July 11, 2019 Korea Morning Focus

Company News & Analysis Major Indices Close Chg Chg (%) Jin Air (272450/Trading Buy/TP: W21,000) KOSPI 2,058.78 6.75 0.33 Waiting for restrictions to be lifted KOSPI 200 268.75 1.03 0.38 KOSDAQ 666.90 9.10 1.38

Turnover ('000 shares, Wbn) Volume Value KOSPI 350,018 3,939 KOSPI 200 66,267 2,805 KOSDAQ 761,789 3,861

Market Cap (Wbn) Value KOSPI 1,372,819 KOSDAQ 228,677

KOSPI Turnover (Wbn) Buy Sell Net Foreign 1,298 1,095 203 Institutional 854 1,043 -188 Retail 1,760 1,762 -1

KOSDAQ Turnover (Wbn) Buy Sell Net Foreign 458 389 69 Institutional 203 165 38 Retail 3,182 3,271 -89

Program Buy / Sell (Wbn) Buy Sell Net KOSPI 997 1,009 -13 KOSDAQ 433 350 84

Advances & Declines Advances Declines Unchanged KOSPI 537 286 72 KOSDAQ 956 258 74

KOSPI Top 5 Most Active Stocks by Value (Wbn) Price (W) Chg (W) Value Electronics 45,550 450 420 Hynix 72,900 3,100 315 KODEX Kosdaq150 8,385 115 187 Leverage KODEX Leverage 11,920 105 174 KODEX KOSDAQ150 8,350 -70 173 INVERSE

KOSDAQ Top 5 Most Active Stocks by Value (Wbn) Price (W) Chg (W) Value SillaJen 44,800 2,800 247 Ilji Tech 4,270 500 116 Dongjin Semichem 12,800 -850 110 DUAL 2,215 510 108 Seoam Machinery 7,130 370 90 Industry Note: As of July 10, 2019

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Jin Air (272450 KS) Waiting for restrictions to be lifted

Airlines 2Q19 preview: Operating loss unavoidable despite limited expansion Earnings Preview For 2Q19, we forecast Jin Air to record revenue of W217.3bn (-4.0% YoY). We believe the carrier continued to reduce domestic capacity (-4.0% YoY) and expand international July 11, 2019 capacity (+5.5% YoY) in the quarter. We estimate overall traffic slipped 0.3% YoY due to a weaker load factor.

At the operating level, we expect the carrier to post a loss of W13.8bn, which is worse than the market consensus (loss of W3.1bn). We believe the declines in international (Maintain) Trading Buy load factor (79%; -4.2%p YoY) and yield (-3.9% YoY) had a larger-than-anticipated impact on earnings. In addition, cost pressures, including fuel costs (+29% YoY) and Target Price (12M, W) 21,000 labor costs (+17% YoY), were likely exacerbated by revenue contraction. On the non-operating side, we believe a higher US$/W rate (won depreciation) at end- Share Price (07/10/19, W) 18,800 2Q19 led to F/X-translation losses, contributing to a quarterly net loss of W21.2bn. Expected Return 12% Waiting for restrictions to be lifted 1) Still no sign of end to restrictions: Jin Air is currently banned from adding new

aircraft or routes, which is why the carrier was unable to participate in the China route OP (19F, Wbn) 62 allocations in May. Jin Air is seeking to expand international capacity by reducing Consensus OP (19F, Wbn) 89 domestic capacity, but we believe this strategy will also begin showing limitations later this year. In our view, the carrier needs a more progressive approach to addressing the EPS Growth (19F, %) -26.4 restrictions. Market EPS Growth (19F, %) -23.8 P/E (19F, x) 17.2 2) Risks of market share losses: We estimate Jin Air’s market share in the short-haul international segment has fallen from 7% to around 6%. In May, Jin Air lost its no. 2 Market P/E (19F, x) 12.2 place for the first time ever to T’way Air, suggesting the restrictions are beginning to KOSPI 2,058.78 erode the carrier’s market position. At this rate, we think the carrier could settle into third place in 2H19. Market Cap (Wbn) 564 Shares Outstanding (mn) 30 3) Worries about growth: Overall sluggish demand is minimizing the adverse impact Free Float (%) 38.1 of the restrictions, as the carrier has seen relatively limited fixed costs (except for labor) Foreign Ownership (%) 6.0 due to the aircraft registration ban. But in the long term, market share losses are likely Beta (12M) 1.44 to raise worries about growth. 52-Week Low 17,000 Maintain Trading Buy and TP of W21,000 52-Week High 29,000 We maintain our Trading Buy rating and target price of W21,000 on Jin Air. A relaxation (%) 1M 6M 12M of the restrictions could cause the stock to rise at any time, but it remains highly Absolute -7.4 -0.3 -27.8 uncertain when this might happen. Valuation also does not look particularly attractive Relative -5.6 0.0 -19.6 on a relative basis, with the stock trading at a P/E of 10x based on earnings estimates for 2020, when the restrictions are expected to be lifted. 140 Jin Air KOSPI In the long term, we continue to see positive changes across the industry, including 120 M&As, better shareholder returns (dividends, etc.), and profitability-oriented route restructuring. In such an environment, Jin Air could once again generate synergies with 100 its affiliate and top domestic airline Korean Air. 80

60 7.18 11.18 3.19 7.19

Mirae Asset Daewoo Co., Ltd.

[ Transport/Energy] FY (Dec.) 12/16 12/17 12/18 12/19F 12/20F 12/21F Revenue (Wbn) 720 888 1,011 991 1,028 1,092 Jay JH Ryu +822-3774-1738 OP (Wbn) 52 97 63 62 91 108 [email protected] OP margin (%) 7.2 10.9 6.2 6.3 8.9 9.9

NP (Wbn) 39 74 44 33 55 68 EPS (W) 1,457 2,721 1,482 1,091 1,831 2,269 ROE (%) 60.9 47.8 17.9 11.8 17.6 18.7

P/E (x) - 9.7 13.0 17.2 10.3 8.3 P/B (x) - 3.4 2.2 1.9 1.7 1.4 Dividend yield (%) - 0.9 1.6 1.6 2.1 2.1 Note: All figures are based on consolidated K-IFRS; NP refers to net profit attributable to controlling interests Source: Company data, Mirae Asset Daewoo Research estimates

Mirae Asset Daewoo Research Key Universe Valuations July 11, 2019

※All data as of close July 09, 2019, unless otherwise noted.

19F Earnings growth Mkt Cap Price P/E (x) P/B (x) ROE (%) Ticker Company Div Yield OP EPS (Wbn) (W) (%) 19F 20F 19F 20F 19F 20F 19F 20F 19F 20F 005930 271,924 45,550 3.1 -56.7 31.8 -49.5 27.8 15.0 11.7 1.2 1.1 8.3 10.0 000660 SK Hynix 53,071 72,900 2.1 -85.3 94.0 -85.4 87.6 23.4 12.5 1.0 1.0 4.8 8.5 005380 Hyundai Motor 29,273 137,000 2.9 61.8 9.5 143.0 11.5 10.5 9.4 0.5 0.5 5.2 5.6 068270 24,254 189,000 - - - - 0.0 0.0 051910 LG Chem 23,825 337,500 1.8 -21.5 56.7 -24.3 68.0 23.7 14.1 1.5 1.3 6.4 10.1 012330 22,063 231,500 1.5 9.1 10.2 27.0 7.4 9.4 8.7 0.7 0.6 7.5 7.6 005490 POSCO 20,838 239,000 4.2 -14.6 2.8 71.9 3.0 7.2 7.0 0.4 0.4 6.6 6.4 055550 20,675 43,600 11.0 4.5 9.0 2.2 6.0 5.9 0.5 0.5 9.3 8.9 017670 SK Telecom 20,550 254,500 3.9 7.2 4.4 -51.8 65.3 13.6 8.3 0.8 0.8 6.6 10.3 051900 LG H&H 19,695 1,261,000 12.8 9.7 15.7 10.6 24.9 22.5 5.4 4.6 20.0 18.9 035420 NAVER 19,036 115,500 0.3 -31.0 123.8 -45.3 194.1 53.6 18.2 2.8 2.4 6.6 17.3 105560 KB Financial Group 18,125 43,350 9.7 3.9 10.8 4.1 5.3 5.1 0.5 0.4 9.2 9.0 000270 Motors 17,410 42,950 1.9 20.5 19.7 54.5 16.7 9.7 8.4 0.6 0.6 6.3 7.0 028260 Samsung C&T 17,319 91,300 2.2 5.4 20.1 -4.2 20.7 13.7 11.4 0.6 0.6 5.2 5.9 018260 Samsung SDS 16,404 212,000 1.3 11.6 16.5 12.7 15.4 23.1 20.0 2.5 2.3 11.3 12.0 015760 KEPCO 16,210 25,250 ------0.2 0.2 - - 032830 Samsung Life 16,020 80,100 - - - - 0.0 0.0 006400 Samsung SDI 15,919 231,500 0.4 17.7 37.7 12.6 27.1 20.6 16.2 1.2 1.2 6.4 7.5 034730 SK Holdings 15,479 220,000 2.1 13.3 12.9 -32.3 20.1 10.2 8.5 0.8 0.8 8.9 9.8 096770 SK Innovation 15,303 165,500 4.8 -46.5 75.4 -56.1 94.1 21.4 11.0 0.8 0.8 4.0 7.6 033780 KT&G 13,413 97,700 4.3 12.8 5.6 17.5 5.1 12.7 12.0 1.5 1.4 12.7 12.6 003550 LG Corp. 12,959 75,100 3.1 17.2 15.4 5.5 15.6 6.7 5.8 0.7 0.6 10.5 11.1 000810 Samsung F&M 12,389 261,500 - - - - 0.0 0.0 066570 LG Electronics 11,554 70,600 1.1 7.1 20.0 23.7 39.9 8.3 5.9 0.8 0.7 10.3 12.9 035720 10,931 131,000 0.1 167.0 116.1 127.8 160.4 93.8 36.0 2.1 2.0 2.2 5.6 086790 10,794 35,950 9.1 7.8 9.6 8.2 4.4 4.0 0.4 0.3 9.0 9.0 036570 NCsoft 10,677 486,500 1.2 27.8 27.2 44.7 17.9 17.6 15.0 3.3 2.8 23.2 22.7 010950 S-Oil 10,076 89,500 1.3 -11.0 217.9 7.6 388.6 37.6 7.7 1.5 1.3 4.2 18.5 090430 AmorePacific 9,295 159,000 0.8 6.0 20.7 6.9 22.4 26.2 21.4 2.3 2.2 7.8 8.9 011170 Lotte Chemical 8,517 248,500 4.2 -34.3 31.9 -35.0 35.1 8.3 6.1 0.6 0.6 7.8 9.9 010130 Korea Zinc 8,293 439,500 2.5 13.8 0.8 23.1 -2.5 12.8 13.1 1.2 1.1 10.0 9.1 251270 8,064 94,100 15.4 51.2 24.8 33.7 33.9 25.3 1.7 1.6 5.3 6.7 009540 KSOE 7,997 113,000 - 594.6 - - - 67.2 0.7 0.7 - 1.0 024110 7,790 13,550 5.6 2.7 3.6 1.8 4.9 4.8 0.4 0.4 8.5 8.1 091990 Celltrion Healthcare 7,594 52,800 - 192.4 1119.2 156.4 54.5 21.2 4.1 3.5 8.2 18.6 030200 KT 7,220 27,650 4.0 2.0 3.0 28.2 5.6 8.2 7.8 0.5 0.5 6.5 6.6 009150 Samsung Electro-Mechanics 6,730 90,100 1.2 -21.6 27.6 -18.9 39.2 13.1 9.4 1.3 1.1 10.5 13.0 018880 Hanon Systems 6,059 11,350 - - - - 0.0 0.0 034220 LG Display 6,011 16,800 - - - - - 233.2 0.4 0.4 - 0.2 086280 6,000 160,000 2.1 10.9 3.4 26.2 15.1 10.9 9.4 1.3 1.1 12.2 12.6 032640 LG Uplus 5,960 13,650 4.8 -2.9 11.7 2.0 18.2 12.1 10.3 0.8 0.8 7.0 7.9 000720 Hyundai E&C 5,395 48,450 1.0 22.4 10.8 21.0 1.6 11.7 11.5 0.8 0.8 7.3 7.0 267250 5,350 328,500 5.6 78.7 2.1 154.0 4.5 7.8 7.5 0.6 0.6 8.6 8.5 Holdings 004020 5,338 40,000 1.9 6.1 22.5 53.1 31.9 8.7 6.6 0.3 0.3 3.5 4.3 010140 SamsungHvyInd 4,788 7,600 - - - - - 61.9 0.6 0.6 - 1.2 071050 Korea Investment Holdings 4,341 77,900 - - - - 0.0 0.0 029780 Samsung Card 4,269 36,850 -16.3 3.1 2.8 4.1 12.0 11.6 0.6 0.6 1.5 1.5 097950 CJ CheilJedang 4,260 283,000 1.2 15.4 12.7 -64.8 23.7 14.8 12.0 0.9 0.8 6.3 7.3 023530 Lotte Shopping 4,187 148,000 3.5 6.5 3.9 - 10.5 10.4 9.4 0.3 0.3 3.4 3.7 005940 NH Investment & Securities 3,996 14,200 - - - - 0.0 0.0 Source: Mirae Asset Daewoo Research

Mirae Asset Daewoo Research Market Data July 11, 2019

※All data as of close July 10, 2019, unless otherwise noted.

Other Major Indices Economic Indicators Close Net Chg 1D (%) YTD (%) Close 1D ago 1M ago 1Y ago MSCI Korea* 418.21 -0.52 -0.12 -2.50 USD/KRW 1,179.90 1,178.50 1,179.50 1,112.30 KOSPI 2,058.78 6.75 0.33 2.43 JPY100/KRW 1,083.52 1,083.63 1,087.55 1,003.20 KOSDAQ 666.90 9.10 1.38 -0.37 EUR/KRW 1,322.14 1,321.75 1,334.90 1,306.95 Dow Jones* 26,783.49 -22.65 -0.08 14.82 3Y Treasury 1.44 1.42 1.53 2.10 S&P 500* 2,979.63 3.68 0.12 18.71 3Y Corporate 1.94 1.92 2.05 2.75 NASDAQ* 8,141.73 43.35 0.54 22.14 DDR4 8Gb* 3.01 3.01 3.53 8.04 Philadelphia Semicon* 1,461.21 10.80 0.74 25.39 NAND MLC 64G* 2.36 2.36 2.38 3.52 FTSE 100* 7,536.47 -12.80 -0.17 11.91 Oil (Dubai)* 62.63 63.32 61.20 74.67 Nikkei 225 21,533.48 -31.67 -0.15 10.08 Gold* 1,400.50 1,400.00 1,341.20 1,259.60 Hang Seng* 28,116.28 -215.41 -0.76 11.88 Customer deposits (Wbn)* 24,600 24,958 23,427 26,185 Taiwan (Weighted) 10,798.48 95.70 0.89 13.02 Equity type BC (Wbn)(Jul. 8) 80,127 80,625 81,113 80,883 Note: * as of July 09, 2019 Source: KSDA, FnGuide, DRAMeXchange, MSCI

KOSPI Top 10 Foreign Net Buy / Net Sell (Wbn) KOSPI Top 10 Institutional Net Buy / Net Sell (Wbn) Net Buy Net Sell Net Buy Net Sell Samsung Electronics 84.22 Netmarble 16.18 Hynix 17.83 Samsung Electronics 16.36 Hynix 83.47 Hyundai Motor 7.98 KODEX Leverage 15.47 KODEX 200 Futures Inverse 2X 13.82 Hyundai Mobis 9.08 Hyundai Eng. & Cosnt. 7.70 KODEX Kosdaq150 Leverage 12.24 11.93 NAVER 8.68 Honam Petrochemical 6.77 S-Oil 7.55 Korea Zinc 9.28 Samsung Electronics (P) 7.93 Kia Motors 4.76 KODEX KOSDAQ 150 6.43 Netmarble 9.16 Korea Zinc 7.31 POSCO 4.74 KODEX 200 4.57 LG Electronics 9.14 KODEX 200 Futures Inverse 2X 6.75 SK Energy 4.26 Mando 3.89 Hyundai Eng. & Cosnt. 9.05 Hyundai Motor (2P) 5.82 NHN 3.90 CJ CGV 3.37 POSCO 8.59 Daelim Industrial 4.28 3.64 Kia Motors 3.14 Samsung Biologics 7.77 LG Display 3.62 Kangwon Land 3.39 Hyundai Motor 3.01 NAVER 6.51 Source: KSDA, FnGuide

KOSDAQ Top 10 Foreign Net Buy / Net Sell (Wbn) KOSDAQ Top 10 Institutional Net Buy / Net Sell (Wbn) Net Buy Net Sell Net Buy Net Sell KMW 12.22 CJ ENM 3.24 SangSangIn 11.72 SillaJen 4.50 HLB 4.68 Young In Frontier 1.94 OE Solutions 7.96 Dongjin Semichem 3.05 JYP Entertainment 3.87 RFTech 1.68 Nepes 2.89 AbClon 1.69 Jenexine 3.34 SFA Engineering 1.59 AfteecaTV 2.82 Easy Bio System 1.67 3.29 Celltrion Healthcare 1.59 Dongkook Pharm. 2.63 IBKS No.5 Spac 1.59 Choong Ang Vaccine ViroMed 2.88 RFHIC 1.54 RFHIC 2.52 1.36 Laboratory CHA Biotech 2.26 SKC Kolon PI 1.44 Tes 2.06 HLB 1.17 YG Entertainment 2.25 Telcon RF Pharm. 1.17 ABL Bio 1.99 ASTK 1.10 Bio Solution Co.,Ltd. 2.18 SFA Semicon 1.12 Soulbrain 1.92 Ubiquoss 1.08 Nexon GT 2.05 Kolon Life Science 1.04 RFTech 1.80 MC Nex 1.03 Source: KSDA, FnGuide

KOSPI Top 10 by Market Cap (Wbn) KOSDAQ Top 10 by Market Cap (Wbn) Close (W) Chg (W) Mkt Cap Close (W) Chg (W) Mkt Cap Samsung Electronics 45,550 450 271,924 Celltrion Healthcare 52,800 -200 7,594 Hynix 72,900 3,100 53,071 CJ ENM 170,000 -500 3,728 Samsung Electronics (P) 37,850 550 31,146 SillaJen 44,800 2,800 3,162 Hyundai Motor 137,000 -500 29,273 ViroMed 173,700 1,700 2,772 Celltrion 189,000 -3,500 24,254 PearlAbyss 199,000 1,500 2,591 LG Chem 337,500 0 23,825 Medy-tox 423,300 -1,700 2,462 Hyundai Mobis 231,500 500 22,063 Studio Dragon 69,400 2,500 1,947 POSCO 239,000 -1,000 20,838 KMW 44,650 2,650 1,735 Shinhan Financial Group 43,600 -50 20,675 Hugel 375,300 -6,200 1,636 SK Telecom 254,500 -500 20,550 SK Materials 147,500 -100 1,556

Mirae Asset Daewoo Research Key Universe Valuations July 11, 2019

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