,300 7,400 7,704 7,810 9,593 32,507 7.0 4.1 7,704 0.0 Source: Company data, KDB Daewoo Securities Research Monthly InsighT 37 Spotlight stocks Samsung Techwin (012450 KS) High uncertainties vs. cheap valuation ■ What’s new: Ownership transition in June (Maintain) Buy - As of end-June, Hanwha Group will become Samsung Techwin’s largest shareholder Target Price (12M, W) 33,000 - High uncertainties: ownership transition is underway internal backlash regarding employee compensation could delay business normalization Share Price (5/29/15, W) 26,850 ■ Catalyst: Uncertainties remain, but valuation looks cheap - Expected Return 23% The stock’s market value has fallen to W1.4tr due to slowing earnings and ownership transition. Undervalued, given that the company’s investment securities alone are worth W1.1tr, including W620.9bn in Korea Aerospace Industries shares OP (15F, Wbn) 69 - In the long term, the company should benefit from synergies with Hanwha’s defense business Consensus OP (15F, Wbn) 41 Market expectations for the defense industry are growing EPS Growth (15F, %) - ■ Valuation: Maintain Buy and TP of W33,000 Market EPS Growth (15F, %) 36.9 - Our target price is equivalent to 1.0x 12-month forward BPS of W33,105 P/E (15F, x) 16.5 Market P/E (15F, x) 10.5 - While uncertainties remain, the stock’s cheap valuation also deserves attention KOSPI 2,114.80 Market Cap (Wbn) 1,427 Shares Outstanding (mn) 53 Free Float (%) 67.6 120 Samsung Techwin KOSPI FY (Dec.) 12/12 12/13 12/14 12/15F 12/16F 12/17F Foreign Ownership (%) 4.9 110 Revenue (Wbn) 2,935 2,630 2,616 2,647 2,860 3,117 100 OP (Wbn) 156 96 8 69 91 105 Beta (12M) 1.45 90 OP margin (%) 5.3 3.7 0.3 2.6 3.2 3.4 52-Week Low 21,300 80 70 NP (Wbn) 131 132 -119 87 98 108 52-Week High 58,300 60 EPS (W) 2,466 2,494 -2,236 1,632 1,848 2,041 (%) 1M 6M 12M 50 ROE (%) 8.3 8.1 -7.1 5.1 5.5 5.8 40 Absolute -6.6 -4.6 -53.9 P/E (x) 24.2 21.8 - 16.5 14.5 13.2 30 Relative -5.4 -10.7 -56.2 5.14 9.14 1.15 5.15 P/B (x) 2.0 1.7 0.8 0.8 0.8 0.7 Notes: All figures are based on consolidated K-IFRS; NP refers to net profit attributable to controlling interests Source: KDB Daewoo Securities Research Monthly InsighT 38 Spotlight stocks Samsung Techwin (012450 KS) Key charts Quarterly revenue and OP margin Earnings forecasts (Wbn) (%) Previous Revised % chg. (Wbn, W, %, %p) 1200 Revenue (L) 12 Swung to profit in 1Q15 15F 16F 17F 15F 16F 17F 15F 16F 17F OP margin (R) Revenue 2,647 2,860 3,117 2,647 2,860 3,117 0.0 0.0 0.0 900 8 Operating profit 69 91 105 69 91 105 0.0 0.0 0.0 Pretax profit 104 128 141 104 128 141 0.0 0.0 0.0 600 4 Net profit 87 98 108 87 98 108 0.0 0.0 0.0 EPS 1,632 1,848 2,041 1,632 1,848 2,041 0.0 0.0 0.0 300 0 OP margin 2.6 3.2 3.4 2.6 3.2 3.4 0.0 0.0 0.0 Pretax margin 3.9 4.5 4.5 3.9 4.5 4.5 0.0 0.0 0.0 0 -4 1Q05 2Q06 3Q07 4Q08 1Q10 2Q11 3Q12 4Q13 1Q15 2Q16F Net margin 3.3 3.4 3.5 3.3 3.4 3.5 0.0 0.0 0.0 Source: Company data, KDB Daewoo Securities Research Source: Company data, KDB Daewoo Securities Research Market cap and equity holdings 12-month forward P/B band (W) Market cap 74.6% 1,400 160,000 4.0x Total value of stock holdings 1,044 120,000 KAI 550 3.2x SHI 2.9 80,000 2.4x Samsung General Chemicals 225 1.5x 40,000 Samsung Thales 208 0.7x Other unlisted stocks 58 (Wbn) 0 10 11 12 13 14 15 0 400 800 1,200 1,600 Source: Company data, KDB Daewoo Securities Research Source: Company data, KDB Daewoo Securities Research Monthly InsighT 39 Spotlight stocks Samsung Techwin (012450 KS) Earnings table 2014 2015F (Wbn, %, %p) 1Q 2Q 3Q 4Q Annual 1Q 2QF 3QF 4QF Annual Revenue SS 168.9 176.3 176.0 161.9 683.1 175.8 182.0 191.1 191.1 739.9 MDS 57.8 0.0 0.0 0.0 57.8 0.0 0.0 0.0 0.0 0.0 IMS 72.0 104.7 57.3 53.8 287.8 67.2 67.5 74.3 63.1 272.2 Power systems 213.9 245.8 236.6 304.8 1,001.1 230.7 258.1 260.3 335.2 1,084.3 Defense program 149.1 196.7 135.1 162.9 643.8 128.5 134.9 141.7 145.9 551.0 Total 661.7 723.5 605.0 683.3 2,673.5 602.2 642.5 667.3 735.4 2,647.3 Operating profit SS 2.7 -3.7 3.5 -21.9 -19.4 5.1 5.5 7.6 5.7 23.9 MDS -2.1 0.0 0.0 0.0 -2.1 0.0 0.0 0.0 0.0 0.0 IMS -0.8 9.1 -5.6 -14.0 -11.3 0.6 0.7 0.7 -1.9 0.1 Power systems 5.3 9.3 4.7 10.7 30.0 4.5 5.2 11.7 11.7 33.1 Defense program -1.8 8.1 2.6 1.8 10.6 0.1 1.3 5.4 5.1 12.0 Total 3.3 22.8 5.2 -23.4 7.9 10.3 12.6 25.5 20.7 69.1 OP margin SS 1.6 -2.1 2.0 -13.5 -2.8 2.9 3.0 4.0 3.0 3.2 MDS -3.7 ------ IMS -1.1 8.7 -9.8 -26.0 -3.9 0.9 1.0 1.0 -3.0 0.0 Power systems 2.5 3.8 2.0 3.5 3.0 1.9 2.0 4.5 3.5 3.1 Defense program -1.2 4.1 1.9 1.1 1.7 0.1 1.0 3.8 3.5 2.2 Total 0.5 3.2 0.9 -3.4 0.3 1.7 2.0 3.8 2.8 2.6 Pretax profit 12.3 35.0 7.8 -77.5 -22.4 21.7 19.5 33.5 28.8 103.6 Net profit 10.2 -32.0 6.8 -103.8 -118.8 18.2 16.3 28.1 24.1 86.7 Pretax margin 1.9 4.8 1.3 -11.3 -0.8 3.6 3.0 5.0 3.9 3.9 Net margin 1.5 -4.4 1.1 -15.2 -4.4 3.0 2.5 4.2 3.3 3.3 Source: Company data, KDB Daewoo Securities Research Monthly InsighT 40 Spotlight stocks Wonik IPS (030530 KQ) Large semiconductor makers to expand investments starting in 2H (Maintain) Buy ■ What’s new: 2Q15F revenue of W118.7bn (+31% YoY), OP of W19.2bn (+100% YoY) - 2Q earnings are likely to deteriorate QoQ (due to absence of orders from SEC) but significantly improve YoY Target Price (12M, W) 18,000 - Expect new order growth and earnings improvement for 2H; SEC is likely to expand semiconductor investments once its Pyeongtaek factory begins to operate full swing in 2016 Share Price (5/29/15, W) 14,550 - In April, the North American and Japanese semiconductor markets saw their book-to-bill ratios climb to 1.04 and 0.96, respectively Expected Return 24% ■ Catalysts: SEC and SK Hynix to expand investments; SEC to pursue factory in Pyeongtaek - Orders to be driven by SEC’s investments in its no. 17 fab in 1H, and 48-layer 3D NAND technology and system OP (15F, Wbn) 124 LSI in 2H Consensus OP (15F, Wbn) 121 - SK Hynix to expand M14 DRAM investments; likely to expand NAND investments starting in 2H, once 3D NAND EPS Growth (15F, %) 93.0 process stabilizes Market EPS Growth (15F, %) 36.9 - SEC plans to widen the gap with competitors by building a 1Xnm DRAM factory in Pyeongtaek P/E (15F, x) 13.0 ■ Valuation: Maintain Buy with TP of W18,000 Market P/E (15F, x) 10.5 - Trading at 2015F P/E of 10.4x and P/B of 2.0x - Despite recent rallies of semiconductor equipment stocks, additional upside still exists in light of rosy outlook for long- KOSDAQ 711.39 term earnings growth Market Cap (Wbn) 1,171 Shares Outstanding (mn) 81 FY (Dec.) 12/12 12/13 12/14 12/15F 12/16F 12/17F Free Float (%) 66.5 150 Wonik IPS KOSDAQ Revenue (Wbn) 349 423 557 655 753 836 Foreign Ownership (%) 26.1 140 OP (Wbn) 26 55 92 124 155 184 Beta (12M) 0.23 130 OP margin (%) 7.4 13.0 16.5 18.9 20.6 22.0 52-Week Low 9,990 120 NP (Wbn) 8 27 47 90 113 135 52-Week High 15,150 110 EPS (W) 108 373 581 1,122 1,400 1,677 (%) 1M 6M 12M 100 ROE (%) 3.0 9.3 13.8 22.5 22.4 21.5 90 Absolute 17.8 3.6 23.3 P/E (x) 43.3 23.0 24.0 13.0 10.4 8.7 80 Relative 15.2 -20.7 -4.7 5.14 9.14 1.15 5.15 P/B (x) 1.2 2.0 3.0 2.5 2.0 1.6 Notes: All figures are based on consolidated K-IFRS; NP refers to net profit attributable to controlling interests Source: KDB Daewoo Securities Research Monthly InsighT 41 Spotlight stocks Wonik IPS (030530 KQ) Key charts Global DRAM capex Global NAND capex (US$bn)SEC (L) SK Hynix (L) (%) (US$bn)SEC (L) SK Hynix (L) (%) 25 Micron (L) Other (L) 200 15 Toshiba/SanDisk (L) Micron/Intel (L) 200 YoY growth (R) YoY growth (R) 20 150 150 100 10 100 15 50 50 10 0 5 0 5 -50 -50 0 -100 0 -100 00 02 04 06 08 10 12 14 00 02 04 06 08 10 12 14 Source: KDB Daewoo Securities Research Source: KDB Daewoo Securities Research Quarterly revenue and OP margin P/E-EPS growth comparison for global equipment players (2015F) (Wbn) Revenue (L) (%) (P/E, x) 250 OP margin (R) 30 35 30 ASML 200 20 25 150 20 TEL Lam Research SFA AMAT 10 Wonik IPS 100 15 Hanmi 10 KC Tech 0 Eugene 50 5 (EPS growth, %) 0 -10 0 1Q13 1Q14 1Q15 1Q16F -20 0 20 40 60 80 100 120 Source: KDB Daewoo Securities Research Source: KDB Daewoo Securities Research Monthly InsighT 42 Spotlight stocks Wonik IPS (030530 KQ) Earnings table (Wbn, %) 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15F 3Q15F 4Q15F 1Q16F 2Q16F 3Q16F 4Q16F 2013 2014 2015F 2016F Revenue 142.0 90.7 122.3 202.2 155.4 118.7 178.9 202.1 186.1 174.4 206.0 186.4 423.0 557.2 655.1 752.9 Semiconductor 79.0 44.7 41.7 101.8 94.9 61.7 80.2 89.0 97.9 88.1 97.0 77.6 150.9 267.1 325.9 360.6 Display 18.7 1.6 14.2 20.0 0.5 0.7 25.5 33.2 16.6 8.3 22.4 24.6 66.6 54.4 59.9 71.9 Solar 1.3 0.0 0.0 1.1 0.1 0.1 0.1 0.1 0.1 0.2 0.1 0.1 6.3 2.4 0.3 0.6 TGS 11.5 7.4 31.1 39.3 21.6 17.3 31.1 34.2 30.8 32.3 35.5 32.0 69.4 89.3 104.1 130.6 Wonik Materials 31.5 37.0 35.4 40.0 38.3 38.9 42.1 45.6 40.7 45.5 51.0 52.1 129.7 144.0 164.9 189.2 Revenue contribution 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 Semiconductor 56 49 34 50 61 52 45 44 53 51 47 42 36 48 50 48 Display 13 2 12 10 0 1 14 16 9 5 11 13 16 10 9 10 Solar 1 0 0 1 0 0 0 0 0 0 0 0 1 0 0 0 TGS 8 8 25 19 14 15 17 17 17 19 17 17 16 16 16 17 Wonik Materials 22 41 29 20 25 33 24 23 22 26 25 28 31 26 25 25 Operating profit 28.6 9.6 17.6 36.1 29.1 19.2 36.9 39.3 41.6 39.6 49.1 25.0 55.1 91.9 124.5 155.3 OP margin 20.1 10.6 14.4 17.9 18.7 16.2 20.6 19.4 22.3 22.7 23.8 13.4 13.0 16.5 19.0 20.6 Net profit 20.3 2.6 11.9 12.0 19.9 14.2 27.2 29.0 30.1 28.3 35.0 19.4 27.4 46.8 90.3 112.7 Net margin 14.3 2.9 9.7 5.9 12.8 12.0 15.2 14.3 16.2 16.2 17.0 10.4 6.5 8.4 13.8 15.0 Growth rate (QoQ/YoY) Revenue -19.7 -36.2 34.9 65.3 -23.2 -23.6 50.8 12.9 -7.9 -6.3 18.1 -9.5 77.1 31.7 17.6 14.9 Semiconductor -22.0 -43.4 -6.9 144.4 -6.8 -35.0 30.0 11.0 10.0 -10.0 10.0 -20.0 7.6 77.0 22.0 10.7 Display 95.1 -91.7 808.2 41.2 -97.5 40.0 3500.0 30.0 -50.0 -50.0 170.0 10.0 115.0 -18.3 10.0 20.0 Solar 474.1 -100.0 - - -94.0 3.0 3.0 20.0 50.0 20.0 -10.0 10.0 49.5 -62.0 -88.0 95.5 TGS -59.6 -35.5 318.7 26.5 -45.1 -20.0 80.0 10.0 -10.0 5.0 10.0 -10.0 9.7 28.6 16.6 25.4 Wonik Materials -15.8 17.2 -4.2 13.0 -4.3 1.7 8.0 8.5 -10.8 11.8 12.1 2.2 - 11.0 14.6 14.7 Operating profit -31.3 -66.4 82.8 105.7 -19.4 -33.9 91.5 6.5 5.9 -4.8 24.1 -49.0 661.5 66.7 35.5 24.7 Net profit -30.3 -87.1 355.0 1.2 65.8 -28.6 91.0 6.6 3.8 -6.0 23.7 -44.6 509.8 70.6 93.0 24.8 Source: KDB Daewoo Securities Research Monthly InsighT 43 Spotlight stocks Humax (115160 KQ) Margin improvement to gather steam (Maintain) Buy ■ 1Q15 review - Revenue of W342.1bn (-0.4% YoY, -8.9% QoQ); OP of W13.7bn (+223.6% YoY, +14.0% QoQ). Target Price (12M, W) 24,300 - OP margin: 4.0% (+2.8%p QoQ) margin improvement - Stronger sales of broadband gateways, and fixed-cost savings from top-line growth Share Price (5/29/15, W) 19,400 ■ Broadcasting-communications convergence, industry restructuring margin growth Expected Return 25% - Diversifying its product portfolio beyond legacy set-top boxes to video gateways (home gate servers) and broadband gateways; well-positioned to capitalize on the convergence of communications and broadcasting, as well as the growth of IoT. OP (15F, Wbn) 62 - Industry restructuring: Arris Group recently agreed to buy the British set-top box maker Pace for US$2.1bn; looking Consensus OP (15F, Wbn) 63 forward, we believe smaller set-top box suppliers will lose ground, presenting opportunities for Humax, which boasts EPS Growth (15F, %) 96.5 strong technology and ample cash flow. Market EPS Growth (15F, %) 36.9 - Profit margins should improve: move to a global production system has yielded cost-saving effects, with the SG&A expense ratio falling 1.3%p to 17.7% in 2014 P/E (15F, x) 10.7 Market P/E (15F, x) 10.5 ■ Valuation: Maintain Buy; Raise target price to W24,300 KOSDAQ 711.39 - 12-month forward EPS of W2,030, P/E of 12x, and P/B of 1.13x Market Cap (Wbn) 464 Shares Outstanding (mn) 24 FY (Dec.) 12/12 12/13 12/14 12/15F 12/16F 12/17F Free Float (%) 65.5 170 Humax KOSDAQ Foreign Ownership (%) 21.4 160 Revenue (Wbn) 1,024 1,139 1,444 1,527 1,734 1,877 150 OP (Wbn) 31 30 33 62 74 84 Beta (12M) 0.72 140 130 OP margin (%) 3.0 2.6 2.3 4.1 4.3 4.5 52-Week Low 9,930 120 NP (Wbn) 14 26 21 43 56 64 52-Week High 19,400 110 EPS (W) 599 1,154 919 1,805 2,346 2,668 100 (%) 1M 6M 12M 90 ROE (%) 3.4 6.4 4.9 9.4 11.0 11.2 80 Absolute 7.5 61.7 55.8 P/E (x) 18.6 10.4 15.1 10.7 8.3 7.3 70 Relative 5.1 23.9 20.4 5.14 9.14 1.15 5.15 P/B (x) 0.6 0.6 0.7 0.9 0.9 0.8 Notes: All figures are based on consolidated K-IFRS; NP refers to net profit attributable to controlling interests Source: KDB Daewoo Securities Research Monthly InsighT 44 Spotlight stocks Humax (115160 KQ) Key charts Quarterly earnings Earnings forecasts Humax Automotive (CI) DTV (Wbn) (%) Previous Revised % chg. 600 Broadband (+IoT) gateway Video gateway 12 (Wbn, W, %, %p) HD PVR HD only 15F 16F 17F 15F 16F 17F 15F 16F 17F 500 SD PVR/SD only SD only 10 Earnings stabilized Revenue 307.3 357.4 370.7 307.3 357.4 370.7 0.0 0.0 0.0 400 8 Operating profit 25.9 31.9 33.6 25.9 31.9 33.6 0.0 0.0 0.0 300 6 Pretax profit 22.7 29.8 31.6 22.7 29.8 31.6 0.0 0.0 0.0 Net profit 18.2 23.5 25.0 18.2 23.5 25.0 0.0 0.0 0.0 200 4 EPS 1,865 2,414 2,561 1,865 2,414 2,561 0.0 0.0 0.0 100 2 OP margin 8.4 8.9 9.1 8.4 8.9 9.1 0.0 0.0 0.0 0 0 Pretax margin 7.4 8.3 8.5 7.4 8.3 8.5 0.0 0.0 0.0 1Q07 1Q08 1Q09 1Q10 1Q11 1Q12 1Q13 1Q14 1Q15 1Q16F Net margin 5.9 6.6 6.7 5.9 6.6 6.7 0.0 0.0 0.0 Source: Company data, KDB Daewoo Securities Research Source: Company data, KDB Daewoo Securities Research Monthly InsighT 45 Spotlight stocks Amotech (052710 KQ) Ample room for growth in wireless charging and electronic payment markets (Maintain) Buy ■ 1Q15 review - Revenue: W76.1bn (+59.6% YoY, +65.6% QoQ), historic-high level Target Price (12M, W) 26,000 - OP: W5.5bn (+426.3% YoY, swinging to positive QoQ), OP margin of 7.2% - Earnings growth drivers Share Price (5/29/15, W) 16,650 - Full-swing sales of new products: company’s wireless charging modules adopted innew flagship model of largest customer Expected Return 56% - CMF sales surged - An increasing number of devices likely to adopt the company’s NFC and integrated antennae OP (15F, Wbn) 29 ■ Entering second growth phase; R&D capacity to drive growth over a medium- to long-term Consensus OP (15F, Wbn) 26 - Still struggling after achieving historic-high quarterly earnings in 2Q13 due to increased competition and unit price cuts EPS Growth (15F, %) - - The company’s material development capabilities appear even more notable; Amotech is using in-house materials to Market EPS Growth (15F, %) 36.9 produce NFC antennae and CMFs. P/E (15F, x) 7.8 - Need to pay attention to subsidiaries given business diversification efforts Market P/E (15F, x) 10.5 ■ Valuation: Maintain Buy with a target price of W26,000 KOSDAQ 711.39 - 12-month forward EPS of W2,316 and a P/E of 11.2x Market Cap (Wbn) 162 Shares Outstanding (mn) 10 FY (Dec.) 12/12 12/13 12/14 12/15F 12/16F 12/17F Free Float (%) 74.1 230 Amotech KOSDAQ Foreign Ownership (%) 5.5 210 Revenue (Wbn) 187 248 179 343 398 456 190 OP (Wbn) 16 22 3 29 34 40 Beta (12M) 1.87 170 OP margin (%) 8.6 8.9 1.7 8.5 8.5 8.8 52-Week Low 7,200 150 130 NP (Wbn) 911-2212529 52-Week High 24,000 110 EPS (W) 950 1,148 -236 2,143 2,559 2,990 (%) 1M 6M 12M 90 ROE (%) 8.4 9.1 -1.8 15.1 15.5 15.5 70 Absolute 3.7 48.0 51.4 P/E (x) 12.3 10.1 - 7.8 6.5 5.6 50 Relative 1.4 13.4 16.9 5.14 9.14 1.15 5.15 P/B (x) 1.0 0.8 1.1 1.1 0.9 0.8 Notes: All figures are based on consolidated K-IFRS; NP refers to net profit attributable to controlling interests Source: KDB Daewoo Securities Research Monthly InsighT 46 Spotlight stocks Amotech (052710 KQ) Key charts Quarterly earnings Earnings forecasts (Wbn) (%) Previous Revised % chg. 120 20 (Wbn, W, %, %p) Revenue매출액(L) (L) 15F 16F 17F 15F 16F 17F 15F 16F 17F OP영업이익률 margin (R)(R) Revenue 342.8 398.4 455.9 342.8 398.4 455.9 0.0 0.0 0.0 90 15 Operating profit 29.0 34.5 39.9 29.0 34.5 39.9 0.0 0.0 0.0 Pretax profit 26.8 32.4 37.8 26.8 32.4 37.8 0.0 0.0 0.0 60 10 Net profit 20.9 24.9 29.1 20.9 24.9 29.1 0.0 0.0 0.0 EPS 2,143 2,559 2,990 2,143 2,559 2,990 0.0 0.0 0.0 30 5 OP margin 8.5 8.6 8.7 8.5 8.6 8.7 0.0 0.0 0.0 0 0 Pretax margin 7.8 8.1 8.3 7.8 8.1 8.3 0.0 0.0 0.0 1Q05 3Q07 1Q10 3Q12F 1Q15F Net margin 6.1 6.3 6.4 6.1 6.3 6.4 0.0 0.0 0.0 Source: Company data, KDB Daewoo Securities Research Source: Company data, KDB Daewoo Securities Research Annual earnings 12-month forward P/B band (Wbn)매출액Revenue(L) (L) 영업이익률OP margin (R)(R) 35.7 (%) (W) 30,000 36 20 1.8x 30.7 25,000 27 24.8 15 1.4x 20,000 18.7 1.1x 18 17.9 8.9 10 15,000 9.0 9.8 8.8 8.4 10,000 0.7x 9 5 5,000 0.3x 0.9 1.4 0 0 0 2004 2006 2008 2010 2012 2014 2016F 10 11 12 13 14 15 Source: Company data, KDB Daewoo Securities Research Source: Company data, KDB Daewoo Securities Research Monthly InsighT 47 Spotlight stocks Amotech (052710 KQ) Earnings table 2014 2015F (Wbn, W, %, %p) 1Q 2Q 3Q 4Q Annual 1Q 2QF 3QF 4QF Annual Revenue 47.7 41.1 43.8 45.9 178.5 76.1 98.6 96.9 71.2 342.8 Operating profit 1 0.3 1.9 -0.7 2.5 5.5 9.1 9 5.4 29 Pretax profit 0.8 -2.2 1.5 -2.8 -2.7 5 8.7 8.3 4.8 26.8 Net profit 0.7 -1.4 1.2 -2.8 -2.3 3.9 6.8 6.5 3.7 20.9 EPS 73 -140 119 -288 -236 404 694 663 383 2144 OP margin 2.2 0.8 4.3 -1.6 1.4 7.2 9.2 9.3 7.6 8.5 Pretax margin 1.7 -5.3 3.4 -6 -1.5 6.6 8.8 8.5 6.7 7.8 Net margin 1.5 -3.3 2.6 -6.1 -1.3 5.2 6.9 6.7 5.2 6.1 Note: KDB Daewoo Securities Research Monthly InsighT 48 Spotlight stocks IDIS (143160 KQ) Earnings to continue to pick up in 2Q ■ What’s new: Earnings turnaround to continue through 2Q Not Rated - Earnings improvement to continue through 2Q: revenue of W34.3bn (+12% YoY) and OP of W4.6bn (+31% YoY ) Target Price (12M, W) - - 1Q revenue by product: W13.5bn for NVR (+77% YoY), W7.4bn for IP cameras (+24% YoY), W5.4bn for DVR, and W7.9bn for other Share Price (5/29/15, W) 17,350 - Earnings to improve steadily on the rapid spread of network products (NVR + IP) and domestic market share gains ■ Expected Return - Catalysts: Rapid growth of network camera market; Favorable video security market environment - DVR and analog camera markets are contracting, but growth in network camera revenue is likely to outstrip the OP (15F, Wbn) 19 decline in DVR revenue Consensus OP (15F, Wbn) 20 - Network camera revenue from key domestic clients (S1 and KT Telecop) projected to increase sharply EPS Growth (15F, %) 69.2 - Given the security camera transition from DVR to NVR, the company will likely enjoy a technological edge Market EPS Growth (15F, %) 39.2 - The video security market is becoming favorable, given mandatory security camera installation regulations as well as the need to integrate NVR, IP camera, and VMS technologies P/E (15F, x) 10.4 ■ Valuation: Undemanding relative to global peers in light of earnings turnaround and robust financials Market P/E (15F, x) 10.8 - Trading at 2015F P/E of 10.4x, IDIS does not seem expensive compared to its global peers (average P/E of 20x) KOSDAQ 711.39 - Current valuation appears particularly undemanding in light of the company’s robust financial position Market Cap (Wbn) 186 (cash & cash equivalents of roughly W60bn, unleveraged) and a turnaround in earnings Shares Outstanding (mn) 11 Free Float (%) 53.3 FY (Dec.) 12/12 12/13 12/14 12/15F 12/16F 140 IDIS KOSDAQ Revenue (Wbn) 152 118 117 141 165 Foreign Ownership (%) 14.1 130 OP (Wbn) 32 20 9 18 23 Beta (12M) 1.03 120 110 OP margin (%) 21.1 16.9 7.7 12.8 13.9 52-Week Low 11,550 100 NP (Wbn) 25 20 11 18 21 52-Week High 18,400 90 EPS (W) 2,626 1,876 982 1,648 1,998 (%) 1M 6M 12M 80 ROE (%) 33.0 17.9 7.6 11.8 13.0 70 Absolute 7.4 46.4 12.7 P/E (x) 9.1 8.9 12.7 10.5 8.7 60 Relative 5.1 12.2 -13.0 5.14 9.14 1.15 5.15 P/B (x) 2.6 1.3 0.9 1.2 1.1 Notes: All figures are based on consolidated K-IFRS; NP refers to net profit attributable to controlling interests Source: KDB Daewoo Securities Research Monthly InsighT 49 Spotlight stocks IDIS (143160 KQ) Key charts Revenue breakdown and proportion of NVR + IP Annual revenue and operating profit (Wbn) Other (L) IP camera (L) (%) (Wbn)Revenue (L) (%) 50 NVR (L) DVR (L) 80 200 OP margin (R) 30 % of NVR + IP (R) 69.3 66.8 70 40 60.7 25 58.1 150 164 53.5 60 152 141 30 44.7 55.9 50 21.3 20 21.5 117 36.7 117 40 100 17.1 20 27.3 30 15 14.3 14.3 20 50 65 13.6 10 15.5 10 3.6 3.8 4.3 10 2.3 6.1 8.9 0 0 0 5 1Q12 3Q12 1Q13 3Q13 1Q14 3Q14 1Q15 3Q15F 11 12 13 14 15F 16F Source: Company data, KDB Daewoo Securities Research Source: Company data, KDB Daewoo Securities Research Global CCTV recorder market size and forecasts Global CCTV camera market size and forecast (US$mn) IP camera market: (US$mn) NVR market: 15,000 IP 2011-2016F 6,000 NVR 2011-2016F Analog CAGR of 27% DVR CAGR of 24% 5,000 1,709 10,000 6,335 4,000 1,394 5,064 911 1,119 4,007 728 3,133 3,000 586 1,923 2,441 5,000 2,000 3,233 3,312 3,375 6,897 2,779 2,945 3,131 5,709 6,000 6,276 6,488 6,695 1,000 0 0 11 12 13 14F 15F 16F 11 12 13 14F 15F 16F Note: Company data, KDB Daewoo Securities Research Note: Company data, KDB Daewoo Securities Research Monthly InsighT 50 Spotlight stocks IDIS (143160 KQ) DVR vs. NVR DVR NVR Product Camera Analog IP Camera Multistream X O Image Coaxial cable LAN/WAN transmission medium Display TV/PC monitor TV/PC monitor Extendibility Low High Storage medium HDD HDD Storage DVR NVR or remote area Maximum channels 16CH Unlimited Resolution CIF-D1 CIF-megapixel Compression type MJPEG, MPEG, H.264 MJPEG, MPEG, H.264 Composition DVR board, stand-alone DVR solution S/W only, stand-alone IP solution Cable unit price Expensive Inexpensive (PoE) Note: Company data, KDB Daewoo Securities Research Monthly InsighT 51 Spotlight stocks IDIS (143160 KQ) Earnings table 2013 2014 2015F (Wbn,%) 2014 2015F 2016F 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2QF 3QF 4QF Revenue 31.5 30.1 29.5 26.1 26.4 30.4 29.1 31.2 34.4 34.1 35.6 36.5 117.1 140.6 164.2 DVR 21.9 18.8 19.1 12.1 11.1 8.8 6.9 6.2 6.6 5.4 4.8 4.2 33.0 21.0 12.7 NVR 0.8 1.6 2.1 3.0 4.5 7.6 8.4 10.7 13.0 13.5 13.9 14.5 31.3 54.8 44.0 IP camera 1.1 2.7 2.4 4.1 5.2 6.0 7.1 7.4 6.3 7.4 9.9 10.8 25.6 34.4 77.2 Other 7.6 7.0 5.7 6.9 5.6 8.0 6.6 6.9 8.6 7.9 7.0 7.1 27.1 30.5 30.2 Operating profit 7.1 5.6 5.1 2.2 1.9 3.5 2.3 2.7 4.7 4.6 4.9 5.0 10.5 19.1 23.4 OP margin 22.7 18.7 17.1 8.5 7.3 11.6 8.0 8.5 13.6 13.4 13.7 13.7 8.9 13.6 14.3 Net profit 6.4 5.1 3.6 3.2 2.0 3.0 2.5 3.4 4.2 4.2 4.5 5.1 10.9 18.0 21.6 Net margin 20.4 17.0 12.3 12.2 7.7 9.7 8.5 10.9 12.3 12.3 12.6 14.0 9.3 12.8 13.2 Growth(YoY) Revenue -15.3 -14.9 -30.2 -29.9 -16.0 0.9 -1.3 19.6 30.2 12.4 22.4 17.1 0.0 20.2 16.7 DVR -18.8 -23.6 -34.2 -56.3 -49.3 -53.0 -64.0 -48.4 -40.8 -39.0 -30.0 -33.0 -54.0 -36.6 -39.4 NVR - 248.8 453.0 384.9 439.0 370.1 291.9 256.6 186.0 77.0 65.0 35.0 310.8 75.1 28.0 IP camera - 208.3 310.8 314.4 385.1 123.1 193.2 79.7 21.7 24.0 39.0 46.4 149.4 34.2 41.0 Other -18.8 -42.4 -28.1 -9.9 -19.5 38.3 -3.6 21.8 8.1 -1.0 5.0 3.0 -0.8 12.7 -1.0 Operating profit -14.7 -26.9 -44.3 -70.4 -72.8 -37.2 -53.9 19.8 141.6 29.5 109.3 88.2 -47.9 83.2 22.5 Net profit 4.4 -21.1 -45.2 -51.5 -68.2 -42.4 -32.2 6.9 107.3 41.8 82.9 51.0 -40.9 66.2 20.1 Revenue breakdown DVR 69.6 62.5 64.9 46.3 42.0 29.1 23.7 20.0 19.1 15.8 13.5 11.4 28.2 14.9 7.7 NVR 3.4 8.9 8.2 15.8 19.6 19.7 24.5 23.7 18.3 21.7 27.8 29.6 26.7 39.0 26.8 IP-camera 2.7 5.4 7.3 11.5 17.1 25.0 29.0 34.4 37.6 39.4 39.0 39.7 21.9 24.5 47.0 Others 24.3 23.2 19.5 26.4 21.3 26.2 22.9 22.0 25.0 23.1 19.6 19.3 23.1 21.7 18.4 Note: Based on non-consolidated K-IFRS Source: Company data, KDB Daewoo Securities Research Monthly InsighT 52 Spotlight stocks ABCO Electronics (036010 KQ) Earnings to take off in 2Q ■ What’s new: Sharp margin growth expected starting in 2Q Not Rated - 2Q15F revenue of W17.6bn (+18% YoY, +8% QoQ), OP of W2.8bn (+11% YoY, +87% QoQ) Target Price (12M, W) - - High-margin products, including signal inductors and chip resistors (for DDR4), to push up overall profitability - Market share is expanding rapidly in the global inductor and resistor market, which had been dominated by Japanese Share Price (05/29/15, W) 5,700 players Expected Return - ■ Catalysts: Wider use of NFC , shift to DDR4, adoption of power inductors in smartphones - Smartphones are increasingly using NFC adoption of ABCO’s signal inductors in NFC has started in 2Q OP (15F, Wbn) 8 - Shift to DDR4 began this year ABCO is supplying chip resistors for server-use DDR4 to a major global Consensus OP (15F, Wbn) 9 semiconductor company EPS Growth (15F, %) 33.6 - Adoption of power inductors in smartphones to accelerate in 2H Market EPS Growth (15F, %) 36.9 ■ Valuation: Undervalued relative to peers P/E (15F, x) 8.8 - Trading at 2015F P/E of 8.8x (vs. two-year average of 12.8x and global peer average of 17x) Market P/E (15F, x) 10.5 - Increasing sales of signal inductors and DDR4-use chip resistors to drive up top- and bottom-line growth KOSDAQ 711.39 Market Cap (Wbn) 73 Shares Outstanding (mn) 13 Free Float (%) 60.9 150 ABEL KOSDAQ FY (Dec.) 12/12 12/13 12/14 12/15F 12/16F Foreign Ownership (%) 2.8 140 Revenue (Wbn) 47 60 59 72 84 130 OP (Wbn) 046810 Beta (12M) 0.64 120 OP margin (%) 0.0 6.7 10.2 11.1 11.9 52-Week Low 4,545 110 NP (Wbn) -53689 52-Week High 7,380 100 EPS (W) -397 289 483 645 737 (%) 1M 6M 12M 90 ROE (%) -8.8 6.4 9.6 12.8 13.2 80 Absolute -10.4 12.4 14.0 P/E (x) - 15.1 10.6 8.8 7.7 70 Relative -12.4 -13.9 -11.9 5.14 9.14 1.15 5.15 P/B (x) 1.0 0.9 1.0 1.1 1.0 Notes: All figures are based on consolidated K-IFRS; NP refers to net profit attributable to controlling interests Source: KDB Daewoo Securities Research Monthly InsighT 53 Spotlight stocks ABCO Electronics (036010 KQ) Key charts Quarterly revenue breakdown Annual revenue and OP margin (Wbn) (Wbn) (%) 20 Other 100 Revenue (L) 20 84 Resistor OP margin (R) Lead inductor 80 15 16 5.5 10.6 72 Signal inductor 4.6 4.9 60 10 Power inductor 4.3 3.7 11.9 12.2 4.1 3.1 4.4 60 51 59 12 3.9 47 3.5 5 3.7 6.5 3.6 4.0 5.7 4.0 2.9 3.1 5.9 40 8 4.1 0 3.1 6.5 6.9 6.6 5.4 4.9 5.2 3.4 20 -0.6 3.3 3.5 3.6 3.0 -5 4 2.1 7.6 -4.4 6.2 5.8 6.7 4.5 4.5 4.3 4.3 4.3 0 -10 3.4 3.1 3.4 2.7 3.4 4.0 4.0 0 11 12 13 14 15F 16F 1Q12 4Q12 3Q13 2Q14 1Q15 4Q15F Source: Company data, KDB Daewoo Securities Research Source: Company data, KDB Daewoo Securities Research Revenue breakdown ABCO’s products Other 2% Resistor 29% Power inductor 38% Lead inductor 3% Signal inductor 28% Note: Company data, KDB Daewoo Securities Research Note: Company data, KDB Daewoo Securities Research Monthly InsighT 54 Spotlight stocks ABCO Electronics (036010 KQ) Key charts Global DRAM market size DRAM market share by technology (Wbn) (%) DDR1 SDRAM 60 100 DDR2 SDRAM 50 DDR3 SDRAM 50 46 DDR4 SDRAM 78 75 76 70 40 35 70 56 61 51 30 26 50 48 46 20 41 25 34 10 17 2 0 0 2012 2013 2014 2015F 11 12 13 14 15F 16F 17F 18F Source: Company data, KDB Daewoo Securities Research Source: Company data, KDB Daewoo Securities Research Stable financials due to ample net cash 12-month forward P/E band (Wbn) (W) 30.0 12,000 18.0x 25.0 15.0x 19.4 20.0 12.0x 16.2 8,000 10.0x 9.1 7.0x 10.0 4,000 2.7 0.6 0.0 0 11 12 13 14 15F 16F 13 14 15 Note: Company data, KDB Daewoo Securities Research Note: WISEfn, KDB Daewoo Securities Research Monthly InsighT 55 Spotlight stocks ABCO Electronics (036010 KQ) Earnings table 2014 2015 (Wbn,%) 2014 2015F 2016F 1Q 2Q 3Q 4Q 1Q 2QF 3QF 4QF Revenue 16.6 14.9 14.3 13.1 16.3 17.6 19.4 18.2 58.9 71.6 84.2 Power inductor 4.3 4.0 4.0 4.3 6.2 5.8 6.7 7.6 16.7 26.3 31.2 Signal inductor 6.9 6.6 5.2 3.4 4.1 5.9 5.7 4.0 22.1 19.8 22.8 Lead inductor 0.8 0.6 0.9 0.6 0.9 0.5 0.8 0.5 2.9 2.7 2.5 Resistor 3.7 3.1 3.9 3.7 4.4 4.6 5.5 4.9 14.4 19.4 23.8 Other 0.3 0.2 0.1 0.4 0.2 0.2 0.2 0.4 1.0 1.1 1.2 Affiliates 0.5 0.5 0.4 0.6 0.5 0.5 0.6 0.8 1.9 2.3 2.6 Operating profit 1.6 2.6 2.1 0.0 1.5 2.8 3.1 1.1 6.2 8.5 10.3 OP margin 9.8 17.2 14.6 -0.3 9.3 16.1 15.8 5.9 10.6 11.9 12.2 Net profit 1.5 2.2 2.5 -0.6 1.6 2.8 3.1 0.8 5.6 8.2 9.4 Net margin 8.9 14.6 17.7 -4.2 9.6 15.9 16.0 4.3 9.6 11.5 11.2 Growth (YoY) Revenue 33.3 -16.6 -7.1 -6.9 -1.5 18.1 35.5 39.1 -1.5 21.5 17.6 Power inductor 28.4 -11.7 -11.7 2.2 41.8 45.5 67.2 75.6 0.0 57.6 18.9 Signal inductor 127.6 1.9 -4.6 -30.2 -40.6 -9.8 11.0 15.9 11.5 -10.6 15.5 Lead inductor -21.7 -31.2 3.0 -34.2 17.8 -10.0 -10.0 -19.0 -21.6 -4.1 -7.3 Resistor -9.7 -28.2 -5.0 5.7 19.4 48.1 41.5 32.4 -10.1 34.9 23.1 Other 97.9 -77.5 -44.3 267.0 -41.9 27.9 99.8 12.8 -22.2 7.6 6.7 Operating profit TTB 4.5 20.8 -111.1 -6.4 10.8 46.9 - 59.1 36.6 21.1 Net profit 635.0 25.3 84.1 - 6.6 28.4 22.2 -243.7 66.9 46.2 14.1 Sales breakdown(%) Power inductor 26.2 26.8 27.8 33.2 37.7 33.1 34.3 41.9 28.3 36.7 37.1 Signal inductor 41.9 44.1 35.9 26.2 25.3 33.7 29.4 21.8 37.5 27.6 27.1 Lead inductor 4.9 4.0 5.9 4.7 5.8 3.1 3.9 2.7 4.9 3.8 3.0 Resistance 22.1 20.7 27.2 28.4 26.8 26.0 28.4 27.0 24.4 27.1 28.3 Other 2.0 1.3 0.8 3.0 1.2 1.4 1.1 2.4 1.7 1.5 1.4 Note: Company data, KDB Daewoo Securities Research Monthly InsighT 56 Other notable stocks Samsung Electronics (005930 KS) Undergoing a short-term correction ■ What’s new: 2Q15F revenue of W54.0tr (+3% YoY), OP of W7.2tr (+1% YoY) (Maintain) Buy - IM: smartphone shipments to increase just 1% to 84mn; ASP to jump 13% Target Price (12M, W) 1,850,000 - Semiconductor: earnings to improve on the back of stabilizing NAND prices despite a fall in PC DRAM prices; losses from system LSI to narrow Share Price (5/29/15, W) 1,307,000 - Display/CE: capacity utilization to pick up with the use of OLED in the Galaxy S6 and low- to mid-end products; earnings to improve on strengthening seasonality for TVs and air conditioners Expected Return 42% ■ Catalysts: 1) Galaxy S6 Edge supply shortage to ease in 2Q, 2) component earnings to improve - Current supply shortage of the Galaxy S6 Edge to ease in 2Q OP (15F, Wbn) 28,239 - In-house manufacturing of key components, including AP and baseband modem, to further differentiate SEC from Consensus OP (15F, Wbn) 28,530 global peers EPS Growth (15F, %) 1.9 - OLED panel shipments to grow, but margin growth to be limited due to higher depreciation costs resulting from the utilization of new A3 flexible OLED line Market EPS Growth (15F, %) 36.8 ■ Valuation: Maintain Buy and TP of W1,850,000 P/E (15F, x) 9.5 - 2Q15 OP likely to reach W7.2tr thanks to revenue growth driven by the Galaxy S6; 2015 OP forecast at W28.2tr Market P/E (15F, x) 10.5 (+13% YoY) KOSPI 2,114.80 - Stock is currently trading at 2015F P/E of 9.5x and a P/B of 1.2x; lack of short-term momentum due to concerns about Market Cap (Wbn) 192,520 the Galaxy S6 sales and the group’s ownership restructuring Shares Outstanding (mn) 170 Free Float (%) 70.1 120 FY (Dec.) 12/12 12/13 12/14 12/15F 12/16F 12/17F Samsung Electronics KOSPI Revenue (Wbn) 201,104 228,693 206,206 210,646 218,775 226,432 Foreign Ownership (%) 51.7 110 OP (Wbn) 29,049 36,785 25,025 28,239 31,149 32,301 Beta (12M) 1.17 100 OP margin (%) 14.4 16.1 12.1 13.4 14.2 14.3 52-Week Low 1,083,000 90 NP (Wbn) 23,185 29,821 23,082 23,511 25,713 26,805 52-Week High 1,503,000 80 EPS (W) 136,278 175,282 135,673 138,192 151,137 157,555 (%) 1M 6M 12M 70 ROE (%) 21.6 22.8 15.1 13.6 13.2 12.3 Absolute -5.6 1.6 -10.5 P/E (x) 11.2 7.8 9.8 9.5 8.6 8.3 60 Relative -4.4 -4.9 -14.8 5.14 9.14 1.15 5.15 P/B (x) 2.1 1.5 1.3 1.2 1.0 0.9 Notes: All figures are based on consolidated K-IFRS; NP refers to net profit attributable to controlling interests Source: KDB Daewoo Securities Research Monthly InsighT 57 Other notable stocks Samsung Electronics (005930 KS) Key charts Operating profits of device and component businesses Smartphone shipments and ASP trend (Wtr) Device (L) (%) (mn units) (US$) 12 Components (L) 120 100 400 Component proportion (R) Shipments (L) 10 100 ASP (R) 80 350 8 80 6 60 60 300 4 40 40 250 2 20 20 200 0 0 -2 -20 0 150 04 06 08 10 12 14 16F 1Q10 1Q11 1Q12 1Q13 1Q14 1Q15 1Q16F Source: KDB Daewoo Securities Research Source: KDB Daewoo Securities Research 12-month forward P/B band 12-month forward P/E band (W'000) 2.0x 1.8x 1.6x (W'000) 2,000 2,000 1.4x 11x 1.2x 1,600 1,600 10x 1.0x 9x 1,200 1,200 8x 7x 6x 800 800 400 400 0 0 03 05 07 09 11 13 15 17 03 05 07 09 11 13 15 17 Source: KDB Daewoo Securities Research Source: KDB Daewoo Securities Research Monthly InsighT 58 Other notable stocks Samsung Electronics (005930 KS) Earnings table (Wbn, %) 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15F 3Q15F 4Q15F 1Q16F 2Q16F 3Q16F 4Q16F 2013 2014 2015F 2016F Revenue 53,675 52,353 47,447 52,730 47,120 54,049 54,024 55,454 49,085 53,571 57,526 58,593 228,693 206,206 210,646 218,775 QoQ growth -9.4 -2.5 -9.4 11.1 -10.6 14.7 0.0 2.6 -11.5 9.1 7.4 1.9 YoY growth 1.5 -8.9 -19.7 -11.0 -12.2 3.2 13.9 5.2 4.2 -0.9 6.5 5.7 13.7 -9.8 2.2 3.9 IM 32,440 28,450 24,580 26,290 25,890 28,558 28,239 27,099 24,893 27,209 29,391 28,064 138,819 111,760 109,787 109,557 CE 11,317 13,002 11,586 14,270 10,260 12,257 11,734 13,082 9,671 11,358 11,687 12,961 50,346 50,175 47,333 45,676 Semiconductor 9,391 9,780 9,890 10,663 10,270 11,613 11,952 12,984 12,209 12,259 12,937 13,402 37,530 39,724 46,819 50,807 Display 6,100 6,336 6,254 7,049 6,852 7,233 7,710 8,049 6,873 7,452 8,084 8,431 29,830 25,739 29,844 30,840 COGS 32,050 31,672 30,711 33,799 28,960 33,428 32,564 34,021 29,381 32,989 34,634 36,313 137,696 128,232 128,973 133,317 Gross profit 21,626 20,681 16,783 18,931 18,160 20,621 21,460 21,433 19,703 20,582 22,892 22,281 90,996 77,974 81,674 85,458 Gross margin 40.3 39.5 35.4 35.9 38.5 38.2 39.7 38.6 40.1 38.4 39.8 38.0 39.8 37.8 38.8 39.1 SG&A 13,137 13,494 12,675 13,637 12,180 13,415 14,022 13,818 12,653 12,898 14,540 14,217 54,211 52,943 53,435 54,309 OP 8,489 7,187 4,107 5,294 5,980 7,206 7,438 7,615 7,050 7,684 8,352 8,063 36,785 25,031 28,239 31,149 QoQ growth 2.1 -15.3 -42.9 28.9 13.0 20.5 3.2 2.4 -7.4 9.0 8.7 -3.5 YoY growth -3.3 -24.6 -59.6 -36.3 -29.6 0.3 81.1 43.8 17.9 6.6 12.3 5.9 26.6 -32.0 12.8 10.3 IM 6,431 4,418 1,750 1,956 2,735 3,074 2,925 2,621 2,857 3,162 3,317 2,955 24,962 14,555 11,355 12,291 CE 186 771 50 175 -144 198 115 131 124 175 152 147 1,664 1,181 300 599 Semiconductor 1,948 1,863 2,259 2,696 2,932 3,324 3,747 4,257 3,647 3,679 4,062 4,104 6,903 8,766 14,261 15,492 Display -80 195 16 468 517 609 650 607 422 668 820 857 2,979 598 2,383 2,767 OP margin 15.8 13.7 8.7 10.0 12.7 13.3 13.8 13.7 14.4 14.3 14.5 13.8 16.1 12.1 13.4 14.2 IM 19.8 15.5 7.1 7.4 10.6 10.8 10.4 9.7 11.5 11.6 11.3 10.5 18.0 13.0 10.3 11.2 CE 1.6 5.9 0.4 1.2 -1.4 1.6 1.0 1.0 1.3 1.5 1.3 1.1 3.3 2.4 0.6 1.3 Semiconductor 20.7 19.1 22.8 25.3 28.5 28.6 31.4 32.8 29.9 30.0 31.4 30.6 18.4 22.1 30.5 30.5 Display -1.3 3.1 0.3 6.6 7.5 8.4 8.4 7.5 6.1 9.0 10.1 10.2 10.0 2.3 8.0 9.0 Pretax profit 9,649 7,785 4,862 5,594 6,223 7,821 8,027 7,941 7,627 8,396 9,031 8,525 38,364 27,889 30,011 33,579 QoQ growth 4.3 -19.3 -37.6 15.1 11.3 25.7 2.6 -1.1 -4.0 10.1 7.6 -5.6 YoY growth 6.7 -20.8 -52.5 -39.5 -35.5 0.5 65.1 42.0 22.6 7.4 12.5 7.4 28.2 -27.3 7.6 11.9 Pretax margin 18.0 14.9 10.2 10.6 13.2 14.5 14.9 14.3 15.5 15.7 15.7 14.5 16.8 13.5 14.2 15.3 Net profit 7,485 6,177 4,135 5,286 4,519 6,265 6,404 6,323 5,848 6,430 6,911 6,524 29,821 23,083 23,511 25,713 QoQ growth 3.7 -17.5 -33.0 27.8 -14.5 38.6 2.2 -1.3 -7.5 10.0 7.5 -5.6 YoY growth 7.3 -18.5 -48.6 -26.8 -39.6 1.4 54.9 19.6 29.4 2.6 7.9 3.2 28.6 -22.6 1.9 9.4 Net margin 13.9 11.8 8.7 10.0 9.6 11.6 11.9 11.4 11.9 12.0 12.0 11.1 13.0 11.2 11.2 11.8 Source: KDB Daewoo Securities Research Monthly InsighT 59 Other notable stocks SK Hynix (000660 KS) NAND margins to pick up ■ What’s new: 2Q15F revenue of W4.9tr (+26% YoY), OP of W1.52tr (+41% YoY) (Maintain) Buy - PC DRAM prices have continued to fall due to muted PC demand and DRAM inventory clearance; however, prices Target Price (12M, W) 64,000 are expected to stabilize as the share of mobile production increases rapidly beginning in 2Q - In 2Q, the mass production of TLC NAND (for smartphones) is expected to drive profitability growth; TLC-based Share Price (5/29/15, W) 51,100 solid-state drives (SSD) are anticipated to hit the market in 2H - Expected Return 25% Profitability is set to fall due to lower PC DRAM prices, but migration to 2Ynm should help offset falling profitability ■ Catalysts: Tight mobile DRAM supply, mass production of TLC in 2Q and 3D NAND in 2H OP (15F, Wbn) 6,207 - Most flagship smartphones are projected to adopt LPDDR4 (tight mobile DRAM supply expected until year-end) Consensus OP (15F, Wbn) 6,286 - NAND’s contribution to earnings is forecast to rise thanks to the mass production of high-margin TLC NAND EPS Growth (15F, %) 14.8 (embedded and SSD-use) beginning in 2Q Market EPS Growth (15F, %) 36.9 - Mass production of 36-layer 3D NAND is scheduled to start in 2H (48-layer in 2016) P/E (15F, x) 7.6 ■ Valuation: Maintain Buy and TP of W64,000 Market P/E (15F, x) 10.5 - Trading at a 12-month forward P/E of 7.6x and a P/B of 1.6x; Despite a recent price surge driven by foreign investors, KOSPI 2,114.80 valuation is still attractive Market Cap (Wbn) 37,201 - Operating cash flow to improve (switching to a net cash position); FCF to reach W5tr this year despite higher capex Shares Outstanding (mn) 728 Free Float (%) 78.9 125 FY (Dec.) 12/12 12/13 12/14 12/15F 12/16F 12/17F SK Hynix KOSPI Foreign Ownership (%) 53.2 120 Revenue (Wbn) 10,162 14,165 17,126 19,590 20,784 22,214 115 OP (Wbn) -227 3,380 5,109 6,207 6,850 7,580 Beta (12M) 0.45 110 OP margin (%) -2.2 23.9 29.8 31.7 33.0 34.1 52-Week Low 41,700 105 100 NP (Wbn) -159 2,872 4,195 4,881 5,550 6,392 52-Week High 51,900 95 EPS (W) -233 4,099 5,842 6,704 7,624 8,780 (%) 1M 6M 12M 90 ROE (%) -1.8 25.2 27.0 24.0 21.9 20.6 85 Absolute 9.0 6.3 20.0 P/E (x) - 9.0 8.2 7.6 6.7 5.8 80 Relative 10.4 -0.4 14.1 5.14 9.14 1.15 5.15 P/B (x) 1.8 2.0 1.9 1.6 1.3 1.1 Notes: All figures are based on consolidated K-IFRS; NP refers to net profit attributable to controlling interests Source: KDB Daewoo Securities Research Monthly InsighT 60 Other notable stocks SK Hynix (000660 KS) Key charts Quarterly revenue and OP margin Annual revenue and OP margin (Wtr) Revenue (L) (%) (Wtr) (%) 6 OP margin (R) 40 25 Revenue (L) 40 OP margin (R) 5 30 20 30 4 20 15 20 3 10 10 10 2 0 1 -10 5 0 0 -20 0 -10 1Q10 1Q11 1Q12 1Q13 1Q14 1Q15F 1Q16F 10 11 12 13 14 15F 16F Source: KDB Daewoo Securities Research Source: KDB Daewoo Securities Research Quarterly EBITDA, capex, and FCF Quarterly cash, debt, and net cash (Wtr) (Wtr) 15 4 EBITDA Cash Debt 3 Capex FCF 10 Net cash 2 1 5 0 0 -1 -5 -2 Net cash position from 4Q14 -3 -10 1Q10 1Q11 1Q12 1Q13 1Q14 1Q15F 1Q16F 1Q10 1Q11 1Q12 1Q13 1Q14 1Q15F 1Q16F Source: KDB Daewoo Securities Research Source: KDB Daewoo Securities Research Monthly InsighT 61 Other notable stocks SK Hynix (000660 KS) Earnings table (Wbn, %) 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15F 3Q15F 4Q15F 1Q16F 2Q16F 3Q16F 4Q16F 2013 2014 2015F 2016F Revenue 3,743 3,923 4,312 5,148 4,818 4,947 5,008 4,816 4,691 4,975 5,447 5,672 14,165 17,126 19,590 20,784 DRAM 2,992 3,065 3,277 3,936 3,635 3,728 3,770 3,625 3,523 3,729 4,141 4,388 10,246 13,269 14,758 15,781 NAND 618 738 907 1,083 1,064 1,096 1,100 1,061 1,042 1,119 1,180 1,166 3,392 3,346 4,320 4,508 Revenue contribution 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% DRAM 80% 78% 76% 76% 75% 75% 75% 75% 75% 75% 76% 77% 72% 77% 75% 76% NAND 17% 19% 21% 21% 22% 22% 22% 22% 22% 22% 22% 21% 24% 20% 22% 22% Operating profit 1,057 1,084 1,301 1,667 1,589 1,523 1,588 1,507 1,414 1,594 1,873 1,968 3,380 5,109 6,207 6,850 DRAM 1,066 1,165 1,298 1,627 1,581 1,476 1,486 1,371 1,324 1,461 1,701 1,835 2,819 5,156 5,914 6,321 NAND -20 -90 -6 27 2 34 89 123 84 121 160 122 523 -89 248 486 OP margin 28.2% 27.6% 30.2% 32.4% 33.0% 30.8% 31.7% 31.3% 30.1% 32.0% 34.4% 34.7% 23.9% 29.8% 31.7% 33.0% DRAM 35.6% 38.0% 39.6% 41.3% 43.5% 39.6% 39.4% 37.8% 37.6% 39.2% 41.1% 41.8% 27.5% 38.9% 40.1% 40.1% NAND -3.2% -12.2% -0.7% 2.5% 0.2% 3.1% 8.1% 11.6% 8.0% 10.8% 13.6% 10.5% 15.4% -2.7% 5.7% 10.8% Net profit 802 674 1,095 1,624 1,295 1,163 1,245 1,178 1,124 1,292 1,526 1,608 2,873 4,195 4,881 5,550 Net margin 21.4% 17.2% 25.4% 31.5% 26.9% 23.5% 24.8% 24.5% 23.9% 26.0% 28.0% 28.4% 20.3% 24.5% 24.9% 26.7% EBITDA 1,882 1,917 2,175 2,579 2,531 2,496 2,581 2,519 2,446 2,647 2,947 3,064 6,458 8,553 10,126 11,105 EBITDA margin 50.3% 48.9% 50.4% 50.1% 52.5% 50.4% 51.5% 52.3% 52.1% 53.2% 54.1% 54.0% 45.6% 49.9% 51.7% 53.4% QoQ/YoY growth Revenue 11% 5% 10% 19% -6% 3% 1% -4% -3% 6% 9% 4% DRAM 22% 2% 7% 20% -8% 3% 1% -4% -3% 6% 11% 6% NAND -20% 20% 23% 19% -2% 3% 0% -4% -2% 7% 5% -1% Operating profit 35% 3% 20% 28% -5% -4% 4% -5% -6% 13% 17% 5% DRAM 51% 9% 11% 25% -3% -7% 1% -8% -3% 10% 16% 8% NAND TTR RR RR TTB -92% 1,548% 157% 39% -32% 45% 32% -24% Net profit 2% -16% 63% 48% -20% -10% 7% -5% -5% 15% 18% 5% EBITDA 20% 2% 13% 19% -2% -1% 3% -2% -3% 8% 11% 4% YoY growth Revenue 35% 0% 6% 53% 29% 26% 16% -6% -3% 1% 9% 18% 39% 21% 14% 6% DRAM 51% 7% 11% 60% 21% 22% 15% -8% -3% 0% 10% 21% 44% 30% 11% 7% NAND -11% -22% -7% 40% 72% 48% 21% -2% -2% 2% 7% 10% 33% -1% 29% 4% Operating profit 233% -3% 12% 112% 50% 41% 22% -10% -11% 5% 18% 31% TTB 51% 21% 10% DRAM 336% 28% 36% 130% 48% 27% 14% -16% -16% -1% 14% 34% TTB 83% 15% 7% NAND TTR TTR TTR -61% TTB TTB TTB 346% 3,902% 251% 81% -1% 6,539% TTR TTB 96% Net income 349% -29% 14% 106% 61% 73% 14% -27% -13% 11% 23% 37% TTB 46% 16% 14% EBITDA 73% 2% 13% 64% 34% 30% 19% -2% -3% 6% 14% 22% 117% 32% 18% 10% Source: KDB Daewoo Securities Research Monthly InsighT 62 Other notable stocks Samsung Electro-Mechanics (009150 KS) Deepening uncertainty ■ What’s new: Overly-high expectations (Maintain) Buy - LCR earnings (multi-layer ceramic capacitors) are expanding, aided by SEC’s Galaxy S6 sales and favorable F/X rate movements Target Price (12M, W) 82,000 - But market expectations seem overly high; thus, we trim our 2Q operating profit forecast from W98.8bn to W88.8bn Share Price (5/29/15, W) 55,200 ■ Catalyst: Cash proceeds vs. restructuring Expected Return 49% - Cash proceeds from the sale of Samsung SDS; equity stake in post-merger Samsung C&T - Business restructuring is likely at SEMCO, given the ongoing group-wide restructuring OP (15F, Wbn) 305 Uncertainty to hang over the company until restructuring decisions are made Consensus OP (15F, Wbn) 310 EPS Growth (15F, %) -58.8 ■ Valuation: Maintain Buy, but lower 12-month TP to W82,000 Market EPS Growth (15F, %) 36.9 - 12-month forward BPS of W61,938 and P/B of 1.33x (five-year average) vs. 1.4x previously P/E (15F, x) 20.7 - The stock’s rebound should hinge on: 1) the aforementioned restructuring decision, 2) M&As (funded by cash proceeds), and 3) identification of new growth drivers Market P/E (15F, x) 10.5 KOSPI 2,114.80 Market Cap (Wbn) 4,123 Shares Outstanding (mn) 78 12/12 12/13 12/14 12/15F 12/16F 12/17F Free Float (%) 73.6 140 Samsung Electro-Mechanics FY (Dec.) KOSPI Foreign Ownership (%) 23.6 130 Revenue (Wbn) 7,913 8,257 7,144 7,535 7,830 8,329 120 OP (Wbn) 580 464 2 305 415 538 Beta (12M) 1.45 110 OP margin (%) 7.3 5.6 0.0 4.0 5.3 6.5 52-Week Low 40,000 100 90 NP (Wbn) 441 330 503 207 286 376 52-Week High 81,800 80 EPS (W) 5,680 4,256 6,478 2,669 3,681 4,850 (%) 1M 6M 12M 70 ROE (%) 11.9 8.2 11.5 4.5 5.9 7.4 60 Absolute -17.4 -9.2 -13.3 P/E (x) 17.5 17.2 8.4 20.7 15.0 11.4 50 Relative -16.3 -15.0 -17.5 5.14 9.14 1.15 5.15 P/B (x) 2.0 1.4 0.9 0.9 0.9 0.8 Notes: All figures are based on consolidated K-IFRS; NP refers to net profit attributable to controlling interests Source: KDB Daewoo Securities Research Monthly InsighT 63 Other notable stocks Samsung Electro-Mechanics (009150 KS) Key charts Quarterly revenue and OP margin Earnings forecast revisions (Wbn) (%) Previous Revised % chg. (Wbn, W, %, %p) 2,500 OMS (L) 20 15F 16F 17F 15F 16F 17F 15F 16F 17F CDS (L) Revenue 7,801 8,519 9,393 7,535 7,830 8,329 -3.4 -8.1 -11.3 2,000 ACI (L) 15 LCR (L) Operating profit 330 458 612 305 415 538 -7.7 -9.4 -12.1 OP margin (R) 1,500 10 Pretax profit 334 465 629 308 423 558 -7.5 -8.9 -11.4 Net profit 224 314 425 207 286 376 -7.6 -8.9 -11.4 1,000 5 EPS 2,888 4,042 5,471 2,669 3,681 4,850 -7.6 -8.9 -11.4 500 0 OP margin 4.2 5.4 6.5 4.0 5.3 6.5 -0.2 -0.1 -0.1 Pretax margin 4.3 5.5 6.7 4.1 5.4 6.7 -0.2 0.0 0.0 0 -5 1Q04 1Q05 1Q06 1Q07 1Q08 1Q09 1Q10 1Q11 1Q12 1Q13 1Q14 1Q151Q16F Net margin 2.9 3.7 4.5 2.7 3.6 4.5 -0.1 0.0 0.0 Source: Company data, KDB Daewoo Securities Research Source: Company data, KDB Daewoo Securities Research Quarterly operating profit 12-month forward P/B band (Wbn) (W) 240 222.4 250,000 3.4x 200,000 160 2.8x 88.8 150,000 80 60.8 2.1x 34.4 21.2 15.1 100,000 1.5x 0 50,000 0.8x -35.9 -80 -69.1 0 1Q13 3Q13 1Q14 3Q14 1Q15 3Q15F 1Q16F 3Q16F 10 11 12 13 14 15 Source: Company data, KDB Daewoo Securities Research Source: Company data, KDB Daewoo Securities Research Monthly InsighT 64 Other notable stocks Samsung Electro-Mechanics (009150 KS) Earnings table 2014 2015F 2Q15F (Wbn, %, %p) 1Q 2Q 3Q 4Q Annual 1Q 2QF 3QF 4QF Annual YoY QoQ Previous % diff. Revenue DM 863.1 896.0 825.6 915.7 3,500.4 851.9 898.5 863.9 841.5 3,455.8 -1.3 -7.0 920.8 -7.5 LCR 464.5 464.6 474.3 479.4 1,882.8 534.0 574.9 632.7 638.3 2,379.9 15.0 11.4 574.9 -7.1 ACI 398.2 396.9 411.1 423.4 1,629.6 388.0 419.9 436.2 444.3 1,688.4 -2.6 -8.4 419.9 -7.6 Other 3.0 103.2 10.7 14.1 130.9 2.6 2.6 2.6 2.6 10.5 -12.0 -81.4 2.6 0.0 Total 1,728.8 1,860.7 1,721.7 1,832.6 7,143.7 1,776.5 1,895.9 1,935.4 1,926.7 7,534.6 2.8 -3.1 1,918.3 -7.4 Operating profit DM 3.8 8.2 -45.1 10.3 -22.7 13.5 23.5 19.7 19.8 76.5 252.6 30.5 31.8 -57.6 LCR 9.3 10.2 -10.4 14.4 23.5 45.4 56.9 62.6 35.1 200.0 388.6 215.6 56.9 -20.3 ACI 2.0 2.8 -13.6 9.7 0.9 1.9 8.4 6.5 11.1 28.0 -2.6 -80.1 10.1 -80.8 Total 15.1 21.2 -69.1 34.4 1.7 60.8 88.8 88.9 66.0 304.5 302.6 76.5 98.8 -38.4 OP margin DM 0.4 0.9 -5.5 1.1 -0.6 1.6 2.6 2.3 2.4 2.2 1.1 0.5 3.5 -1.9 LCR 2.0 2.2 -2.2 3.0 1.2 8.5 9.9 9.9 5.5 8.4 6.5 5.5 9.9 -1.4 ACI 0.5 0.7 -3.3 2.3 0.1 0.5 2.0 1.5 2.5 1.7 0.0 -1.8 2.4 -1.9 Total 0.9 1.1 -4.0 1.9 0.0 3.4 4.7 4.6 3.4 4.0 2.5 1.5 5.1 -1.7 Pretax profit 8.1 29.4 -82.2 684.0 639.3 56.1 82.1 97.8 72.4 308.4 179.0 46.2 92.0 -10.8 Net profit 1.7 13.9 -70.7 557.9 502.7 36.8 55.4 66.0 48.9 207.1 298.2 50.4 62.1 -10.8 Pretax margin 0.5 1.6 -4.8 37.3 8.9 3.2 4.3 5.1 3.8 4.1 2.7 1.2 4.8 -0.5 Net margin 0.1 0.7 -4.1 30.4 7.0 2.1 2.9 3.4 2.5 2.7 2.2 0.8 3.2 -0.3 Source: Company data, KDB Daewoo Securities Research Monthly InsighT 65 Other notable stocks LG Innotek (011070 KS) Growth to resume in 2H15 ■ What’s new: Unfavorable market environment in 2Q15 (Maintain) Buy - 1Q15 earnings were solid for a traditionally low-demand season Target Price (12M, W) 136,000 - 2Q15 operating profit is estimated to have fallen 23.0% YOY (+0.3% QoQ) to W69.2bn, due to unfavorable F/X rate movements and sluggish camera module sales Share Price (5/29/15, W) 95,100 Expected Return 43% ■ Catalyst: Solid growth in 2014; Growth to be stronger in 2H15 than in 1H15 - Strong performance in 2014, with operating profit growth of 130.6% YoY and record OP margin of 4.9% OP (15F, Wbn) 343 - Operating profit to climb 9.2% to W343.3 in 2015; quarterly operating profit to remain stable Consensus OP (15F, Wbn) 335 Growth to be stronger in 2H than in 1H; automotive electronics (new business) and higher ASP for camera EPS Growth (15F, %) 58.4 modules supplied to largest customer Market EPS Growth (15F, %) 36.9 P/E (15F, x) 12.0 ■ Valuation: Maintain Buy with TP of W136,000 Market P/E (15F, x) 10.5 - Target price implies P/B of 1.65x, based on 12M-forward BPS (W82,911) (a 10% premium above the five-year avg.) KOSPI 2,114.80 Market Cap (Wbn) 2,251 Shares Outstanding (mn) 24 12/12 12/13 12/14 12/15F 12/16F 12/17F Free Float (%) 59.2 130 FY (Dec.) LG Innotek KOSPI Revenue (Wbn) 5,316 6,212 6,466 6,784 7,228 7,781 Foreign Ownership (%) 12.8 120 OP (Wbn) 77 136 314 343 417 486 Beta (12M) 0.30 110 OP margin (%) 1.4 2.2 4.9 5.1 5.8 6.2 52-Week Low 82,200 100 NP (Wbn) -25 16 113 188 259 318 52-Week High 150,000 90 EPS (W) -1,237 770 5,020 7,952 10,925 13,441 80 (%) 1M 6M 12M ROE (%) -1.9 1.2 7.5 10.5 12.9 13.9 70 Absolute -3.2 -4.8 -27.7 P/E (x) - 108.6 22.4 12.0 8.7 7.1 60 Relative -1.9 -10.8 -31.2 5.14 9.14 1.15 5.15 P/B (x) 1.3 1.3 1.6 1.2 1.1 0.9 Notes: All figures are based on consolidated K-IFRS; NP refers to net profit attributable to controlling interests Source: KDB Daewoo Securities Research Monthly InsighT 66 Other notable stocks LG Innotek (011070 KS) Key charts Quarterly revenue and OP margin Earnings forecasts (Wbn) Previous Revised % chg. Favorable earnings in 1Q15 (%) (Wbn, W, %, %p) 2,100 Revenue (L) 10 15F 16F 17F 15F 16F 17F 15F 16F 17F OP margin (R) Revenue 6,784 7,228 7,781 6,784 7,228 7,781 0.0 0.0 0.0 Operating profit 343 417 486 343 417 486 0.0 0.0 0.0 1,400 5 Pretax profit 261 345 424 261 345 424 0.0 0.0 0.0 Net profit 188 259 318 188 259 318 0.0 0.0 0.0 700 0 EPS 7,952 10,925 13,441 7,952 10,925 13,441 0.0 0.0 0.0 OP margin 5.1 5.8 6.3 5.1 5.8 6.3 0.0 0.0 0.0 Pretax margin 3.8 4.8 5.5 3.8 4.8 5.5 0.0 0.0 0.0 0 -5 1Q05 2Q 3Q07 4Q 1Q10 2Q11 3Q12 4Q13 1Q15 2Q16F Net margin 2.8 3.6 4.1 2.8 3.6 4.1 0.0 0.0 0.0 Source: Company data, KDB Daewoo Securities Research Source: Company data, KDB Daewoo Securities Research Quarterly operating profit 12-month forward P/B band (Wbn) (W) 150 300,000 103 105 100 2.9x 100 90 200,000 2.4x 69 69 1.9x 63 58 1.4x 50 100,000 0.9x 0 0 1Q13 4Q13 3Q14 2Q15F 1Q16F 4Q16F 10 11 12 13 14 15 Source: Company data, KDB Daewoo Securities Research Source: Company data, KDB Daewoo Securities Research Monthly InsighT 67 Other notable stocks LG Innotek (011070 KS) Earnings table 2014 2015F (Wbn, W, %, %p) 1Q 2Q 3Q 4Q Annual 1Q 2QF 3QF 4QF Annual Tuner 62.3 58.1 58.6 53.9 232.9 59.2 59.7 62.2 55.5 236.5 PM 69.6 54.0 53.3 53.8 230.7 44.0 46.4 56.4 53.7 200.5 CM 586.3 589.6 632.5 937.6 2,746.0 711.9 644.1 681.8 979.8 3,017.7 LED 263.9 281.8 283.7 219.9 1,049.3 221.0 245.3 283.2 247.6 997.1 Wireless telecom 48.9 59.8 61.9 71.9 242.5 72.9 75.8 97.6 121.9 368.2 Motor 13.9 12.7 24.0 25.0 75.6 24.3 14.4 27.3 28.3 94.4 Automotive 70.7 67.9 64.0 62.5 265.1 64.7 69.2 80.7 90.9 305.5 Revenue Photomask 47.2 51.0 45.5 41.8 185.5 49.9 58.7 52.4 48.1 209.1 Lead frame 12.7 13.0 12.0 10.6 48.3 11.3 11.6 10.7 9.4 43.0 Tape substrate 41.2 44.4 44.9 50.7 181.2 52.4 52.6 53.2 60.0 218.2 PCB 78.1 75.9 102.4 95.6 352.0 78.2 79.0 106.8 99.8 363.9 Package 65.6 75.6 77.6 81.0 299.8 75.8 87.6 87.4 89.4 340.2 Touch window 108.8 164.8 207.0 139.1 619.7 112.6 132.7 157.0 102.1 504.4 Other -10.4 -5.7 -18.1 -28.4 -62.6 -36.9 -22.3 -26.4 -28.5 -114.1 Total 1,458.8 1,542.9 1,649.3 1,815.0 6,466.0 1,541.3 1,554.9 1,730.1 1,958.2 6,784.5 Operating profit 63.1 89.9 102.9 58.0 314.0 69.0 69.2 104.9 100.1 343.3 OP margin 4.3 5.8 6.2 3.2 4.9 4.5 4.5 6.1 5.1 5.1 Pretax profit 34.7 55.4 73.7 27.7 191.6 47.6 48.3 84.7 80.5 261.1 Net profit 16.4 43.6 58.4 -5.7 112.7 28.1 36.2 63.5 60.4 188.2 Pretax margin 2.4 3.6 4.5 1.5 3.0 3.1 3.1 4.9 4.1 3.8 Net margin 1.1 2.8 3.5 -0.3 1.7 1.8 2.3 3.7 3.1 2.8 Source: Company data, KDB Daewoo Securities Research Monthly InsighT 68 Other notable stocks Seoul Semiconductor (046890 KQ) The worst is almost over ■ Concerns are easing (Maintain) Buy - Market concerns have gradually eased since 1Q15 earnings were released Target Price (12M, W) 23,500 1) Results met guidance for the first time in four quarters (revenue between W220bn and 240bn, OP margin between -1% and 1%) Share Price (5/29/15, W) 17,900 2) General lighting revenue is believed to have reached W103.2bn, returning to the W100bn level for the first time in three quarters, possibly due to increased sales to large lighting companies Expected Return 31% 3) Inventory assets came in at W122.8bn in 1Q, but handset-related revenue grew to W50.4bn, supported by increased sales to a US smartphone maker OP (15F, Wbn) 43 ■ Catalyst: Strong patent lineup boosts long-term competitiveness Consensus OP (15F, Wbn) 31 - 2Q15 outlook: revenue of W251.2bn (+1.1% YoY; +7.1% QoQ), OP of W7.7bn (-41.2% YoY, +63.9% QoQ) EPS Growth (15F, %) - (company guidance: revenue between W240bn and W260bn, OP margin between 1% and 3%) Market EPS Growth (15F, %) 36.9 - LED restructuring (Philips to sell its 80.1% stake in Lumileds) positive for SSC P/E (15F, x) 54.1 - Patents to be an obstacle to Chinese companies seeking overseas expansion; meanwhile, SSC boasts world-class Market P/E (15F, x) 10.5 patent competitiveness KOSDAQ 711.39 ■ Valuation: Maintain Buy with 12-month TP of W23,500 Market Cap (Wbn) 1,044 - P/B of 2.3x (the lower end of the five-year band), based on 12-month forward BPS of W10,225 Shares Outstanding (mn) 58 12/12 12/13 12/14 12/15F 12/16F 12/17F Free Float (%) 65.7 150 Seoul Semiconductor FY (Dec.) KOSDAQ Revenue (Wbn) 859 1,032 939 1,052 1,236 1,272 Foreign Ownership (%) 8.8 130 OP (Wbn) 33 96 3 43 87 101 Beta (12M) 1.77 110 OP margin (%) 3.8 9.3 0.3 4.1 7.0 7.9 52-Week Low 15,300 90 NP (Wbn) 636-7195768 52-Week High 41,950 70 EPS (W) 95 619 -118 331 974 1,170 (%) 1M 6M 12M 50 ROE (%) 0.9 6.3 -1.2 3.4 9.5 10.5 Absolute -10.5 0.6 -55.3 P/E (x) 254.2 65.2 - 54.1 18.4 15.3 30 Relative -12.5 -22.9 -65.4 5.14 9.14 1.15 5.15 P/B (x) 2.5 4.1 2.1 1.8 1.7 1.5 Notes: All figures are based on consolidated K-IFRS; NP refers to net profit attributable to controlling interests Source: KDB Daewoo Securities Research Monthly InsighT 69 Other notable stocks Seoul Semiconductor (046890 KQ) Key charts Quarterly revenue and OP margin Earnings forecasts Revenue (L) (Wbn) (%) Previous Revised % chg. 400 OP margin (R) 20 (Wbn, W, %, %p) 15F 16F 17F 15F 16F 17F 15F 16F 17F Revenue 1,052 1,236 1,272 1,052 1,236 1,272 0.0 0.0 0.0 300 10 Operating profit 43 87 101 43 87 101 0.0 0.0 0.0 Pretax profit 34 79 95 34 79 95 0.0 0.0 0.0 200 0 Net profit 19 57 68 19 57 68 0.0 0.0 0.0 EPS 332 974 1,170 332 974 1,170 0.0 0.0 0.0 100 -10 OP margin 4.1 7.0 7.9 4.1 7.0 7.9 0.0 0.0 0.0 Pretax margin 3.3 6.4 7.5 3.3 6.4 7.5 0.0 0.0 0.0 0 -20 1Q04 2Q05 3Q06 4Q07 1Q09 2Q10 3Q11 4Q12 1Q14 2Q15F 3Q16F Net margin 1.8 4.6 5.4 1.8 4.6 5.4 0.0 0.0 0.0 Note: Based on consolidated K-IFRS since 1Q13 Source: Company data, KDB Daewoo Securities Research Source: Company data, KDB Daewoo Securities Research General lighting revenue Revenue: Guidance vs. actual (Wbn) (Wbn) 계열2 180.0 300 Revenue guidance Actual 120.0 113.0 100.9 107.4 103.2 250 82.8 87.593.5 60.0 200 0.0 150 1Q12 3Q12 1Q13 3Q13 1Q14 3Q14 1Q15 3Q15F 1Q16F 3Q16F 2Q12 1Q13 4Q13 3Q14 2Q15F Source: Company data, KDB Daewoo Securities Research Note: 2Q15F revenue is our estimate Source: Company data, KDB Daewoo Securities Research Monthly InsighT 70 Other notable stocks Seoul Semiconductor (046890 KQ) Earnings table 2014 2015F (Wbn, W, %, %p) 1Q 2Q 3Q 4Q Annual 1Q 2QF 3QF 4QF Annual Revenue 248.0 248.5 230.2 212.6 939.3 234.6 251.2 286.4 279.4 1,051.6 Operating profit 17.1 13.0 4.3 -31.8 2.6 4.7 7.7 17.6 13.4 43.3 Pretax profit 17.0 6.0 1.1 -37.4 -13.2 2.4 5.4 15.4 11.3 34.5 Net profit 11.7 2.7 -0.5 -20.7 -6.9 -1.2 3.5 9.8 7.2 19.3 EPS 201 46 -9 -355 -118 -20 60 169 124 331 OP margin 6.9 5.2 1.9 -15.0 0.3 2.0 3.0 6.1 4.8 4.1 Pretax margin 6.9 2.4 0.5 -17.6 -1.4 1.0 2.2 5.4 4.0 3.3 Net margin 4.7 1.1 -0.2 -9.7 -0.7 -0.5 1.4 3.4 2.6 1.8 Source: Company data, KDB Daewoo Securities Research Monthly InsighT 71 Appendix Fund flows SEC: Share performance and fund flow SK Hynix: Share performance and fund flow LGE: Share performance and fund flow Share price (R) (W) (Wbn) (Wbn)Share price (R) (W) (Wbn)Share price (R) (W) 6,000 Domestic (L) 1,900,000 9,000 Domestic (L) 66,000 1,200 Domestic (L) 100,000 Foreign (L) Foreign (L) Foreign (L) 800 3,000 1,600,000 6,000 88,000 52,000 400 0 1,300,000 3,000 76,000 38,000 0 -3,000 1,000,000 0 64,000 -400 24,000 -6,000 700,000 -3,000 52,000 -800 -9,000 400,000 -6,000 10,000 -1,200 40,000 6/13 10/13 2/14 6/14 10/14 2/15 6/15 6/13 10/13 2/14 6/14 10/14 2/15 6/15 6/13 10/13 2/14 6/14 10/14 2/15 6/15 Source: WISEfn, KDB Daewoo Securities Research Source: WISEfn, KDB Daewoo Securities Research Source: WISEfn, KDB Daewoo Securities Research LGD: Share performance and fund flow LG Innotek: Share performance and fund flow Samsung SDI: Share performance and fund flow Share price (R) (Wbn)Share price (R) (W) (Wbn) (W) (Wbn)Share price (R) (W) 600 38,000 Domestic (L) Domestic (L) 400 160,000 1,200 Domestic (L) 220,000 Foreign (L) Foreign (L) 140,000 Foreign (L) 400 34,000 300 800 120,000 180,000 200 200 400 30,000 100,000 0 140,000 0 100 80,000 26,000 -400 60,000 100,000 -200 0 40,000 -800 22,000 -400 -100 60,000 20,000 -1,200 -600 18,000 -200 0 -1,600 20,000 6/13 10/13 2/14 6/14 10/14 2/15 6/15 6/13 10/13 2/14 6/14 10/14 2/15 6/15 6/13 10/13 2/14 6/14 10/14 2/15 6/15 Source: WISEfn, KDB Daewoo Securities Research Source: WISEfn, KDB Daewoo Securities Research Source: WISEfn, KDB Daewoo Securities Research Monthly InsighT 72 Appendix Fund flows Samsung Techwin: Share performance and fund SEMCO: Share performance and fund flow SSC: Share performance and fund flow flow Share price (R) (Wbn) (W) (Wbn) Share price (R) (W) (Wbn) Share price (R) (W) 400 Domestic (L) 120,000 300 Domestic (L) 80,000 400 Domestic (L) 60,000 Foreign (L) Foreign (L) Foreign (L) 300 50,000 200 100,000 200 60,000 200 40,000 0 80,000 100 100 40,000 30,000 -200 60,000 0 0 20,000 -100 20,000 -400 40,000 -100 -200 10,000 -600 20,000 -200 0 -300 0 6/13 10/13 2/14 6/14 10/14 2/15 6/15 6/13 10/13 2/14 6/14 10/14 2/15 6/15 6/13 10/13 2/14 6/14 10/14 2/15 6/15 Source: WISEfn, KDB Daewoo Securities Research Source: WISEfn, KDB Daewoo Securities Research Source: WISEfn, KDB Daewoo Securities Research Wonik IPS: Share performance and fund flow Amotech: Share performance and fund flow IDIS: Share performance and fund flow (Wbn) Share price (R) (W) (Wbn)Share price (R) (W) (Wbn) Share price (R) Domestic (L) (W) 300 Domestic (L) 16,000 20 Domestic (L) 30,000 15 Foreign (L) 40,000 Foreign (L) Foreign (L) 250 14,000 15 25,000 10 35,000 12,000 10 5 30,000 200 20,000 10,000 0 25,000 150 5 8,000 15,000 -5 20,000 100 0 6,000 10,000 -10 15,000 50 -5 4,000 -15 10,000 5,000 0 2,000 -10 -20 5,000 -50 0 -15 0 -25 0 6/13 10/13 2/14 6/14 10/14 2/15 6/15 6/13 10/13 2/14 6/14 10/14 2/15 6/15 6/13 10/13 2/14 6/14 10/14 2/15 6/15 Source: WISEfn, KDB Daewoo Securities Research Source: WISEfn, KDB Daewoo Securities Research Source: WISEfn, KDB Daewoo Securities Research Monthly InsighT 73 Appendix Earnings consensus movements SEC: Share performance and OP consensus SK Hynix: Share performance and OP consensus LGE: Share performance and OP consensus (Wbn) 2015 OP consensus (L) (W) (Wbn) 2015 OP consensus (L) (W) (Wbn) 2015 OP consensus (L) (W) 41,600 Share price (R) 1,600,000 7,000 Share price (R) 60,000 2,500 Share price (R) 100,000 6,000 2,000 80,000 31,200 55,000 5,000 1,400,000 4,000 1,500 60,000 20,800 50,000 3,000 1,000 40,000 1,200,000 2,000 10,400 45,000 500 20,000 1,000 0 1,000,000 0 40,000 0 0 5/14 8/14 11/14 2/15 5/15 5/14 8/14 11/14 2/15 5/15 5/14 8/14 11/14 2/15 5/15 Source: Bloomberg, KDB Daewoo Securities Research Source: Bloomberg, KDB Daewoo Securities Research Source: Bloomberg, KDB Daewoo Securities Research Samsung SDI: Share performance and OP LGD: Share performance and OP consensus LG Innotek: Share performance and OP consensus consensus (Wbn) 2015 OP consensus (L) (W) (Wbn) 2015 OP consensus (L) (W) (Wbn) 2015 OP consensus (L) (W) 2,500 Share price (R) 40,000 450 Share price (R) 160,000 450 Share price (R) 200,000 180,000 400 140,000 400 2,000 350 160,000 350 120,000 30,000 140,000 300 300 100,000 120,000 1,500 250 250 20,000 80,000 100,000 200 200 1,000 60,000 80,000 150 150 60,000 10,000 100 40,000 500 100 40,000 20,000 50 50 20,000 0 0 0 0 0 0 5/14 8/14 11/14 2/15 5/15 5/14 8/14 11/14 2/15 5/15 5/14 8/14 11/14 2/15 5/15 Source: Bloomberg, KDB Daewoo Securities Research Source: Bloomberg, KDB Daewoo Securities Research Source: Bloomberg, KDB Daewoo Securities Research Monthly InsighT 74 Appendix Earnings consensus movements Samsung Techwin: Share performance and OP SEMCO: Share performance and OP consensus SSC: Share performance and OP consensus consensus (Wbn) 2015 OP consensus (L) (W) (Wbn) 2015 OP consensus (L) (W) (Wbn) 2015 OP consensus (L) (W) 560 Share price (R) 80,000 200 Share price (R) 70,000 160 Share price (R) 45,000 40,000 480 60,000 140 70,000 160 120 35,000 400 50,000 30,000 60,000 120 100 320 40,000 25,000 80 240 30,000 20,000 50,000 80 60 15,000 160 20,000 40 40,000 40 10,000 80 10,000 20 5,000 0 30,000 0 0 0 0 5/14 8/14 11/14 2/15 5/15 5/14 8/14 11/14 2/15 5/15 5/14 8/14 11/14 2/15 5/15 Source: Bloomberg, KDB Daewoo Securities Research Source: Bloomberg, KDB Daewoo Securities Research Source: Bloomberg, KDB Daewoo Securities Research Wonik IPS: Share performance and OP consensus Amotech: Share performance and OP consensus IDIS: Share performance and OP consensus (Wbn) 2015 OP consensus (L) (W) (Wbn) 2015 OP consensus (L) (W) (Wbn) 2015 OP consensus (L) (W) 140 Share price (R) 16,000 30 Share price (R) 30,000 25 Share price (R) 20,000 135 14,000 18,000 25 25,000 20 16,000 130 12,000 14,000 20 20,000 125 10,000 15 12,000 120 8,000 15 15,000 10,000 115 6,000 10 8,000 10 10,000 6,000 110 4,000 5 4,000 5 5,000 105 2,000 2,000 100 0 0 0 0 0 5/14 8/14 11/14 2/15 5/15 5/14 8/14 11/14 2/15 5/15 5/14 8/14 11/14 2/15 5/15 Source: Bloomberg, KDB Daewoo Securities Research Source: Bloomberg, KDB Daewoo Securities Research Source: Bloomberg, KDB Daewoo Securities Research Monthly InsighT 75 Appendix Macro overview US CLI and MSCI World IT China CLI and MSCI World IT Europe CLI and MSCI World IT (p)US CLI (L) (p) (p)China CLI (L) (p) (p) (p) 135 MSCI World IT (R) 160 110 MSCI World IT (R) 160 105 Europe CLI (L) 160 MSCI World IT (R) 125 106 103 120 120 120 115 102 101 105 98 99 80 80 80 95 94 97 85 40 90 40 95 40 1/05 1/07 1/09 1/11 1/13 1/15 1/05 1/07 1/09 1/11 1/13 1/15 1/05 1/07 1/09 1/11 1/13 1/15 Source: Conference Board, Bloomberg Source: OECD, Bloomberg Source: OECD, Bloomberg US consumer confidence index China consumer confidence index Oil price trends (p) (p) (US$/bbl) 140 US CCI 115 China CCI 160 Brent Current WTI Expectations 110 120 120 100 105 80 80 100 40 60 95 40 90 0 1/13 7/13 1/14 7/14 1/15 1/13 7/13 1/14 7/14 1/15 1/14 4/14 7/14 10/14 1/15 4/15 Source: Conference Board Source: National Bureau of Statistics of China Source: Thomson Reuters Monthly InsighT 76 Appendix IT macro Retail sales of telecom devices and home appliances US IT retail sales China retail sales in China (US$bn) (%) (RMBbn)China retail sales (L) (%) (RMBbn)Telecom devices (L) (%) Household appliances (L) 20 15 6,000 YoY growth (R) 20 1,500 90 Tech retail sales (L) Telecom device growth (R) YoY growth (R) Household appliance growth (R) 10 5,000 15 16 4,000 1,000 60 5 10 3,000 12 0 2,000 500 30 5 8 -5 1,000 0 -10 0 4 0 0 1/13 7/13 1/14 7/14 1/15 1/13 7/13 1/14 7/14 1/15 1/13 7/13 1/14 7/14 1/15 Source: Conference Board Note: February figure is sum of January and February data Note: February figure is sum of January and February data Source: National Bureau of Statistics of China Source: National Bureau of Statistics of China Semiconductor export growth of Korean makers Display export growth of Korean makers Mobile device export growth of Korean makers (%) (%) (%) 25 20 80 20 10 60 15 0 40 10 -10 20 5 -20 0 0 -5 -30 -20 1/13 7/13 1/14 7/14 1/15 1/13 7/13 1/14 7/14 1/15 1/13 7/13 1/14 7/14 1/15 Source: Korea Customs Service Source: Korea Customs Service Source: Korea Customs Service Monthly InsighT 77 Appendix Share performances and valuations Price Mkt. cap Share performance (%), <5/29/15 > 2015F 2016F Sector Company (local) (US$mn) 5D 1M 3M 6M 12M P/E (x) P/B (x) ROE (%) P/E (x) P/B (x) ROE (%) S&P 500 (US) 2,107 -1.1 -0.0 0.1 2.6 9.6 17.8 2.7 15.4 15.9 2.6 15.5 Dow Jones (US) 18,011 -1.5 -0.1 -0.7 1.3 7.7 16.1 3.0 18.9 14.8 2.9 19.0 NASDAQ (US) 5,070 -0.4 1.3 2.1 7.2 19.5 22.4 3.6 22.8 19.2 3.3 20.8 Euro Stoxx (Euro) 3,571 -2.9 -1.2 -0.8 10.5 10.1 15.4 1.5 8.5 13.8 1.5 9.2 Index TOPIX (Japan) 1,674 1.6 5.6 9.8 17.7 39.3 16.2 1.4 8.5 14.8 1.3 8.5 NIKKEI 225 (Japan) 20,563 1.5 5.3 9.4 16.9 40.5 19.6 1.8 9.9 17.7 1.7 10.1 Hong Kong Hang Seng 27,424 -0.4 -2.5 10.5 17.4 18.8 13.0 1.4 15.1 11.8 1.3 14.5 Shanghai (China) 4,612 -1.0 3.8 39.3 72.1 126.2 18.4 2.2 14.4 16.1 2.0 13.8 TAIEX (Taiwan) 9,701 0.6 -1.2 0.8 6.4 6.9 13.6 1.7 15.4 12.5 1.6 14.7 IT index PHLX Semiconductor 745 3.5 5.7 4.3 10.2 24.3 18.5 4.2 23.3 16.0 3.6 17.3 World 149 -0.5 0.8 1.1 4.6 16.0 17.8 3.6 25.2 16.1 3.2 23.5 US 167 -0.5 0.6 0.6 4.1 17.0 17.5 4.0 27.0 15.8 3.6 25.0 MSCI Korea 730 -0.9 -3.3 -1.9 -0.3 -7.8 9.4 1.3 16.9 8.7 1.1 15.1 IT index Japan 137 1.3 6.2 12.3 14.2 44.6 18.9 1.7 10.4 17.2 1.6 10.5 Taiwan 173 0.5 1.5 -0.2 4.9 13.1 12.5 2.0 20.8 11.6 1.8 19.1 China 370 -1.9 -6.6 12.1 28.7 40.4 29.8 5.9 18.5 23.1 4.8 19.4 US$/W 1,108 -1.6 -3.6 -0.7 0.5 -7.9 EUR/W 1,214 0.2 -3.4 1.4 14.2 14.4 JPY/W 9 1.2 0.4 2.6 5.4 12.0 F/X RMB/W 179 -1.6 -3.6 -1.9 1.3 -8.5 US$/JPY 124 -2.1 -3.2 -3.2 -4.6 -17.5 US$/RMB 6 -0.0 0.0 1.2 -0.8 0.7 HP 1,307,000 173,100 -3.3 -7.3 -3.7 0.9 -9.4 8.5 1.1 13.9 7.9 1.0 13.4 Lenovo 51,100 33,448.4 10.2 10.7 9.7 6.6 15.7 7.3 1.6 24.9 7.2 1.4 20.4 Asustek 55,300 8,136.9 -1.6 -8.4 -10.5 -13.3 -24.1 12.0 0.8 6.5 8.7 0.7 8.5 PC Acer 95,100 2,023.7 -3.5 -4.9 -9.4 -8.1 -25.4 11.5 1.2 11.1 8.6 1.1 12.9 Seagate 29,250 9,410.4 -3.5 -2.0 -14.0 -14.5 7.7 6.5 0.8 13.2 6.9 0.7 11.2 IBM 122,500 7,573.9 3.4 2.1 -10.3 -2.8 -19.1 24.7 0.7 2.9 18.7 0.7 3.8 EMC 55,200 3,707.2 -11.4 -18.2 -19.9 -5.6 -12.2 18.5 0.9 4.8 15.5 0.9 5.6 Apple 26,850 1,282.6 7.0 -3.1 7.8 2.7 -53.1 19.8 0.8 3.9 14.5 0.8 5.1 HTC 17,900 938.4 -0.8 -7.7 -1.6 0.6 -53.6 69.6 1.8 2.6 34.3 1.7 4.9 Handset Blackberry 14,550 1,053.1 0.3 20.7 14.6 3.2 25.4 14.1 2.6 20.3 11.9 2.1 19.8 ZTE 14,700 162.7 -4.5 -5.8 -1.0 8.1 -23.6 6.5 1.1 17.5 4.6 0.9 19.6 Monthly InsighT 78 Appendix Share performances and valuations Price Mkt. cap Share performance (%), <5/29/15 > 2015F 2016F Sector Company (local) (US$mn) 5D 1M 3M 6M 12M P/E (x) P/B (x) ROE (%) P/E (x) P/B (x) ROE (%) Whirlpool 184 14,490 -4.1 4.9 -13.1 -1.0 28.4 14.8 - 18.3 12.1 - - Philips 25 25,475 -1.6 -3.3 -7.3 2.3 7.1 17.2 2.0 11.4 15.1 1.9 12.6 Electrolux 260 9,436 -1.8 3.9 -4.5 17.4 54.7 22.7 3.9 18.0 14.9 3.4 23.6 Sony 3,862 36,396 0.5 6.4 13.1 46.3 137.4 25.4 1.8 7.5 18.6 1.7 9.5 Hitachi 848 33,032 -0.2 3.6 3.7 -7.8 24.0 10.6 1.2 10.8 9.8 1.1 10.6 Consumer NEC 408 8,561 -0.7 1.5 12.1 7.7 29.9 15.3 1.3 8.1 13.7 1.2 8.5 electronics Haier 24 8,468 0.2 5.1 14.9 10.1 29.5 17.8 3.5 22.1 15.4 2.9 21.0 Skyworth 7 2,724 9.0 6.9 34.0 72.3 102.2 11.6 1.5 13.4 10.9 1.4 14.0 TCL 7 1,194 1.9 8.2 50.0 122.6 166.4 21.2 1.8 8.6 16.5 1.6 10.4 Hisense 32 6,757 -7.1 18.5 58.6 174.9 206.2 26.3 3.5 13.2 24.2 3.1 13.5 Nintendo 21,120 24,104 -1.0 4.3 65.3 49.5 79.4 90.0 2.2 2.5 54.6 2.1 3.9 Best Buy 35 12,226 -1.2 0.1 -7.8 -10.9 27.0 13.8 2.4 18.8 12.3 2.2 19.8 Ingram Micro 27 4,190 1.2 6.6 8.5 -2.3 -3.5 9.7 0.9 9.0 8.4 0.8 8.1 Distribution Tech Data 63 2,313 4.0 12.0 6.1 1.3 6.1 13.3 1.1 8.9 12.2 1.0 9.0 Alibaba 89 220,174 -4.9 9.9 4.9 -20.0 - 32.2 8.0 24.0 24.2 6.0 25.2 Micron 28 30,207 3.8 -0.7 -8.9 -22.3 -2.3 9.1 2.4 27.6 7.7 1.9 25.1 Nanya 67 5,276 -1.9 -2.3 -14.5 -9.5 -19.1 6.6 2.4 45.5 6.6 1.8 31.6 Memory Inotera 36 7,691 2.4 1.8 -21.9 -23.4 -20.0 7.6 1.6 23.5 7.3 1.3 21.0 Toshiba 436 14,874 9.5 -9.7 -11.9 -17.9 4.5 9.8 1.2 12.5 8.7 1.1 12.7 Sandisk 68 14,215 2.0 2.2 -14.5 -33.9 -29.2 23.4 2.6 8.6 15.5 2.4 14.4 Intel 34 163,478 2.7 5.9 3.6 -7.5 26.1 15.5 2.8 19.2 13.9 2.6 18.6 Texas Instruments 56 58,177 0.8 3.2 -4.9 2.8 19.0 19.5 5.6 27.7 17.7 5.3 29.6 AMD 2 1,774 0.0 0.9 -26.7 -18.3 -43.0 - - -254.8 - - 73.9 STMicro 9 7,742 3.0 6.8 -4.4 13.6 -14.7 28.1 1.8 3.0 14.2 1.8 8.6 Qualcomm 70 113,590 -0.6 2.5 -3.9 -4.4 -13.4 14.5 3.3 18.1 13.5 3.3 22.1 Logic chips ARM 1,155 24,922 3.1 3.7 -0.3 26.3 25.5 37.5 8.8 24.0 31.2 7.4 24.5 Mediatek 415 21,137 1.1 4.9 -12.4 -10.5 -14.9 16.3 2.5 16.3 14.1 2.4 18.0 Nvidia 22 11,906 5.9 -0.3 0.3 5.5 16.5 19.3 2.8 12.0 15.9 2.6 13.9 Broadcom 57 33,996 20.0 28.6 25.7 31.8 79.4 19.0 3.5 19.8 17.7 3.0 18.5 Synaptics 100 3,670 5.7 17.6 15.9 58.2 46.4 17.2 4.7 28.8 14.1 3.6 26.6 TSMC 146 122,841 0.3 -0.7 -3.0 4.3 22.2 12.2 3.1 27.1 11.3 2.6 24.5 Foundry UMC 14 5,751 0.0 -4.8 -13.1 1.8 2.0 11.6 0.8 6.6 11.4 0.7 6.8 SMIC 1 4,137 8.5 3.5 30.9 14.1 34.8 16.4 1.3 5.7 19.1 1.2 6.7 Monthly InsighT 79 Appendix Share performances and valuations Price Mkt. cap Share performance (%), <5/29/15 > 2015F 2016F Sector Company (local) (US$mn) 5D 1M 3M 6M 12M P/E (x) P/B (x) ROE (%) P/E (x) P/B (x) ROE (%) Japan Display 523 2,534 9.4 7.6 7.0 32.4 -11.5 14.2 0.7 5.5 10.9 0.7 6.9 AU Optronics 17 5,262 1.5 9.1 1.8 14.6 48.7 6.9 0.8 11.3 8.4 0.7 8.5 Display Innolux 19 6,137 6.7 19.5 18.0 28.4 63.8 6.7 0.8 11.5 8.7 0.7 8.0 panel Sharp 174 2,385 4.8 -33.1 -31.5 -39.4 -39.6 36.3 2.1 4.1 15.9 1.3 11.0 BOE 5 28,277 8.9 11.5 59.5 83.3 133.3 ------ Corning 21 26,329 -4.1 -0.0 -14.3 -0.5 -1.8 13.6 1.3 10.2 12.7 1.3 10.1 Display Asahi Glass 812 7,763 -0.1 1.8 7.7 40.0 43.5 25.6 0.8 3.4 24.8 0.8 3.3 glass NEG 662 2,654 1.4 1.2 10.7 21.2 30.1 32.1 0.6 2.0 28.5 0.6 2.2 Novatek 168 3,307 4.4 4.0 -0.9 -4.3 9.1 13.7 3.4 25.3 12.6 3.1 26.3 Display Chipbond 71 1,500 -0.7 6.9 16.7 23.0 35.8 15.0 1.9 12.9 12.1 1.7 15.4 components Radiant 113 1,698 1.8 11.4 8.7 7.7 -8.5 14.5 2.1 13.8 11.3 1.9 17.8 TPK 204 2,326 -7.1 6.8 -10.1 3.0 -16.0 24.1 1.4 5.6 12.5 1.3 10.6 Nissha Printing 2,255 818 1.6 0.1 -11.6 23.2 45.0 13.6 1.5 10.7 14.4 1.3 8.5 Touchscreen Alps Electric 3,190 4,666 -0.2 6.0 18.6 32.3 172.0 14.7 2.7 20.7 13.1 2.3 19.6 O-film 46 7,620 16.4 50.3 100.5 101.3 115.8 42.3 7.0 15.6 34.3 6.1 18.8 Applied Materials 20 24,792 -0.1 1.7 -19.6 -16.3 -0.3 16.4 3.0 18.1 13.5 3.0 20.8 ASML 102 48,439 1.2 5.2 5.3 19.8 61.6 29.8 5.3 18.9 23.0 4.7 21.3 KLA Tencor 60 9,541 0.8 1.5 -8.2 -14.1 13.3 20.5 22.5 38.4 14.9 24.5 137.3 SPE/FPD Lam Research 82 13,022 1.3 8.8 -0.3 -0.5 32.6 16.4 2.7 16.0 14.0 2.5 18.3 equipment Tokyo Electron 7,947 11,563 5.8 20.6 -11.6 -4.2 30.0 16.9 2.0 12.5 17.1 1.9 12.1 Ulvac 2,140 851 3.9 6.0 17.8 30.6 -3.1 14.7 1.9 10.8 11.0 1.7 15.6 DNS 957 1,958 7.3 18.6 16.8 19.9 119.5 15.0 1.9 13.8 14.3 1.7 12.4 Yaskawa Electric 1,750 3,695 2.5 8.0 4.9 13.0 40.5 17.8 2.5 14.6 16.4 2.2 14.3 Fanuc Corp 27,540 53,138 6.2 3.7 20.0 35.9 59.0 27.2 3.7 13.8 26.2 3.5 13.4 Automation Denso 6,511 46,372 3.1 8.3 15.9 14.6 39.6 17.1 1.6 9.7 15.6 1.5 9.9 equipment Daifuku 1,888 1,729 0.3 16.7 21.3 46.1 42.3 15.6 1.7 10.4 12.9 1.5 10.7 KuKa 72 2,840 3.4 16.6 4.2 19.0 73.1 30.5 4.4 14.8 22.3 3.9 18.7 Monthly InsighT 80 Appendix Share performances and valuations Price Mkt. cap Share performance (%), <5/29/15 > 2015F 2016F Sector Company (local) (US$mn) 5D 1M 3M 6M 12M P/E (x) P/B (x) ROE (%) P/E (x) P/B (x) ROE (%) Hon Hai 99 47,569 2.7 7.7 13.8 4.0 20.1 10.7 1.4 14.4 10.2 1.3 14.0 Quanta 78 9,763 -0.6 1.2 -1.9 1.2 -3.5 14.3 2.2 15.5 12.7 2.0 16.4 EMS/ODM Pegatron 92 7,476 2.3 0.3 6.3 25.1 57.9 10.7 1.6 14.9 9.4 1.4 15.8 Compal 25 3,686 1.2 -9.3 4.1 27.6 4.7 9.7 1.0 10.6 9.0 1.0 11.3 Wistron 25 2,018 2.2 -3.6 -15.0 -11.0 0.8 11.4 0.8 7.2 9.4 0.8 8.9 Largan 3,420 14,886 -1.2 11.0 27.6 38.7 74.5 20.1 7.5 42.1 16.9 5.9 39.1 Lite-On Tech 39 2,996 1.7 1.5 -1.3 6.2 -18.5 11.4 1.1 10.3 10.4 1.1 11.1 Delta 176 13,881 2.9 -5.1 -13.5 -4.9 -10.0 19.3 3.8 20.2 16.5 3.5 21.7 Chicony 86 1,935 2.1 -3.1 -1.7 4.0 6.3 12.6 2.5 19.6 10.6 2.4 23.3 Sunny Optical 17 2,408 -5.9 -2.0 32.8 22.4 83.0 18.4 3.8 22.0 15.0 3.2 22.7 AAC 43 6,866 -3.3 5.3 -15.6 -2.1 -5.2 14.6 3.7 28.2 12.9 3.1 27.2 Goertek 41 10,016 5.9 24.4 36.8 54.0 52.9 28.3 6.2 21.2 22.1 5.0 22.7 Ibiden 2,326 2,827 1.5 3.6 15.5 30.9 25.1 18.9 0.9 4.9 17.5 0.9 5.3 Kinsus Technology 93 1,349 3.0 -0.7 -8.2 -16.4 -32.0 11.1 1.4 12.8 10.9 1.3 12.4 Components Shinko 1,011 1,101 -0.4 7.2 15.3 29.7 22.1 19.0 1.0 5.2 18.1 0.9 5.2 Catcher 360 8,999 2.0 0.0 25.4 36.4 34.3 12.3 2.5 21.6 10.8 2.0 21.2 Murata 20,235 36,721 4.3 18.5 37.2 55.9 134.7 22.7 3.4 16.3 20.5 3.1 15.9 TDK 9,960 10,398 5.6 15.5 18.3 38.3 129.2 18.9 1.6 9.0 16.5 1.5 9.5 Taiyo Yuden 1,863 1,808 5.4 3.2 28.5 37.3 76.1 17.0 1.4 8.9 15.3 1.3 9.0 Kyocera 6,775 20,610 1.4 6.3 12.2 16.3 49.7 23.1 1.1 5.0 22.3 1.1 4.9 Avago 148 37,993 14.3 26.7 16.0 58.5 109.5 17.5 8.6 55.8 16.1 6.0 42.5 Skyworks 109 20,899 5.3 18.5 24.6 62.1 152.5 21.4 6.8 31.9 18.6 5.7 28.0 Cirrus Logic 38 2,394 2.6 11.8 25.4 106.4 70.6 16.7 2.9 23.7 15.4 2.4 13.7 Nitto Denko 9,658 13,519 5.0 19.5 27.4 54.0 105.8 18.3 2.4 13.8 16.9 2.2 13.4 JSR 2,266 4,344 1.8 12.8 3.5 7.5 32.6 16.6 1.4 8.6 15.2 1.3 9.1 Shin-Etsu Chem 7,598 26,449 0.5 2.8 -7.4 -6.4 25.6 22.2 1.6 7.3 20.2 1.5 7.8 Materials Sumitomo Chem 725 9,669 4.0 8.4 29.7 55.2 92.3 14.4 1.5 10.6 12.3 1.4 11.1 Hitachi Chemical 2,463 4,134 0.8 7.3 -6.7 10.9 56.0 13.6 1.3 10.2 12.5 1.2 10.4 UDC 54 2,490 2.2 21.9 56.2 93.6 105.3 48.9 4.9 10.5 34.0 4.2 14.5 Panasonic 1,831 36,184 1.8 8.0 22.5 17.8 67.5 20.5 2.1 10.6 16.8 1.9 12.0 Hitachi Maxell 1,974 848 -0.7 3.8 -4.1 10.4 14.2 17.1 0.9 5.2 14.6 0.8 6.0 GS Yuasa 547 1,822 0.6 -3.4 1.3 -3.9 -5.9 13.7 1.4 10.5 12.1 1.3 11.1 LIB BYD 55 25,558 -0.1 15.6 61.2 21.5 43.4 56.1 3.7 8.2 44.6 3.4 7.8 Dynapack 74 362 3.7 -1.3 -0.8 1.4 -16.9 12.7 1.5 9.2 12.2 1.4 7.8 Simplo 142 1,415 0.4 -7.2 -9.3 -11.8 -10.4 12.6 2.0 16.5 12.3 1.9 15.9 Monthly InsighT 81 Appendix Share performances and valuations Price Mkt. cap Share performance (%), <5/29/15 > 2015F 2016F Sector Company (local) (US$mn) 5D 1M 3M 6M 12M P/E (x) P/B (x) ROE (%) P/E (x) P/B (x) ROE (%) Cree 30 3,304 -0.9 -4.4 -22.9 -16.7 -37.1 28.7 1.3 3.5 23.2 1.2 1.7 Epistar 50 1,769 6.7 3.1 -17.6 -16.8 -26.9 23.4 0.9 3.8 21.6 0.9 4.1 Everlight 70 981 3.2 -1.0 -13.1 5.9 -0.7 12.2 1.6 13.8 11.2 1.6 14.2 Veeco 30 1,223 -4.4 2.6 -0.7 -19.1 -9.1 34.1 1.6 1.8 20.4 1.6 6.2 LED Aixtron 8 861 -6.7 14.4 -3.9 -35.0 -48.0 - 1.9 -6.1 - 1.9 -2.0 GT Advanced Tech.0 34 -2.0 -14.0 -16.2 -43.5 -98.5 ------Rubicon 3 70 -11.8 -29.9 -38.3 -47.7 -68.3 - 0.5 -19.0 - 0.6 -25.0 CISCO 29 149,067 -0.4 1.7 -0.7 6.0 19.0 13.5 2.5 18.1 12.9 2.3 17.4 Alcatel Lucent 4 11,303 3.0 15.6 4.2 27.2 21.8 19.3 4.0 18.1 13.7 3.2 25.5 Network ARRIS 33 4,813 -0.9 -2.0 12.4 10.9 -0.3 12.9 2.6 - 11.0 2.4 - PACE 412 2,004 -0.5 -0.7 23.2 14.6 9.8 10.3 3.0 29.6 9.9 2.4 26.6 UTSTARCOM 2 82 -4.1 -17.6 -26.0 -21.9 -18.5 - 0.9 -21.6 - 1.0 -9.2 Stratasys 36 1,811 -4.7 -5.0 -42.7 -65.1 -61.8 26.2 0.8 2.9 20.0 0.8 2.3 3D printing 3D Systems 22 2,445 -1.6 -12.8 -28.2 -38.0 -56.8 40.8 1.9 3.4 25.2 1.8 4.8 EV Tesla Motors 251 31,702 2.1 10.9 23.3 2.6 20.7 - 34.3 -8.2 75.4 24.1 31.3 Google 545 367,271 -2.1 -0.6 -3.1 -0.7 -4.6 19.2 3.0 15.9 16.7 2.5 16.0 Microsoft 47 379,077 -1.2 -3.7 6.9 -2.0 14.5 18.4 4.2 24.1 16.8 4.0 22.5 Software Amazon 429 199,884 -0.6 1.8 12.9 26.8 37.3 124.8 17.1 5.3 69.5 13.7 15.5 Twitter 37 24,011 -0.0 -5.9 -23.7 -12.1 13.0 109.5 6.5 -2.5 55.3 5.9 2.8 Facebook 79 222,384 -1.6 0.5 0.3 1.9 25.1 39.9 5.0 11.2 30.4 4.2 13.2 Boeing 141 97,172 -4.6 -2.0 -6.8 4.6 3.9 16.4 12.2 64.6 15.1 13.4 71.3 Lockheed 188 59,238 -2.5 0.9 -5.9 -1.8 15.0 16.9 16.9 95.4 15.1 14.2 104.9 Defense General Dynamics 140 46,075 -0.5 2.1 1.0 -3.6 18.7 16.3 4.0 23.8 15.2 3.8 24.1 BAE 32 25,013 -1.8 1.0 -3.4 5.2 10.7 13.3 8.0 53.5 12.5 6.8 52.0 Raytheon 103 31,509 -4.0 -0.7 -5.1 -3.2 5.8 15.2 3.1 21.3 14.5 2.9 20.9 Automotive Continental 210 46,198 -3.8 -0.2 -1.4 24.3 21.2 15.0 3.3 23.1 13.5 2.8 21.8 electronics Magna 71 23,588 0.5 17.5 5.2 16.9 28.8 12.2 2.2 22.9 10.0 2.2 25.7 NEXANS 36 1,686 -4.7 3.1 9.4 37.0 -16.8 26.4 1.1 3.1 15.2 1.1 7.5 Cable ABB 21 50,640 -0.1 2.7 3.3 -2.6 -0.7 18.5 3.1 16.1 16.1 3.0 18.6 PRYSMIAN 21 4,893 -1.6 12.3 14.9 42.2 20.7 18.0 3.4 19.7 14.8 3.0 21.0 Monthly InsighT 82 Important Disclosures & Disclaimers 2-Year Rating and Target Price History Company (Code) Date Rating Target Price Company (Code) Date Rating Target Price LG Display(034220) 01/23/2015 Buy 43,000 04/28/2015 Buy 156,000 No Coverage 02/02/2015 Buy 163,000 10/23/2014 Buy 40,000 01/23/2015 Buy 150,000 10/01/2014 Trading Buy 40,000 No Coverage 07/24/2014 Trading Buy 36,000 10/31/2014 Buy 180,000 01/24/2014 Trading Buy 32,000 10/01/2014 Buy 190,000 07/19/2013 Hold - 01/26/2014 Buy 200,000 07/04/2013 Trading Buy 31,000 10/21/2013 Buy 240,000 06/03/2013 Trading Buy 34,000 07/28/2013 Buy 220,000 LG Electronics(066570) 06/01/2015 Buy 84,000 06/03/2013 Buy 180,000 01/01/2015 Buy 87,000 Samsung Techwin(012450) 04/29/2015 Buy 33,000 10/29/2014 Buy 95,000 01/28/2015 Buy 31,000 10/01/2014 Buy 97,000 11/26/2014 Buy 37,000 07/25/2014 Buy 98,000 10/31/2014 Buy 44,000 05/27/2014 Buy 92,000 10/01/2014 Buy 50,000 04/30/2014 Buy 91,000 09/01/2014 Buy 58,000 04/20/2014 Buy 95,000 07/21/2014 Buy 69,000 01/28/2014 Buy 90,000 04/21/2014 Buy 79,000 10/23/2013 Buy 100,000 10/23/2013 Buy 77,000 06/12/2013 Buy 108,000 04/23/2013 Buy 89,000 Samsung SDI(006400) 05/26/2015 Buy 175,000 (W) (W) LG Electronics LG Display (W) Samsung SDI (W) Samsung Techwin 50,000 120,000 300,000 100,000 100,000 40,000 250,000 80,000 80,000 30,000 200,000 60,000 60,000 20,000 150,000 40,000 40,000 100,000 10,000 20,000 20,000 50,000 0 0 Jun 13 Jun 14 JunJun 15 13 Jun 14 Jun0 15 0 Jun 13 Jun 14 JunJun 15 13 Jun 14 Jun 15 2-Year Rating and Target Price History Company (Code) Date Rating Target Price Company (Code) Date Rating Target Price Samsung Electronics(005930) 03/27/2015 Buy 1,850,000 06/23/2013 Buy 37,000 01/22/2015 Buy 1,800,000 06/10/2013 Buy 42,000 No Coverage Samsung Electro-Mechanics(009150) 06/01/2015 Buy 82,000 09/28/2014 Buy 1,400,000 03/12/2015 Buy 97,000 08/27/2014 Buy 1,500,000 11/30/2014 Buy 85,000 07/08/2014 Buy 1,600,000 09/01/2014 Buy 77,000 05/14/2014 Buy 1,700,000 07/21/2014 Buy 80,000 No Coverage 04/27/2014 Buy 98,000 01/26/2014 Buy 1,650,000 01/29/2014 Buy 93,000 01/02/2014 Buy 1,750,000 01/23/2014 Buy 95,000 09/22/2013 Buy 1,900,000 12/11/2013 Buy 113,000 06/10/2013 Buy 2,100,000 04/26/2013 Buy 119,000 SK Hynix(000660) 01/22/2015 Buy 64,000 LG Innotek(011070) 04/29/2015 Buy 136,000 No Coverage 10/29/2014 Buy 140,000 06/15/2014 Buy 57,000 10/01/2014 Buy 164,000 05/14/2014 Buy 52,000 07/21/2014 Buy 170,000 No Coverage 04/29/2014 Buy 138,000 01/29/2014 Buy 46,000 03/27/2014 Buy 130,000 10/30/2013 Buy 43,000 07/24/2013 Buy 114,000 09/12/2013 Buy 38,000 04/25/2013 Buy 107,000 07/26/2013 Buy 35,000 (W) (W) SK Hynix Samsung Electronics (W) Samsung Electro-Mechanics(W) LG Innotek 2,500,000 70,000 140,000 200,000 60,000 2,000,000 120,000 50,000 150,000 100,000 1,500,000 40,000 80,000 30,000 100,000 1,000,000 60,000 20,000 40,000 500,000 10,000 50,000 20,000 0 0 Jun 13 Jun 14 JunJun 15 13 Jun 14 Jun0 15 0 Jun 13 Jun 14 JunJun 15 13 Jun 14 Jun 15 2-Year Rating and Target Price History Company (Code) Date Rating Target Price Company (Code) Date Rating Target Price Seoul Semiconductor(046890) 05/03/2015 Buy 23,500 05/12/2015 Buy 22,300 02/11/2015 Trading Buy 20,000 02/08/2015 Buy 20,500 11/02/2014 Buy 25,000 01/01/2015 Buy 17,800 10/01/2014 Buy 33,000 11/09/2014 Buy 16,800 09/01/2014 Buy 38,000 05/11/2014 Buy 16,000 07/30/2014 Buy 48,000 07/22/2013 Buy 18,100 05/01/2014 Buy 55,000 05/09/2013 Buy 14,500 02/13/2014 Buy 57,000 Amotech(052710) 04/01/2015 Buy 26,000 11/05/2013 Buy 52,000 01/01/2015 Buy 17,300 10/23/2013 Buy 55,000 08/28/2014 Trading Buy 11,600 07/22/2013 Buy 48,000 07/21/2014 Buy 11,600 05/15/2013 Buy 41,000 01/23/2014 Buy 15,700 Wonik IPS(030530) 01/22/2015 Buy 18,000 10/23/2013 Buy 18,600 No Coverage 08/14/2013 Buy 23,300 11/25/2013 Buy 13,000 07/22/2013 Buy 24,700 09/30/2013 Buy 10,000 05/22/2013 Buy 27,500 Humax(115160) 06/01/2015 Buy 24,300 (W) (W) Wonik IPS Seoul Semiconductor (W) Humax (W) Amotech 60,000 20,000 30,000 30,000 50,000 15,000 25,000 25,000 40,000 20,000 20,000 30,000 10,000 15,000 15,000 20,000 5,000 10,000 10,000 10,000 5,000 5,000 0 0 Jun 13 Jun 14 JunJun 15 13 Jun 14 Jun0 15 0 Jun 13 Jun 14 JunJun 15 13 Jun 14 Jun 15 Stock Ratings Industry Ratings Buy : Relative performance of 20% or greater Overweight : Fundamentals are favorable or improving Trading Buy : Relative performance of 10% or greater, but with volatility Neutral : Fundamentals are steady without any material changes Hold : Relative performance of -10% and 10% Underweight : Fundamentals are unfavorable or worsening Sell : Relative performance of -10% Ratings and Target Price History (Share price (─), Target price (▬), Not covered (■), Buy (▲), Trading Buy (■), Hold (●), Sell (◆)) * Our investment rating is a guide to the relative return of the stock versus the market over the next 12 months. * Although it is not part of the official ratings at Daewoo Securities, we may call a trading opportunity in case there is a technical or short-term material development. * The target price was determined by the research analyst through valuation methods discussed in this report, in part based on the analyst’s estimate of future earnings. * The achievement of the target price may be impeded by risks related to the subject securities and companies, as well as general market and economic conditions. Equity Ratings Distribution Buy Trading Buy Hold Sell 71.9% 13.8% 14.3% 0% * Based on recommendations in the last 12-months (as of March 31, 2015) Disclosures As of the publication date, Daewoo Securities Co., Ltd. has acted as a liquidity provider for single stock futures backed by shares of Samsung Techwin as an underlying asset, and other than this, Daewoo Securities has no other special interests in the covered companies. As of the publication date, Daewoo Securities Co., Ltd. has interest in LG Electronics Inc. in accordance with a subscription agreement, etc. As of the publication date, Daewoo Securities Co., Ltd. has been acting as a financial advisor to Seoul Semiconductor for its treasury stock trust, and other than this, Daewoo Securities has no other special interests in the companies covered in this report. Analyst Certification The research analysts who prepared this report (the “Analysts”) are registered with the Korea Financial Investment Association and are subject to Korean securities regulations. They are neither registered as research analysts in any other jurisdiction nor subject to the laws and regulations thereof. Opinions expressed in this publication about the subject securities and companies accurately reflect the personal views of the Analysts primarily responsible for this report. Daewoo Securities Co., Ltd. policy prohibits its Analysts and members of their households from owning securities of any company in the Analyst’s area of coverage, and the Analysts do not serve as an officer, director or advisory board member of the subject companies. Except as otherwise specified herein, the Analysts have not received any compensation or any other benefits from the subject companies in the past 12 months and have not been promised the same in connection with this report. No part of the compensation of the Analysts was, is, or will be directly or indirectly related to the specific recommendations or views contained in this report but, like all employees of Daewoo Securities, the Analysts receive compensation that is impacted by overall firm profitability, which includes revenues from, among other business units, the institutional equities, investment banking, proprietary trading and private client division. At the time of publication of this report, the Analysts do not know or have reason to know of any actual, material conflict of interest of the Analyst or Daewoo Securities Co., Ltd. except as otherwise stated herein. Disclaimers This report is published by Daewoo Securities Co., Ltd. (“Daewoo”), a broker-dealer registered in the Republic of Korea and a member of the Korea Exchange. Information and opinions contained herein have been compiled from sources believed to be reliable and in good faith, but such information has not been independently verified and Daewoo makes no guarantee, representation or warranty, express or implied, as to the fairness, accuracy, completeness or correctness of the information and opinions contained herein or of any translation into English from the Korean language. If this report is an English translation of a report prepared in the Korean language, the original Korean language report may have been made available to investors in advance of this report. Daewoo, its affiliates and their directors, officers, employees and agents do not accept any liability for any loss arising from the use hereof. This report is for general information purposes only and it is not and should not be construed as an offer or a solicitation of an offer to effect transactions in any securities or other financial instruments. The intended recipients of this report are sophisticated institutional investors who have substantial knowledge of the local business environment, its common practices, laws and accounting principles and no person whose receipt or use of this report would violate any laws and regulations or subject Daewoo and its affiliates to registration or licensing requirements in any jurisdiction should receive or make any use hereof. Information and opinions contained herein are subject to change without notice and no part of this document may be copied or reproduced in any manner or form or redistributed or published, in whole or in part, without the prior written consent of Daewoo. Daewoo, its affiliates and their directors, officers, employees and agents may have long or short positions in any of the subject securities at any time and may make a purchase or sale, or offer to make a purchase or sale, of any such securities or other financial instruments from time to time in the open market or otherwise, in each case either as principals or agents. Daewoo and its affiliates may have had, or may be expecting to enter into, business relationships with the subject companies to provide investment banking, market-making or other financial services as are permitted under applicable laws and regulations. The price and value of the investments referred to in this report and the income from them may go down as well as up, and investors may realize losses on any investments. Past performance is not a guide to future performance. Future returns are not guaranteed, and a loss of original capital may occur. Distribution United Kingdom: This report is being distributed by Daewoo Securities (Europe) Ltd. in the United Kingdom only to (i) investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the “Order”), and (ii) high net worth companies and other persons to whom it may lawfully be communicated, falling within Article 49(2)(A) to (E) of the Order (all such persons together being referred to as “Relevant Persons”). This report is directed only at Relevant Persons. Any person who is not a Relevant Person should not act or rely on this report or any of its contents. United States: This report is distributed in the U.S. by Daewoo Securities (America) Inc., a member of FINRA/SIPC, and is only intended for major institutional investors as defined in Rule 15a-6(b)(4) under the U.S. Securities Exchange Act of 1934. All U.S. persons that receive this document by their acceptance thereof represent and warrant that they are a major institutional investor and have not received this report under any express or implied understanding that they will direct commission income to Daewoo or its affiliates. Any U.S. recipient of this document wishing to effect a transaction in any securities discussed herein should contact and place orders with Daewoo Securities (America) Inc., which accepts responsibility for the contents of this report in the U.S. The securities described in this report may not have been registered under the U.S. Securities Act of 1933, as amended, and, in such case, may not be offered or sold in the U.S. or to U.S. persons absent registration or an applicable exemption from the registration requirements. Hong Kong: This document has been approved for distribution in Hong Kong by Daewoo Securities (Hong Kong) Ltd., which is regulated by the Hong Kong Securities and Futures Commission. The contents of this report have not been reviewed by any regulatory authority in Hong Kong. This report is for distribution only to professional investors within the meaning of Part I of Schedule 1 to the Securities and Futures Ordinance of Hong Kong (Cap. 571, Laws of Hong Kong) and any rules made thereunder and may not be redistributed in whole or in part in Hong Kong to any person. All Other Jurisdictions: Customers in all other countries who wish to effect a transaction in any securities referenced in this report should contact Daewoo or its affiliates only if distribution to or use by such customer of this report would not violate applicable laws and regulations and not subject Daewoo and its affiliates to any registration or licensing requirement within such jurisdiction. KDB Daewoo Securities International Network Daewoo Securities Co. Ltd. (Seoul) Daewoo Securities (Hong Kong) Ltd. Daewoo Securities (America) Inc. Head Office Two International Finance Centre 320 Park Avenue 34-3 Yeouido-dong, Yeongdeungpo-gu Suites 2005-2012 31st Floor Seoul 150-716 8 Finance Street, Central New York, NY 10022 Korea Hong Kong, China United States Tel: 82-2-768-3026 Tel: 85-2-2845-6332 Tel: 1-212-407-1000 Daewoo Securities (Europe) Ltd. Daewoo Securities (Singapore) Pte. Ltd. Tokyo Branch 41st Floor, Tower 42 Six Battery Road #11-01 7th Floor, Yusen Building 25 Old Broad St. Singapore, 049909 2-3-2 Marunouchi, Chiyoda-ku London EC2N 1HQ Tokyo 100-0005 United Kingdom Japan Tel: 44-20-7982-8000 Tel: 65-6671-9845 Tel: 81-3- 3211-5511 Beijing Representative Office Shanghai Representative Office Ho Chi Minh Representative Office 2401A, 24th Floor, East Tower, Twin Towers Room 38T31, 38F SWFC Suite 2103, Saigon Trade Center B-12 Jianguomenwai Avenue 100 Century Avenue 37 Ton Duc Thang St, Chaoyang District, Beijing 100022 Pudong New Area, Shanghai 200120 Dist. 1, Ho Chi Minh City, China China Vietnam Tel: 86-10-6567-9299 Tel: 86-21-5013-6392 Tel: 84-8-3910-6000 Daewoo Investment Advisory (Beijing) Co., Ltd. Daewoo Securities (Mongolia) LLC PT. Daewoo Securities Indonesia 2401B, 24th Floor, East Tower, Twin Towers #406, Blue Sky Tower, Peace Avenue 17 Equity Tower Building Lt.50 B-12 Jianguomenwai Avenue, 1 Khoroo, Sukhbaatar District Sudirman Central Business District Jl. Chaoyang District, Beijing 100022 Ulaanbaatar 14240 Jendral Sudirman Kav. 52-53, Jakarta Selatan China Mongolia Indonesia 12190 Tel: 86-10-6567-9699 Tel: 976-7011-0807 Tel: 62-21-515-1140