October 22, 2019 Korea Morning Focus

Sector News & Analysis Major Indices Close Chg Chg (%) Mobile Components (Overweight) KOSPI 2,064.84 4.15 0.20 IT Corporate Day review: Why now is the time to buy smartphone KOSPI 200 273.79 0.98 0.36 component stocks KOSDAQ 649.18 2.49 0.39

Turnover ('000 shares, Wbn) Volume Value KOSPI 600,283 3,598 KOSPI 200 44,907 1,946 KOSDAQ 754,168 4,694

Market Cap (Wbn) Value KOSPI 1,381,669 KOSDAQ 228,312

KOSPI Turnover (Wbn) Buy Sell Net Foreign 775 896 -121 Institutional 750 696 54 2,037 1,992 45

KOSDAQ Turnover (Wbn) Buy Sell Net Foreign 407 426 -19 Institutional 147 209 -62 Retail 4,120 4,027 93

Program Buy / Sell (Wbn) Buy Sell Net KOSPI 721 807 -87 KOSDAQ 370 383 -12

Advances & Declines Advances Declines Unchanged KOSPI 266 554 77 KOSDAQ 372 862 78

KOSPI Top 5 Most Active Stocks by Value (Wbn) Price (W) Chg (W) Value Feelux 7,050 460 394 Electronics 50,300 400 220 KODEX Kosdaq150 8,070 300 198 Leverage Hynix 77,500 100 163 KODEX KOSDAQ150 8,125 -170 156 INVERSE

KOSDAQ Top 5 Most Active Stocks by Value (Wbn) Price (W) Chg (W) Value HLB 167,800 38,700 752 SillaJen 14,300 1,550 276 Energy Solutions 28,850 6,650 273 Kukil Paper 5,790 -20 232 ViroMed 85,800 1,500 124 Note: As of October 21, 2019

This document is a summary of a report prepared by Mirae Asset Co., Ltd. (“Mirae Asset 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. Mirae Asset Daewoo makes no guarantee, representation or warranty, express or implied, as to the fairness, accuracy or completeness of the information and opinions contained in this document. Mirae Asset Daewoo accepts no responsibility or liability whatsoever for any loss arising from the use of this document or its contents or otherwise arising in connection therewith. Information and 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.

Mobile Components IT Corporate Day review: Why now is the time to buy smartphone component stocks

Overweight (Maintain) Look to foldable phones; High-end product expansion strategy needed in 2020 Industry Report We hosted a Corporate Day event with smartphone component companies on October th th October 22, 2019 15 -16 . Smartphone component stocks, which had performed well amid strong earnings in 1H19, have pulled back sharply. We believe they now deserve renewed attention for several reasons. First, we expect ’ (SEC) smartphone business to improve; we forecast SEC’s smartphone sales volume—which had fallen Mirae Asset Daewoo Co., Ltd. from 320mn units in 2017 to 290mn units in 2018—to recover to 300mn units in 2019 and 330mn units in 2020, driven by strong sales of the A series. [Telecom Equipment/Electronic Components] Second, while investments in smartphone component stocks this year have largely

Wonjae Park revolved around those benefiting from volume growth of the A series, we believe +822-3774-1426 investors should now shift their attention to high-performance/high-end component [email protected] stocks. Backed by market share gains, SEC is likely to focus on improving its margins

Yumi Cha by raising the mix of high-end products, such as foldable phones. +822-3774-1770 [email protected] SEC’s OED/ODM volume growth to be limited; In-house production volume to remain steady

Third, we believe worries about SEC’s move toward OEM/ODM are overblown. In our view, it makes little sense for SEC to increase the share of low-end models, which have limited upside to margins. Although SEC will likely raise the share of mid-range models (A series) and expand OEM/ODM volume to meet the increase in demand sparked by Huawei’s woes, it would be unreasonable for SEC to recklessly expand its OEM/ODM volume, given the potential impact on the company’s brand value.

While the market fears SEC’s OEM/ODM volume could exceed 100mn units, we think this is unlikely; our forecasts are around 25mn units for 2019 and 50-60mn units for 2020. We estimate SEC will keep in-house production volume at around 270-280mn units.

With Galaxy S11 coming out in early 2020, now is the time to buy We expect SEC’s Galaxy S11 to be released in early 2020. Supplies of related components will likely begin in December 2019. This is why we believe now is the time to buy smartphone component stocks. We favor: 1) suppliers of camera modules, which are becoming more advanced in terms of resolution and features; 2) small-sized OLED display and hinge makers, which should benefit from the growth of foldable phones; and 3) substrate/case makers, which stand to benefit from volume growth. We plan to initiate coverage of some of the companies that attended our Corporate Day event in 2020.

SEC’s smartphone shipments and IM division’s OP margin

(mn units) (%) 100 Shipment(L) OPM(R) 25

80 20

60 15

40 10

20 5

0 0 1Q04 1Q06 1Q08 1Q10 1Q12 1Q14 1Q16 1Q18 1Q20F

Source: SEC, Mirae Asset Daewoo Research

Analysts who prepared this report are registered as research analysts in Korea but not in any other jurisdiction, including the U.S. PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES & DISCLAIMERS IN APPENDIX 1 AT THE END OF REPORT.

Mirae Asset Daewoo Research Key Universe Valuations October 22, 2019

※All data as of close October 18, 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 Samsung Electronics 300,280 50,300 2.8 -53.2 36.9 -46.5 33.3 15.6 11.7 1.3 1.2 8.8 10.9 000660 SK Hynix 56,420 77,500 1.9 -86.0 149.3 -85.7 138.4 25.3 10.6 1.1 1.0 4.7 10.5 005380 Hyundai Motor 26,068 122,000 3.3 46.5 18.5 110.7 27.2 10.8 8.5 0.5 0.5 4.5 5.5 035420 NAVER 25,052 152,000 0.2 -17.2 75.6 -40.0 123.1 64.4 28.9 3.6 3.3 7.2 14.5 068270 Celltrion 23,357 182,000 - - - - 0.0 0.0 012330 22,731 238,500 1.7 10.3 7.8 25.4 8.8 9.8 9.0 0.7 0.6 7.4 7.4 051910 LG Chem 21,072 298,500 2.0 -50.7 85.8 -60.7 131.6 40.4 17.4 1.3 1.3 3.4 7.5 055550 20,319 42,850 12.7 4.1 9.5 -0.3 5.9 5.9 0.5 0.5 9.1 8.4 051900 LG H&H 19,601 1,255,000 0.9 12.8 9.7 16.5 10.7 24.6 22.3 5.4 4.6 20.3 19.1 017670 SK Telecom 19,258 238,500 4.2 10.7 -6.0 -58.8 64.3 14.9 9.1 0.8 0.7 5.7 8.9 005490 POSCO 19,225 220,500 5.0 -23.7 -6.4 50.5 -5.3 7.6 8.0 0.4 0.4 5.8 5.3 105560 KB Financial Group 18,042 43,150 9.3 1.1 11.2 0.2 5.3 5.3 0.5 0.4 9.1 8.4 028260 Samsung C&T 17,641 93,000 2.2 -16.8 41.4 -39.5 16.8 17.2 14.7 0.6 0.6 4.2 4.1 034730 SK Holdings 16,922 240,500 2.1 0.6 27.1 -51.4 16.8 15.6 13.3 0.9 0.9 6.3 6.9 015760 KEPCO 16,498 25,700 - - - - - 78.1 0.2 0.2 - 0.3 000270 Motors 16,377 40,400 2.2 82.2 7.7 95.5 11.5 7.2 6.5 0.6 0.5 8.0 8.3 006400 Samsung SDI 15,438 224,500 0.4 2.2 50.9 0.7 42.2 22.4 15.7 1.2 1.1 5.7 7.6 018260 Samsung SDS 15,050 194,500 1.3 13.6 15.8 13.2 15.8 21.1 18.2 2.3 2.1 11.3 12.0 096770 SK Innovation 14,841 160,500 5.0 -37.5 28.9 -60.6 85.6 23.1 12.5 0.8 0.8 3.6 6.5 033780 KT&G 14,210 103,500 4.1 12.8 5.6 17.5 5.1 13.4 12.8 1.6 1.5 12.7 12.6 032830 Samsung Life 14,120 70,600 - - - - 0.0 0.0 003550 LG Corp. 12,096 70,100 3.3 17.2 15.4 5.5 15.6 6.3 5.4 0.6 0.6 10.5 11.1 036570 NCsoft 11,723 534,000 1.1 1.2 78.1 27.2 54.8 22.0 14.2 3.7 3.0 20.7 26.4 066570 LG Electronics 11,308 69,100 1.1 -9.9 29.6 -17.1 79.5 12.2 6.8 0.8 0.7 6.9 11.4 035720 11,197 133,500 0.1 184.9 132.6 205.6 127.5 71.3 31.3 2.1 2.0 3.0 6.5 010950 S-Oil 11,033 98,000 1.3 14.7 169.5 47.8 288.7 30.0 7.7 1.7 1.4 5.7 19.8 086790 10,659 35,500 6.0 4.8 16.8 -4.5 4.1 4.2 0.4 0.3 9.5 8.3 000810 Samsung F&M 10,612 224,000 - - - - 0.0 0.0 090430 AmorePacific 8,944 153,000 0.7 -15.7 30.9 -9.8 31.4 29.8 22.7 2.3 2.1 6.6 8.1 009540 KSOE 8,599 121,500 - 215.7 - 27.2 210.7 165.6 0.7 0.7 0.3 0.4 009150 Samsung Electro-Mechanics 8,403 112,500 1.0 -32.5 17.1 -1.3 -8.2 13.5 14.7 1.5 1.4 12.5 10.3 010130 Korea Zinc 8,341 442,000 2.5 11.5 3.5 23.7 -1.0 12.8 12.9 1.2 1.1 10.0 9.2 011170 Lotte Chemical 8,140 237,500 4.4 -35.3 21.0 -39.4 30.8 8.5 6.5 0.6 0.6 7.3 9.0 251270 7,751 90,400 16.8 50.4 24.2 35.1 32.7 24.2 1.6 1.5 5.3 6.7 091990 Celltrion Healthcare 7,628 53,000 - 214.5 745.0 180.7 78.9 28.1 4.2 3.8 5.7 14.8 024110 7,330 12,700 0.6 -0.8 -1.0 -2.3 4.8 4.9 0.4 0.4 8.0 7.3 030200 KT 7,037 26,950 4.1 9.5 1.0 18.2 5.3 8.6 8.2 0.5 0.5 6.0 6.0 018880 Hanon Systems 6,245 11,700 - - - - 0.0 0.0 032640 LG Uplus 6,003 13,750 4.7 -12.3 11.1 -17.2 15.2 15.1 13.1 0.8 0.8 5.7 6.4 267250 5,643 346,500 5.3 78.7 2.1 154.0 4.5 8.3 7.9 0.7 0.6 8.6 8.5 Holdings 086280 5,513 147,000 2.2 14.1 4.5 17.3 19.6 10.7 9.0 1.2 1.0 11.4 12.2 034220 LG Display 5,206 14,550 ------0.4 0.4 - - 000720 Hyundai E&C 4,883 43,850 1.1 20.6 14.3 32.0 12.8 9.7 8.6 0.7 0.7 7.8 8.2 010140 4,857 7,710 - - - - - 39.2 0.7 0.7 - 1.9 004020 4,711 35,300 2.1 -26.2 40.7 -30.1 111.1 16.9 8.0 0.3 0.3 1.6 3.2 271560 Orion 4,072 103,000 0.6 9.2 7.1 48.2 9.5 19.6 17.9 2.5 2.2 13.7 13.1 029780 Samsung Card 4,032 34,800 -10.3 -7.8 -1.1 5.6 11.8 11.2 0.6 0.6 1.5 1.6 004990 3,939 37,550 2.1 91.0 11.9 198.2 20.3 7.2 6.0 0.4 0.4 7.5 8.3 071050 Korea Investment Holdings 3,879 69,600 - - - - 0.0 0.0 005830 DB Insurance 3,752 53,000 - - - - 0.0 0.0 Source: Mirae Asset Daewoo Research

Mirae Asset Daewoo Research Market Data October 22, 2019

※All data as of close October 21, 2019, unless otherwise noted.

Other Major Indices Economic Indicators Close Net Chg 1D (%) YTD (%) Close 1D ago 1M ago 1Y ago MSCI Korea* 428.22 -2.64 -0.61 -0.16 USD/KRW 1,180.50 1,186.60 1,195.10 1,132.60 KOSPI 2,064.84 4.15 0.20 2.73 JPY100/KRW 1,089.42 1,092.99 1,106.22 1,009.40 KOSDAQ 649.18 2.49 0.39 -3.02 EUR/KRW 1,317.14 1,320.15 1,320.05 1,297.56 Dow Jones* 26,770.20 -255.68 -0.95 14.76 3Y Treasury 1.41 1.38 1.33 1.99 S&P 500* 2,986.20 -11.75 -0.39 18.97 3Y Corporate 1.91 1.88 1.84 2.43 NASDAQ* 8,089.54 -67.31 -0.83 21.36 DDR4 8Gb* 2.99 3.00 3.24 7.06 Philadelphia Semicon* 1,590.09 -17.07 -1.06 36.45 NAND MLC 64G* 2.31 2.31 2.37 2.87 FTSE 100* 7,150.57 -31.75 -0.44 6.18 Oil (Dubai)* 59.70 59.23 63.30 78.43 Nikkei 225 22,548.90 56.22 0.25 15.27 Gold* 1,488.20 1,492.30 1,509.10 1,226.50 Hang Seng* 26,719.58 -128.91 -0.48 6.32 Customer deposits (Wbn)* 24,123 25,081 24,483 23,883 Taiwan (Weighted) 11,184.15 3.93 0.04 -99.83 Equity type BC (Wbn)(Oct. 17) 79,471 79,472 79,319 81,918 Note: * as of October 18, 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 SEMCO 28.22 KODEX MSCI Korea TR 59.20 KODEX MSCI Korea TR 59.17 Doosanfc 42.76 Hanall Biopharma 12.98 Hynix 57.08 KODEX Kosdaq150 Leverage 29.03 KODEX 200 Futures Inverse 2X 19.60 Celltrion 7.52 LG Household & Health Care 10.72 Samsung Electronics 22.57 KODEX KOSDAQ150 INVERSE 17.99 Shilla 4.72 Hyundai Motor 9.44 Hynix 16.75 KODEX Inverse 6.19 LG Chem 4.47 NAVER 6.86 KODEX Leverage 14.49 Doosanfc(1P) 5.85 NC Soft 2.90 POSCO 6.62 NAVER 8.84 5.29 LG Innotek 2.44 SK Energy 6.21 Kakao 8.52 Hyundai Steel 5.27 LG Electronics 2.32 KODEX 200 5.74 LG Display 7.70 Hanwha Chemical 4.09 Samsung SDI 2.23 KB Financial Group 5.53 KB Financial Group 7.67 POSCO 4.08 Woongjin Coway 2.01 Korea 5.42 KODEX 200 7.07 Hanall Biopharma 3.82 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 HLB 10.84 ViroMed 11.05 KH Vatec 3.85 HLB 10.21 Seojin System 6.93 Partrion 9.06 ATON 2.86 KMW 5.86 Wonik IPS 4.11 Wi-Sol 4.71 ViroMed 2.59 Seojin System 4.52 Celltrion Healthcare 3.85 Deutsch Motors 3.34 BH,LTD. 2.49 Celltrion Healthcare 3.15 KMW 3.08 Mezzion Pharma 3.10 Com2us 2.30 Olipass 3.02 Vitcell 2.78 Welcron 2.32 WebCash 1.80 Medy-tox 2.83 SFA Engineering 2.26 Unick Corporation 2.15 SillaJen 1.72 ECOPROBM 2.62 Energy Solutions 2.26 Clean & Science 2.07 Duksan Neolux 1.70 Mezzion Pharma 2.49 CJ ENM 2.19 Com2us 1.62 NHN KCP 1.56 MC Nex 2.14 Daea TI 1.78 Eugene Corporation 1.37 SKC Kolon PI 1.41 CJ ENM 2.01 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 50,300 400 300,280 Celltrion Healthcare 53,000 -400 7,628 Hynix 77,500 100 56,420 HLB 167,800 38,700 6,584 Samsung Electronics (P) 40,600 300 33,409 CJ ENM 163,800 300 3,592 Hyundai Motor 122,000 -1,000 26,068 PearlAbyss 208,000 500 2,709 NAVER 152,000 1,500 25,052 KMW 67,500 -1,500 2,687 Celltrion 182,000 500 23,357 SK Materials 188,000 1,000 1,983 Hyundai Mobis 238,500 -2,500 22,731 Hugel 375,200 -6,600 1,921 339,500 -4,500 22,463 67,700 400 1,902 LG Chem 298,500 3,000 21,072 ViroMed 85,800 1,500 1,837 Shinhan Financial Group 42,850 750 20,319 Medy-tox 314,100 -200 1,827 Source: