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Home , Hankook Tire, Industrial Bank of Korea, POSCO

December 17, 2014

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Company News & Analysis Major Indices Close Chg Chg (%) Hankook (161390/Buy/TP: W66,000) KOSPI 1,900.16 -3.97 -0.21 Impact of 's potential bid for HVCC KOSPI 200 243.72 -0.71 -0.29 KOSDAQ 533.06 -1.09 -0.20

Turnover ('000 shares, Wbn) Volume Value KOSPI 301,895 4,011 KOSPI 200 59,128 2,843 KOSDAQ 446,655 2,308

Market Cap (Wbn) Value KOSPI 1,166,393 KOSDAQ 139,996

KOSPI Turnover (Wbn) Buy Sell Net Foreign 1,079 1,495 -416 Institutional 1,130 727 403 Retail 1,672 1,763 -91

KOSDAQ Turnover (Wbn) Buy Sell Net Foreign 143 134 9 Institutional 99 95 4 Retail 2,059 2,068 -9

Program Buy / Sell (Wbn) Buy Sell Net KOSPI 1,235 1,026 210 KOSDAQ 31 24 8

Advances & Declines Advances Declines Unchanged KOSPI 390 413 70 KOSDAQ 399 563 69

KOSPI Top 5 Most Active by Value (Wbn) Price (W) Chg (W) Value Electronics 1,266,000 -13,000 319 KODEX 200 24,385 -80 227 KODEX LEVERAGE 10,135 -65 197 SAMSUNG SDS 290,000 3,500 176 Hyundai Motor 169,000 -5,500 162

KOSDAQ Top 5 Most Active Stocks by Value (Wbn) Price (W) Chg (W) Value Com2us 138,000 18,000 154 Gamevil 130,900 7,900 115 DTNC 26,050 -3,950 63 SNET 8,630 140 54 SMEC 5,450 485 48 Note: As of December 17, 2014

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

Hankook Tire (161390 KS/Buy)

Impact of Hankook Tire’s potential bid for

HVCC ¢ Hankook Tire is considering becoming a strategic investor in Hahn & Company’s News Comment acquisition of HVCC December 17, 2014 ¢ Deal would pose a financial burden on Hankook Tire, but should be positive to business diversification and long-term growth

¢ More beneficial to Hankook Tire Worldwide, given the likely increase in subsidiary Daewoo Securities CCo.,o., Ltd. earnings over the long term

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Michael Yun 1. Hankook Tire mulling strategic in HVCC +822-768-4169 Hankook Tire is reportedly considering participating as a strategic investor in the acquisition [email protected] of Halla Visteon Climate Control (HVCC) by the private equity fund Hahn & Company. In

Young-ho Park response to ’s inquiry following media reports, Hankook Tire disclosed that it +822-768-3033 was indeed in the midst of negotiations. [email protected] According to several outlets, Hankook Tire is looking to acquire a 21% stake in HVCC, or 30%

of the 69.99% stake that Hahn & Company has agreed to buy from Visteon (total acquisition price of W3.89tr, or W52,000 per share). If so, Hankook Tire would pay around W1.17tr. It is also presumed that Hankook Tire will have right of first refusal and tag-along rights if Hahn & Company decides to sell its shares in the future.

2. Acquisition poses a financial burden If Hankook Tire indeed invests 30% of the total acquisition price—or in the long term purchases additional shares for a controlling interest—this would put the company under heavy financial pressure. The acquisition, which would cost Hankook Tire more than W1tr in cash, could raise the need for additional borrowing, as the company has little financial leeway (cash of W1.22tr and net debt of W1.33tr in consolidated terms as of end-3Q14).

3. But positive to business diversification and long-term growth Despite the potential financial burden, we are positive on the acquisition over the long term. HVCC holds core technologies in thermal for both combustion engines and electric vehicles. The company is also expanding its footprint into powertrain solutions that offer improved efficiency. For Hankook Tire, the deal would help diversify its business portfolio and support long-term growth. Excluding the acquisition price, the deal would result in cash outflow from the payment of net interest expenses, but also cash inflow from the receipt of dividend income from HVCC. We estimate net interest expenses and dividend income at about W25-30bn each, assuming a financing rate of 2.4-2.7% and a dividend payout ratio of 35-40% (based on HVCC’s consolidated net profit). Meanwhile, we foresee a potential boost to Hankook Tire’s EPS, as we estimate the firm could record equity-method gains of over W60bn from a 20% equity stake in HVCC.

4. More beneficial to Hankook Tire Worldwide Over the long term, we believe the deal will be more beneficial to Hankook Tire’s holding company, Hankook Tire Worldwide (000240 KS/Not Rated). Since Hankook Tire would be footing the bill, the acquisition should have little bearing on the holding company’s financial or investment capacities. Additionally, brand royalties from its subsidiary (Hankook Tire) and second-tier subsidiary (HVCC) could increase over the medium and long term. In our view, the deal would have a larger impact on the net profit growth of Hankook Tire Worldwide than that of Hankook Tire. Assuming trademark royalties at around 0.5% of HVCC’s revenue, the holding company would see an additional W30bn in income, lifting the company’s annual operating profit by more than 10%. If the deal goes through, it would represent a long-term positive for both Hankook Tire and Hankook Tire Worldwide. But at this point, we believe it is too early to tell the deal’s actual benefits. On the day of the news (December 16th), shares of Hankook Tire and its holding company rose 6.3% and 10.2%, respectively. We think any anticipated near-term effects have largely been priced in. Analysts who prepared this report are registered as research analysts in Korea but not in any other jurisdiction, including tthehe U.S. PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES & DISCLAIMERS IN APPENDIX 1 AT THE END OF REPORT.

Key Universe Valuations December 17, 2014

※All data as of close December 16, 2014, unless otherwise noted.

15F Earnings growth Mkt Cap Price P/E (x) P/B (x) ROE (%) Ticker Company Div Yield OP EPS (Wbn) (W) (%) 15F 16F 15F 16F 15F 16F 15F 16F 15F 16F 005380 Hyundai Motor 37,227 169,000 1.3 1.9 6.2 3.7 7.1 5.9 5.5 0.7 0.6 13.0 12.4 015760 KEPCO 26,321 41,000 2.2 5.9 10.2 215.0 -57.9 3.3 7.8 0.4 0.4 14.2 5.5 005490 POSCO 24,892 285,500 2.8 26.2 14.5 98.6 20.4 10.0 8.3 0.5 0.5 5.7 6.6 035420 NAVER 24,030 729,000 0.1 38.9 30.3 61.7 34.6 31.4 23.4 7.3 5.6 33.3 32.5 032830 Samsung Life 23,200 116,000 - - - - 0.0 0.0 012330 23,022 236,500 1.0 11.4 8.8 11.8 6.6 5.8 5.4 0.8 0.7 15.8 14.6 018260 Samsung SDS 22,440 290,000 0.1 39.5 8.9 29.9 10.0 41.1 37.4 4.9 4.3 11.7 11.5 055550 22,264 46,950 - - - - 0.0 0.0 017670 SK Telecom 22,124 274,000 3.6 15.8 7.5 13.9 8.0 10.5 9.8 1.2 1.1 13.8 13.6 000270 Motors 21,282 52,500 1.7 19.5 10.2 12.9 7.7 5.4 5.0 0.8 0.7 15.9 14.8 105560 KB Financial Group 14,527 37,600 - - - - 0.0 0.0 000810 Samsung F&M 14,189 299,500 - - - - 0.0 0.0 090430 Amorepacific 13,165 2,252,000 0.3 16.0 22.1 16.7 23.0 32.2 26.2 4.7 4.0 15.5 16.4 051910 LG Chem 12,691 191,500 2.1 19.7 35.2 29.2 36.2 11.1 8.1 1.1 1.0 10.1 12.5 034220 LG Display 12,255 34,250 -7.6 23.2 -17.5 32.3 14.2 10.7 1.0 0.9 7.2 8.8 033780 KT&G 11,450 83,400 4.0 1.0 2.4 3.3 -1.5 13.5 13.7 1.8 1.7 14.4 13.2 003550 LG Corp. 10,716 62,100 1.6 18.0 4.2 18.5 5.9 8.7 8.2 0.8 0.7 9.4 9.2 086280 10,256 273,500 0.5 12.2 12.2 1.7 10.3 17.1 15.5 3.0 2.6 19.3 17.9 034730 SK C&C 9,825 196,500 0.6 9.9 19.7 15.8 -56.6 18.5 42.8 2.7 2.5 17.6 6.9 000830 Samsung C&T 9,795 62,700 1.0 26.7 6.4 41.7 6.8 15.6 14.6 0.9 0.8 5.7 5.8 066570 LG Electronics 9,737 59,500 0.7 16.2 25.9 67.5 26.8 8.7 6.9 0.8 0.7 9.7 11.1 051900 LG Household & Health Care 9,683 620,000 0.6 18.8 12.2 20.0 14.6 26.4 23.1 5.2 4.4 22.3 21.2 086790 9,465 32,650 - - - - 0.0 0.0 009540 9,234 121,500 1.6 - 103.3 - 118.1 22.1 10.1 0.5 0.5 2.7 5.6 023530 Lotte Shopping 8,802 279,500 0.5 8.3 6.0 15.3 7.3 9.8 9.1 0.5 0.5 5.2 5.3 006400 Samsung SDI 8,458 123,000 1.3 - 71.5 143.2 52.1 31.3 20.6 1.1 1.0 3.5 5.1 030200 KT 8,225 31,500 3.2 - 7.2 - 33.0 15.2 11.4 0.7 0.7 4.9 6.3 024110 Industrial of Korea 8,177 14,800 - - - - 0.0 0.0 096770 SK Innovation 8,054 87,100 3.7 198.4 35.4 - 35.5 10.9 8.0 0.5 0.5 4.8 6.2 003600 SK Holdings 7,749 165,000 1.5 29.8 6.2 34.0 -3.9 5.5 5.7 0.5 0.5 10.9 9.5 004020 Hyundai 7,529 64,600 0.8 -0.5 8.0 1.0 17.7 9.5 8.1 0.5 0.5 5.6 6.2 010130 Korea Zinc 7,435 394,000 1.3 15.6 5.5 21.5 6.2 12.3 11.6 1.4 1.3 12.5 11.9 035720 Daum Communications 7,276 126,100 0.9 226.9 35.3 144.0 39.4 29.2 20.9 9.2 6.8 37.2 38.4 088350 Hanwha Life 7,122 8,200 - - - - 0.0 0.0 035250 6,718 31,400 3.5 7.2 5.3 12.1 7.1 15.2 14.2 2.1 2.0 15.3 15.1 161390 Hankook Tire 6,503 52,500 1.0 7.0 9.0 13.2 10.1 7.8 7.1 1.2 1.1 17.1 16.1 021240 Coway 6,340 82,200 2.4 14.4 13.6 14.3 17.3 21.5 18.3 4.7 4.1 26.0 26.3 139480 Emart 6,091 218,500 0.7 12.4 9.7 18.1 13.8 11.8 10.3 0.8 0.7 7.0 7.3 001800 Orion 5,730 959,000 0.3 3.6 17.5 12.4 18.5 32.2 27.2 4.1 3.6 13.6 14.2 002380 KCC 5,712 543,000 1.5 7.9 11.4 10.2 12.3 20.3 18.0 1.1 1.0 5.4 5.8 011170 Lotte Chemical 5,570 162,500 0.6 74.8 26.5 87.6 30.4 10.1 7.8 0.8 0.7 8.1 9.7 010950 S-Oil 5,539 49,200 2.8 - 62.4 - 62.4 16.4 10.1 1.0 1.0 6.6 10.0 032640 LG Uplus 4,999 11,450 2.0 16.6 3.6 35.9 9.5 15.4 14.1 1.1 1.1 7.5 7.8 010140 4,698 20,350 2.5 152.4 4.2 128.4 6.0 7.9 7.5 0.7 0.6 9.5 9.3 000720 Hyundai E&C 4,677 42,000 1.4 19.8 5.1 38.8 9.6 7.0 6.4 0.8 0.7 11.6 11.4 036460 Korea Gas 4,546 49,250 2.0 19.1 8.4 0.1 21.8 9.3 7.6 0.4 0.4 5.0 5.8 011210 4,474 164,500 0.3 20.6 10.4 11.8 10.5 8.3 7.5 1.4 1.2 18.3 17.0 009150 Samsung Electro-Mechanics 4,332 58,000 0.9 - 68.4 -65.7 60.2 25.6 16.0 1.0 0.9 3.9 6.0 000120 CJ Korea Express 4,289 188,000 51.5 14.5 157.1 9.7 27.2 24.8 1.5 1.4 6.7 6.9 097950 CJ CheilJedang 4,217 321,000 0.6 22.3 7.9 118.2 14.7 15.5 13.5 1.4 1.3 9.7 10.2 Source: KDB Daewoo Securities Research

Market Data December 17, 2014

※All data as of close December 17, 2014, unless otherwise noted.

Other Major Indices Economic Indicators Close Net Chg 1D (%) YTD (%) Close 1D ago 1M ago 1Y ago MSCI Korea* 390.94 1.55 0.40 -11.65 USD/KRW 1,092.40 1,103.00 1,099.60 1,052.60 KOSPI 1,900.16 -3.97 -0.21 -3.41 JPY100/KRW 937.32 936.69 943.42 1,021.35 KOSDAQ 533.06 -1.09 -0.20 7.41 EUR/KRW 1,366.70 1,372.57 1,376.70 1,448.48 Dow Jones* 17,068.87 -111.97 -0.65 3.82 3Y Treasury 2.17 2.13 2.19 2.88 S&P 500* 1,972.74 -16.89 -0.85 7.68 3Y Corporate 2.48 2.45 2.51 3.30 NASDAQ* 4,547.83 -57.33 -1.24 9.77 DDR2 1Gb* 1.35 1.35 1.40 1.56 Philadelphia Semicon* 661.30 -4.41 -0.66 25.31 NAND 16Gb* 2.25 2.25 2.31 3.45 FTSE 100* 6,331.83 149.11 2.41 -5.75 Oil (Dubai)* 55.61 59.75 75.19 107.04 Nikkei 225 16,819.73 64.41 0.38 5.73 Gold* 1,193.90 1,207.20 1,185.60 1,245.50 Hang Seng* 22,670.50 -357.35 -1.55 -2.87 Customer deposits (Wbn)* 17,412 17,123 15,434 13,497 Taiwan (Weighted) 8,828.36 -122.55 -1.37 2.51 Equity type BC (Wbn)(Dec. 15) 78,616 78,237 78,944 83,456 Note: * as of December 16, 2014 Source: KSDA, Wisefn, 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 F&M Insurance 9.04 156.63 Samsung Electronics 84.70 KODEX LEVERAGE 44.60 S-Oil 7.87 SAMSUNG SDS 64.96 SAMSUNG SDS 52.81 LG Electronics 28.11 Daewoo Securities 5.16 Hyundai Motor 50.68 POSCO 19.66 14.30 SK Corp. 4.66 Kia Motors 21.53 SK Energy 17.97 Kia Motors 12.71 NHN Entertainment 4.21 Samsung Electronics (P) 18.68 KEPCO 14.16 Samsung F&M Insurance 10.89 Hyundai Eng. & Cosnt. 3.66 Shinhan Financial Group 12.20 NHN 14.15 Hyundai Motor 6.25 DSME 3.62 POSCO 12.09 Hynix 11.55 CUCKOO 4.74 Korean Air Lines 3.45 LG Electronics 10.13 KCC 11.07 TIGER WTI Futures 4.29 Honam Petrochemical 3.20 TIGER200 9.68 Shinhan Financial Group 10.91 KT 3.26 Kolao Holdings 2.74 LG Display 9.37 Daesang Corp. 10.59 HYUNDAI WIA 3.26 Source: KSDA, Wisefn

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 Com2us 14.36 Paradise 5.67 Daum Communications 4.48 Com2us 4.01 Gamevil 5.39 Webzen 3.00 YG Entertainment 2.32 HARIM 2.17 CJ O Shopping 2.54 Daum Communications 2.31 CJ E&M 1.73 i-SENS 1.48 Medy-tox 2.28 SundayToz 2.20 Paradise 1.63 SKPI 1.36 GS Home Shopping 1.64 EO Technics 1.78 Tovis 1.32 Romanson 1.13 i-SENS 1.44 JCE 1.58 KMW 1.14 Abov Semiconductor 0.87 KH Vatec 1.26 Sung Woo HiTech 1.30 SFA 1.08 LabGen 0.85 Tovis 1.01 NEOWIZ Games 1.29 NICEI&T 1.06 RSUPPORT 0.84 Mobilians 1.01 NICEI&T 0.97 BLUECOM 1.05 Silicon Works 0.82 Wemade 0.95 Access Bio 0.84 OCI Materials 1.01 ADTechnology 0.77 Source: KSDA, Wisefn

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 1,266,000 -13,000 186,481 Daum Communications 126,100 -1,700 7,276 Hyundai Motor 169,000 -5,500 37,227 38,700 -1,050 4,008 Hynix 46,700 200 33,998 Dongsuh 23,350 -550 2,328 KEPCO 41,000 650 26,321 Paradise 24,250 -800 2,205 POSCO 285,500 5,500 24,892 CJ O Shopping 267,100 5,100 1,658 NHN 729,000 0 24,030 Medy-tox 281,000 7,000 1,589 Samsung Life Insurance 116,000 -2,500 23,200 GS Home Shopping 217,200 5,200 1,425 Hyundai Mobis 236,500 -6,000 23,022 Webzen 39,750 5,150 1,404 SAMSUNG SDS 290,000 3,500 22,440 Com2us 138,000 18,000 1,392 Shinhan Financial Group 46,950 -150 22,264 CJ E&M 35,700 450 1,383 Source: Korea Exchange