August 10, 2012

KOREA

Company News & Analysis Major Indices Close Chg Chg (%) Amorepacific (Buy/TP: W1,240,000) Lower TP KOSPI 1,946.40 5.81 0.30 Robust overseas growth offset domestic sluggishness in 2Q KOSPI 200 258.91 0.83 0.32 KOSDAQ 475.51 1.46 0.31 NHN (Buy/TP: W330,000) Lower TP Focus on mobile monetization efforts & secular growth potential Turnover ('000 shares, Wbn) Volume Value LS (Buy/TP: W109,000) Lower TP KOSPI 320,982 4,000 Weaker-than-expected results, but earnings stability recovering KOSPI 200 73,422 3,385 KOSDAQ 504,180 1,519

Doosan Heavy I&C (Buy/TP: W82,000) Market Cap (Wbn) 2H Share price performance to hinge on order-taking Value KOSPI 1,122,272 Silicon Works (Buy/TP: W40,000) KOSDAQ 103,748 Growing demand for thinner and clearer displays KOSPI Turnover (Wbn) Buy Sell Net S&T Dynamics (Buy/TP: W18,100) Lower TP Foreign 1,431 776 655 Lower expectations, but valuations appear attractive Institutional 919 1,203 -284 Retail 1,636 1,988 -352 CJ E&M (Trading Buy/TP: W28,000) Lower TP Broadcasting operations: The lone bright spot KOSDAQ Turnover (Wbn) Buy Sell Net S&T Motiv (Hold) Downgrade rating Foreign 41 58 -16 Normalization to take some time Institutional 64 78 -14 Retail 1,416 1,381 35

Program Buy / Sell (Wbn) Buy Sell Net KOSPI 1,220 616 604 KOSDAQ 11 13 -2

Advances & Declines Advances Declines Unchanged KOSPI 410 374 114 KOSDAQ 498 421 83

KOSPI Top 5 Most Active Stocks by Value (Wbn) Price (W) Chg (W) Value Samsung Electronics 1,348,000 8,000 395 KODEX LEVERAGE 12,590 20 244 KODEX INVERSE 7,525 -35 202 NHN 250,500 -13,000 155 KODEX 200 25,995 55 142

KOSDAQ Top 5 Most Active Stocks by Value (Wbn) Price (W) Chg (W) Value Hicel 2,870 215 43 Ewha Technologies 1,140 20 35 Information Celltrion 28,500 500 31 Kyung Bong 8,390 390 30 Agabang 13,300 400 29 Note: As of August 10, 2012 This document is a summary of a report prepared by Daewoo 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.

Company August 10, 2012

Cosmetics Amorepacific (090430 KS) Daewoo Securities Co., Ltd. Mina Kim Robust overseas growth offset domestic sluggishness in 2Q +822-768-4163 [email protected] Lower TP to W1,250,000; Maintain Buy call Jieun Lee +822-768-3265 We maintain our Buy call on Amorepacific but lower our target price by 8% to [email protected] W1,250,000 (from W1,360,000). Our target price revision is mainly due to the fact

that we adjusted down our 2012 and 2013 net profit estimates by 8.3% and 8%, respectively, to reflect the slower-than-expected recovery of domestic consumption. However, we expect AmorepacificÊs overseas cosmetics operations to display strong growth despite intensifying competition. Using a sum-of-the-parts Buy (Maintain) methodology, we derived our target price by adding the value of AmorepacificÊs Target Price (12M, W) 1,250,000 domestic operations (W1,180,000/sh; based on our 2012F EPS for the domestic Share Price (08/09/12, W) 1,037,000 business and a three-year average P/E of 22x) to the value of its Chinese operations Expected Return (%) 20.5 (W70,000/sh; based on our 2012F EPS for the Chinese business and a P/E of 30x). EPS Growth (12F, %) -4.1 Market EPS Growth (12F, %) 13.0 2Q Review: Robust overseas growth offset domestic sluggishness P/E (12F, x) 22.8 Market P/E (12F, x) 10.1 For 2Q, Amorepacific posted revenues of W726.8bn (up 11.5% YoY) and an KOSPI 1,940.59 operating profit of W98.1bn (up 4.9% YoY), under consolidated K-IFRS. As for the Market Cap (Wbn) 6,062 domestic cosmetics division, revenues at department stores and online channels Shares Outstanding (mn) 7 jumped 14.8% YoY and 13.3% YoY on the back of successful new product launches Avg Trading Volume (60D, '000) 11 Avg Trading Value (60D, Wbn) 12 and marketing efforts. And door-to-door sales increased 3.1% YoY (after slowing for Dividend Yield (12F, %) 0.0 two consecutive quarters) thanks to an increase in sales personnel. Meanwhile, Free Float (%) 50.4 discount store revenues declined 1.8% YoY. Overseas revenues soared 40.9% YoY 52-Week Low (W) 923,000 to W109.1bn (15% of overall revenues) on the back of strong performances in China 52-Week High (W) 1,325,000 (up 49% YoY to W67.2bn; driven by the launch of a new brand and retail channel Beta (12M, Daily Rate of Return) 0.26 expansion) and the rest of Asia (up 35.1% YoY to W17.7bn). Price Return Volatility (12M Daily, %, SD) 2.0 Foreign Ownership (%) 32.0 Meanwhile, operating profit at the domestic cosmetics division only inched up 1.6% Major Shareholder(s) due to an increase in promotional expenses at the MC&S (personal care) unit Amore G et al. (49.55%) (operating profit: down 18.3% YoY). However, this domestic sluggishness was FSIMet al. (6.8%) CRMC et al. (5.27%) offset by strong overseas performances. Overseas operating profit leaped YoY from Price Performance W800mn to W3.9bn in 2Q, aided by a surge in margins at Chinese cosmetics (%) 1M 6M 12M operation. Absolute -2.6 4.8 -2.2 Relative -8.3 8.4 -9.9 Chinese operations to show robust growth on brand reputation improvement Key Business In the domestic market, low-end cosmetics brands remain strong regardless of Develops, manufactures, and exports cosmetics and household goods. Sales economic conditions. In 2Q, sales of Etude and Innisfree (low-end brands that were portion of two divisions is 85:15. spun off from Amorepacific) jumped 34% YoY and 86% YoY, respectively. Since the spin-offs of these brands, Amorepacific has focused on mid- and high-end products. Because the recovery of domestic consumption is slowing, the companyÊs mid and high-end cosmetics business is likely to show only modest growth. Nevertheless,

Share price FY Revenues OP OP Margin NP EPS EBITDA FCF ROE P/E P/B EV/EBITDA 120 KOSPI (Wbn) (Wbn) (%) (Wbn) (Won) (Wbn) (Wbn) (%) (X) (X) (X) 110 12/10 2,272 365 16.0 288 41,693 445 113 18.3 27.3 4.3 15.1 100 12/11 2,555 373 14.6 327 47,384 454 -52 16.4 22.2 3.6 13.7 90 12/12F 2,846 393 13.8 314 45,420 399 94 13.9 22.8 3.1 14.8 80 12/13F 3,156 439 13.9 357 51,736 460 134 14.0 20.0 2.7 12.6

70 12/14F 3,508 490 14.0 407 58,916 515 173 14.1 17.6 2.4 10.9 8/11 12/11 4/12 8/12 Notes: All figures are based on consolidated K-IFRS; NP refers to net profit attributable to controlling interests Source: Company data, KDB Daewoo Securities Research estimates

This document is a summary of a report prepared by Daewoo 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. Company August 10, 2012

we believe that, once the economy picks up, the high-end cosmetics unit should grow drastically. We expect the companyÊs Chinese operations to stay robust on the back of its improving reputation. In particular, AmorepacificÊs diversified product portfolio (with the launch of Innisfree) should help the company become less vulnerable to economic conditions.

2 Company August 10, 2012

Internet NHN (035420 KS) Daewoo Securities Co., Ltd. Chang-kwean Kim Focus on mobile monetization efforts & secular growth potential +822-768-4321 [email protected] Focus more on strong mobile business growth potential (than on earnings)

We maintain our Buy call on NHN but trim our target price to W330,000 (from W340,000). We lowered our 2012 and 2013 EPS estimates by 10.2% and 7.6%,

respectively. For 2H, we anticipate NHN to monetize new mobile sources (e.g., mobile ads, Line

messenger services). And these mobile sources are likely to drive NHNÊs earnings Buy (Maintain) starting in 2013. We believe that the companyÊs shares will hinge on its acquisition Target Price (12M, W) 330,000 of secular growth engines, rather than on near-term quarterly earnings. Share Price (08/09/12, W) 263,500 Expected Return (%) 25.2 2Q Review: Revenues up 9.6% YoY; OP down 1.3% YoY EPS Growth (12F, %) 17.6 For 2Q, NHN posted revenues of W572.1bn (up 9.6% YoY) and an operating profit Market EPS Growth (12F, %) 13.0 of W149.5bn (down 1.3% YoY). These results fell short of our estimates (W586bn P/E (12F, x) 24.0 Market P/E (12F, x) 10.1 for revenues; W162bn for operating profit). OP margin deteriorated 2.1%p QoQ to KOSPI 1,940.59 26%. Market Cap (Wbn) 12,682 Despite strong mobile search ad sales, NHNÊs 2Q search ad revenue growth slowed Shares Outstanding (mn) 48 Avg Trading Volume (60D, '000) 188 QoQ to 12.1% YoY (vs. 20.3% YoY in 1Q), affected by the economic slowdown. In Avg Trading Value (60D, Wbn) 47 particular, the game divisionÊs revenues deteriorated 9.3% YoY due to the Dividend Yield (12F, %) 0.3 contraction of web-board gambling game sales and decreased revenues related to Free Float (%) 79.2 TERA (owing to the emergence of a competing game). The display ad divisionÊs 52-Week Low (W) 173,000 revenues stayed robust, increasing 17.6% YoY in 2Q. 52-Week High (W) 285,500 Beta (12M, Daily Rate of Return) 0.46 We project the companyÊs revenue growth to pick up speed in 3Q and 4Q. The Price Return Volatility (12M Daily, %, SD) 2.7 proportion of mobile search ad revenues (out of overall search ad revenues) is likely Foreign Ownership (%) 61.2 to increase (from the 9% level recorded in 2Q). And the company is likely to begin Major Shareholder(s) generating revenues from mobile display ads in 2H. The pace of online game OppenheimerFunds, Inc.(OFI) et al. (12.19%) revenue contraction should slow in light of the expected increase in Line-related HJ Lee et al. (9.52%) Treasury stock (8.64%) mobile game revenues and a low base effect. Price Performance (%) 1M 6M 12M Domestic mobile ad revenues and new Line-related revenues to expand Absolute 0.0 24.0 50.6 NHN launched its mobile display ad business on June 28th. The company also Relative -5.7 27.7 42.8 provides mobile ad services for its partner apps and websites. And on July 12th, Key Business - Naver (search portal) NHN increased the number of ads on its mobile search page („Power Link‰ section) - Hangame (internet game portal) to five (from three) and improved the exposure of some keywords. - Line (multi-messaging service) Since NHN placed more ads on its mobile page (in July), NHN has seen its monthly mobile search ad revenues jump by more than 30% on the back of an increase in clicks. For August, we expect the companyÊs monthly mobile search ad revenues to

Share price FY Revenues OP OP Margin NP EPS EBITDA FCF ROE P/E P/B EV/EBITDA 140 KOSPI (Wbn) (Wbn) (%) (Wbn) (Won) (Wbn) (Wbn) (%) (X) (X) (X) 130 120 12/10 1,785 590 33.1 473 9,830 710 457 41.0 23.1 8.8 14.5 110 12/11 2,121 620 29.3 450 9,350 745 424 31.0 22.6 6.8 12.6 100 12/12F 2,410 663 27.5 529 10,992 735 524 31.8 24.0 7.6 16.0 90 80 12/13F 2,978 822 27.6 659 13,696 888 694 35.5 19.2 6.7 12.9 70 12/14F 3,636 1,008 27.7 805 16,733 1,063 825 37.9 15.8 5.7 10.5 8/11 12/11 4/12 8/12 Notes: All figures are based on consolidated K-IFRS; NP refers to net profit attributable to controlling interests Source: Company data, KDB Daewoo Securities Research estimates

exceed W13bn. This suggests that mobile search queries (which are now equivalent to 80% of PC search queries) have begun to have a meaningful impact on search ad revenues. Furthermore, NHN is slated to launch content sales (e.g., games, e-books, music, fortune-telling) via Line (cumulative downloads of over 53mn) in mid-August.

2 Company August 10, 2012

Telecom equipment LS (006260 KS) Daewoo Securities Co., Ltd. Wonjae Park Weaker-than-expected results, but earnings stability recovering +822-768-3372 [email protected] Trim TP by 7.6% to W109,000; Maintain Buy call Young Ryu +822-768-4138 We maintain our Buy call on LS but trim our target price by 7.6% to W109,000 (from [email protected] W118,000). We derived our target price by applying a P/E of 12.2x (unchanged; 30%

discount to the companyÊs 2009~2011 P/E average of 17.5x) to our consolidated K- IFRS-based 3Q12F~2Q13F EPS of W8,960. The average 2012F P/E of global cable companies is 14.0x. Our target price implies a 25% upside from the current price.

Buy (Maintain) 2Q Review: OP (W163.4bn) missed our expectations but hit a record high Target Price (12M, W) 109,000 For 2Q, LS posted an operating profit of W163.4bn (up 82.2% YoY; up 12.9% QoQ) Share Price (08/09/12, W) 87,200 on revenues of W3.18tr (down 2.9% YoY; up 7.2% QoQ). The operating profit figure Expected Return (%) 25.0 EPS Growth (12F, %) 114.7 represents a record since the companyÊs adoption of a holding structure in 2008. Market EPS Growth (12F, %) 13.0 In the quarter, LS Industrial Systems (LSIS) and LS-Nikko Copper posted healthy P/E (12F, x) 11.1 Market P/E (12F, x) 10.1 results, with respective operating profits of W52.1bn (up 57.7% QoQ; up 57.3% KOSPI 1,940.59 YoY) and W96bn (up 80.7% QoQ; up 29.2% YoY). Meanwhile, LS MtronÊs operating Market Cap (Wbn) 2,808 profit came in at a mere W17.2bn (down 9.6% QoQ; down 7.9% YoY) due to the Shares Outstanding (mn) 32 sluggishness of the copper foil business. Avg Trading Volume (60D, '000) 116 Avg Trading Value (60D, Wbn) 10 LS Cable & SystemÊs 2Q operating profit was W48.9bn (swinging to positive YoY Dividend Yield (12F, %) 1.5 but down 29.0% QoQ). We attribute this weak result to: 1) additional expenses Free Float (%) 52.8 related to a submarine cable project (W10bn) and 2) restructuring expenses and 52-Week Low (W) 66,100 inventory valuation losses at US-based Superior Essex (SPSX; a subsidiary). Since 52-Week High (W) 102,000 we believed that these expenses had dissipated, LS Cable & SystemÊs 2Q revenues Beta (12M, Daily Rate of Return) 1.05 and operating profit missed our estimates by 1.2% and 13.7%, respectively. Price Return Volatility (12M Daily, %, SD) 2.4 Foreign Ownership (%) 13.0 For 3Q, we forecast LS to generate revenues of W3.34tr and an operating profit of Major Shareholder(s) W145.6bn. We took a conservative approach to our 3Q projections in light of weak Zayul Koo et al. (33.43%) seasonality and potential additional submarine cable-related expenses. LS treasury share (13.77%) NPS(9.28%) Recovery of LS Cable & System; Stable earnings at other subsidiaries Price Performance (%) 1M 6M 12M Our optimism on LS is mainly premised on the recovery of the companyÊs earnings Absolute -0.6 -4.2 -11.9 stability, which had been negatively affected by LS Cable & SystemÊs earnings Relative -6.3 -0.5 -19.7 deterioration in 2011. However, the subsidiary resumed high-margin ultra-high- Key Business Holding company of LS Group. voltage cable sales to the Middle East in 2012 and has taken additional orders. And LS Cable & System is also seeing its domestic LTE network-related sales grow. In light of LS Cable & SystemÊs recovery as well as solid earnings at other subsidiaries (e.g., LSIS, LS Mtron, and LS-Nikko Copper), we anticipate LSÊ quarterly operating profit to remain at the W150bn level.

Share price FY Revenues OP OP Margin NP EPS EBITDA FCF ROE P/E P/B EV/EBITDA 110 KOSPI (Wbn) (Wbn) (%) (Wbn) (Won) (Wbn) (Wbn) (%) (X) (X) (X) 100 12/10 10,360 571 5.5 245 7,618 698 730 13.1 14.0 2.2 10.6 90 12/11 12,352 338 2.7 118 3,653 538 -563 5.4 20.8 1.5 13.6 80 70 12/12F 12,820 616 4.8 253 7,845 838 103 10.8 11.1 1.6 9.3 60 12/13F 13,730 620 4.5 312 9,672 868 100 12.3 9.0 1.4 9.2 50 12/14F 14,676 680 4.6 334 10,385 943 174 12.1 8.4 1.3 8.7 8/11 12/11 4/12 8/12 Notes: All figures are based on consolidated K-IFRS; NP refers to net profit attributable to controlling interests Source: Company data, KDB Daewoo Securities Research estimates

Machinery Doosan Heavy I&C (034020 KS) Daewoo Securities Co., Ltd. Ki-jong Sung 2H Share price performance to hinge on order-taking +822-768-3263 [email protected] New orders to be robust in 4Q

Doosan Heavy I&CÊs (DHIC) 2012 order target is W10.8tr. Thus far this year, the company has recorded new orders (including soon-to-be-finalized orders) worth

W4.9tr. In light of the fact that DHIC is currently pursuing high-potential projects worth W3.9tr and high-priority projects worth W3.4tr, we believe that there is a strong possibility that DHIC could meet its annual order target.

Buy (Maintain) In 3Q, DHIC is likely to take W1.9tr in orders related to Saudi ArabiaÊs Yanbu III Target Price (12M, W) 82,000 project and other mid- to small-sized projects. However, most of the companyÊs Share Price (08/09/12, W) 63,600 large-sized new orders are projected to be placed in 4Q. Given that DHIC has Expected Return (%) 28.9 showed robust 4Q order-taking over the past few years, we expect a large EPS Growth (12F, %) 105.0 proportion of DHICÊs 2012 new orders to be placed in 4Q. Market EPS Growth (12F, %) 13.0 P/E (12F, x) 12.0 India’s blackout could change the mood of the power generation market Market P/E (12F, x) 10.1 KOSPI 1,940.59 Last week, India experienced a huge blackout that affected more than 600mn Market Cap (Wbn) 6,732 people. The Indian government announced that the blackout was mainly due to Shares Outstanding (mn) 106 excessive electricity consumption in certain regions. However, in our view, the Avg Trading Volume (60D, '000) 298 blackout was actually driven by: 1) poor infrastructure, which could not meet the Avg Trading Value (60D, Wbn) 17 countryÊs rapid economic growth and increasing demand for electricity, and 2) the Dividend Yield (12F, %) 0.0 Indian governmentÊs passivity. We believe that the scale and vigor of the Free Float (%) 42.8 52-Week Low (W) 49,550 governmentÊs response to the blackout will hold the key for IndiaÊs power 52-Week High (W) 78,300 generation market going forward. Beta (12M, Daily Rate of Return) 0.96 Previously, IndiaÊs power generation market was expected to show sharp growth, Price Return Volatility (12M Daily, %, SD) 2.2 Foreign Ownership (%) 14.1 with annual capacity expansion of 20GW. However, we have revised down our Major Shareholder(s) annual new capacity forecast to 12GW. Despite IndiaÊs electricity shortage, the Doosan et al. (41.28%) countryÊs power generation plants are operating at 60% capacity due to difficulties Treasury shares (15.88%) related to the procurement of fuel and poor transmission/distribution facilities.

Price Performance Wind power generation unit is in the R&D stages (%) 1M 6M 12M Absolute 7.3 -17.1 14.8 For the time being, DHICÊs wind power generation unit is in the R&D stages. The Relative 1.6 -13.4 7.1 company has succeeded in acquiring 3MW offshore generator technologies and is Key Business working to develop a 7MW generator. As the offshore wind power generation DHICÊs major units (in terms of sales market is projected to take off in 2014 or 2015, we believe that company will begin contributions) are: power generation its marketing efforts then. (53%), industrial (11%), castings & forgings (6%), construction (8%), and DPS (22%).

Share price FY Revenues OP OP Margin NP EPS EBITDA FCF ROE P/E P/B EV/EBITDA 130 KOSPI (Wbn) (Wbn) (%) (Wbn) (Won) (Wbn) (Wbn) (%) (X) (X) (X) 120 110 12/10 7,929 516 6.5 1,252 11,831 746 2,320 30.9 7.3 2.0 17.0 100 12/11 8,496 570 6.7 275 2,596 682 518 5.7 25.1 1.6 15.0 90 12/12F 10,034 687 6.8 564 5,324 887 89 11.2 12.0 1.4 11.5 80 70 12/13F 11,238 792 7.1 671 6,341 986 575 12.0 10.0 1.3 10.0 60 12/14F 12,587 887 7.1 861 8,138 1,078 644 13.8 7.8 1.1 8.9 8/11 12/11 4/12 8/12 Notes: All figures are based on consolidated K-IFRS; NP refers to net profit attributable to controlling interests Source: Company data, KDB Daewoo Securities Research estimates

Reiterate Buy call with TP of W82,000 We maintain our Buy call on DHIC with a target price of W82,000. We believe the companyÊs favorable earnings should partially offset concerns over previously-taken low-margin orders. Thanks to its solid order backlogs (2.7 years), DHIC is projected to record stable earnings going forward. We are highly confident that the company will meet 70% of its annual new order target. As such, DHICÊs ability to meet the remaining 30% of its target will be a key factor for the companyÊs shares.

Figure 1. Quarterly earnings trends and forecasts by business unit Figure 2. 2012 Order target breakdown

(Wbn) (Wtr) 3,000 Power Industrial Casting & forging 20 Construction DPS, etc. - Power EPC: W3.1tr - Equipment/service: W0.8tr 2,500 15 Major potential 2012 Order additional orders - Domestic nuclear: W1.6tr 2,000 target: - Equipment/service: W1.8tr W10.8tr Target projects - Power EPC: W4.1tr 1,500 10 - Equipment/service: W1.8tr High-potential 1,000 projects - Desalination EPC: W1.1tr 5 - Power generation equipment: W0.8tr - Indian bulk ordes:r W0.6tr 500 On-hand orders - Forging: W0.4tr 1H Orders - Equipment/service: W0.5tr 0 0 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 1

Source: Company data, KDB Daewoo Securities Research Source: Company data, KDB Daewoo Securities Research

2 Company August 10, 2012

Display Silicon Works (108320 KQ) Daewoo Securities Co., Ltd. Jonathan Hwang Growing demand for thinner and clearer displays +822-768-4140 [email protected] Maintain Buy call with TP of W40,000

We maintain our Buy call on Silicon Works with a target price of W40,000. Silicon WorksÊ earnings hit a historic high in 2Q and are likely to set another record in 3Q,

given that: 1) the companyÊs sales volume has jumped following the launch of LG DisplayÊs (LGD) Line P98 (for 8G tablet PC panel production) in June and 2) an increase in ASP. We arrived our target price by applying a P/E of 13x to our 12- month forward EPS estimate of W3,056. Buy (Maintain) Target Price (12M, W) 40,000 2Q Review: Revenues of W121.9bn (up 58% YoY); OP of W13.5bn (up 206% YoY) Share Price (08/09/12, W) 31,100 For 2Q, Silicon Works posted revenues of W121.9bn (up 42% QoQ; up 58% YoY) Expected Return (%) 28.6 EPS Growth (12F, %) 29.8 and an operating profit of W13.5bn (up 42% QoQ; up 206% YoY). The companyÊs Market EPS Growth (12F, %) 13.0 shipments jumped 20% QoQ on the back of full-swing expansion of sales related to P/E (12F, x) 11.9 the new iPad. And the companyÊs blended ASP soared 16% QoQ thanks to product Market P/E (12F, x) 10.1 mix improvement (e.g., the addition of high-priced Retina display-use parts). COG KOSDAQ 474.05 driver-IC revenues leaped 92% QoQ, driving overall revenue growth. T-Con, PMIC, Market Cap (Wbn) 506 and EPD revenues expanded 10% QoQ, 24% QoQ, and 4% QoQ, respectively. Shares Outstanding (mn) 16 Although COF driver-IC revenues contracted 12% QoQ, the companyÊs 2Q OP Avg Trading Volume (60D, '000) 175 Avg Trading Value (60D, Wbn) 5 margin improved to 11.1% due to the low-margin nature of COF driver ICs. Dividend Yield (12F, %) 1.9 Apple-related revenues accounted for a whopping 55% of Silicon WorksÊ overall Free Float (%) 72.8 52-Week Low (W) 13,850 revenues (iPad products: 45%; MacBook: 10%) in 2Q. We estimate that the 52-Week High (W) 36,550 companyÊs iPad-related shipments reached 8.5mn units in 2Q (6mn units of new Beta (12M, Daily Rate of Return) 1.39 iPad-related parts; 2.5mn units of iPad 2-related parts). Although shipments only Price Return Volatility (12M Daily, %, SD) 4.3 edged up 9% YoY (from 7.8mn units), iPad-related revenues jumped 93% YoY Foreign Ownership (%) 28.7 thanks to the increased unit price of new iPad parts. Major Shareholder(s) Comet Network et al.(23.26%) Adoption of high-resolution displays to increase LG Display(13%) TMK(8.22%) For 3Q, we project Silicon Works to ship 7.5mn new iPad parts and 3mn iPad 2 Price Performance parts. Steady iPad 2-related shipments should be attributable to the fact that (%) 1M 6M 12M demand for the relatively lower-priced iPad 2 is likely to stay solid on the back of the Absolute 6.5 3.5 108.7 increasing use of tablet PCs in North American schools. In 2H, Apple is expected to Relative 0.8 7.2 101.0 use Retina displays in more of its laptop models (currently, only the MacBook Pro Key Business features Retina technology). Manufacturing display-use driver-ICs and T- Cons. Given that Microsoft is scheduled to launch Windows 8 in 2H, demand for Ultrabooks and slim laptops (as well as for tablet PCs) should pick up. Using COG driver-ICs (which are directly placed on panels without film), laptop makers can achieve slim designs. As such, we believe that makers are likely to increasingly adopt COG driver-ICs (instead of COF driver-ICs) in order to produce thinner and Share price FY Revenues OP OP Margin NP EPS EBITDA FCF ROE P/E P/B EV/EBITDA 170 KOSDAQ (Wbn) (Wbn) (%) (Wbn) (Won) (Wbn) (Wbn) (%) (X) (X) (X) 150 12/10 257 38 14.7 41 2,688 39 20 27.5 12.5 2.7 9.7 130 12/11 301 25 8.4 33 2,047 27 22 15.6 15.2 2.3 12.3 110 90 12/12F 432 43 10.0 43 2,625 44 37 17.9 11.9 2.0 6.9 70 12/13F 469 50 10.7 52 3,224 52 41 18.9 9.7 1.7 5.4 50 12/14F 539 61 11.3 62 3,815 62 52 19.2 8.2 1.5 3.9 8/11 12/11 4/12 8/12 Notes: All figures are based on non-consolidated K-IFRS; NP refers to net profit attributable to controlling interests Source: Company data, KDB Daewoo Securities Research estimates

higher-resolution displays.

For 3Q, we project the companyÊs earnings to hit another high, with revenues of W134.1bn (up 10% QoQ; up 67% YoY) and an operating profit of W14.7bn (up 9% QoQ; up 184% YoY).

Table 1. Earnings forecast revisions (under non-consolidated K-IFRS) (Wbn, %, %p) Previous Revised % change 2012F 2013F 2014F 2012F 2013F 2014F 2012F 2013F 2014F Revenues 431 485 548 432 469 539 0.2 -3.2 -1.6 Operating profit 43 54 63 43 50 61 0.6 -6.3 -2.8 Net profit 45 55 63 43 52 62 -5.7 -4.4 -1.9 EPS 2,784 3,373 3,887 2,625 3,224 3,815 -5.7 -4.4 -1.9 OP margin 10.0 11.1 11.5 10.0 10.7 11.3 0.0 -0.4 -0.1 Net margin 10.5 11.3 11.5 9.9 11.2 11.5 -0.6 -0.1 0.0 Avg. F/X rate (US$/W) 1,092 1,090 1,060 1,123 1,064 1,045 2.9 -2.4 -1.4 Source: KDB Daewoo Securities Research

2 Company August 10, 2012

Auto parts S&T Dynamics (003570 KS) Daewoo Securities Co., Ltd. Michael Yun Lower expectations, but valuations appear attractive +822-768-4169 [email protected] Lower TP to W18,100, but maintain Buy rating Young-ho Park +822-768-3033 We maintain our Buy rating on S&T Dynamics but lower our 12-month target price [email protected] to W18,100 (from W21,500). We have lowered our 2012 and 2013 EPS estimates

by 12.1% and 13.7%, respectively, to reflect the slower-than-anticipated growth of the companyÊs main business areas (aside from the defense unit). Our target price was derived by applying a target P/E multiple of 9.3x to our 12-month forward EPS estimate of W1,960. Buy (Maintain) Target Price (12M, W) 18,100 Even though we have lowered our target price for S&T Dynamics, we still believe Share Price (08/09/12, W) 13,950 that the companyÊs defense business will continue to show solid growth with high Expected Return (%) 29.7 margins. In addition, we anticipate S&T DynamicsÊ profitability to improve from 2H. EPS Growth (12F, %) 11.6 Thus, we believe that the companyÊs current valuation (12-month forward P/E of Market EPS Growth (12F, %) 12.9 7.1x) appears attractive. P/E (12F, x) 7.6 Market P/E (12F, x) 10.1 2Q Review: Weak earnings on weak performances at machinery unit and S&TC KOSPI 1,940.59 Market Cap (Wbn) 453 S&T DynamicsÊ 2Q consolidated revenues and operating profit came in at W195bn Shares Outstanding (mn) 32 (up 8.2% YoY) and W18.6bn (up 6.7% YoY), respectively. These results were below Avg Trading Volume (60D, '000) 156 our forecasts, which reflected expectations for strong seasonality and growing Avg Trading Value (60D, Wbn) 2 contributions from S&T Corporation (S&TC; a subsidiary). Dividend Yield (12F, %) 3.6 Free Float (%) 58.1 S&T DynamicsÊ weaker-than-expected revenues were largely due to the sub-par 52-Week Low (W) 11,350 performances of its machinery and auto parts divisions, which continued to suffer 52-Week High (W) 19,800 from the weak macro environment. Operating profit was also sluggish due to weak Beta (12M, Daily Rate of Return) 0.93 sales, a peak in S&TCÊs costs, and the recognition of low-margin orders. Meanwhile, Price Return Volatility (12M Daily, %, SD) 2.8 Foreign Ownership (%) 14.2 in 2Q, S&T Dynamics saw a one-time disposal gain of W7.4bn resulting from the Major Shareholder(s) sale of one of its Chinese businesses. Stripping away this gain, the companyÊs OP S&T Holidngs et al. (35.51%) margin would have come in at 6.2%. NPS (9.46%) Allianz Global Asset (7.57%) Expect the defense business to pick up in 2H Price Performance We forecast S&T DynamicsÊ revenues and profitability to pick up from 2H, after the (%) 1M 6M 12M Absolute 7.3 -24.2 -5.7 companyÊs high-margin defense business lifts off. We are forecasting the defense Relative 1.6 -20.5 -13.5 businessÊ 2H revenues to come in at W184bn, which represents a 50% increase Key Business from 1H. S&T Dynamics is a mid-sized company that specializes in the auto parts and defense Meanwhile, we also anticipate S&TCÊs profitability to improve in 2H, as most of its businesses. low-margin orders have been already booked.

Share price FY Revenues OP OP Margin NP EPS EBITDA FCF ROE P/E P/B EV/EBITDA 120 KOSPI (Wbn) (Wbn) (%) (Wbn) (Won) (Wbn) (Wbn) (%) (X) (X) (X) 110 100 12/10 581 67 11.5 54 1,648 78 11 9.1 13.9 1.2 8.7 90 12/11 744 76 10.2 54 1,647 87 1 8.4 9.9 0.8 6.7 80 12/12F 855 84 9.8 60 1,837 94 -7 8.8 7.6 0.7 5.6 70 60 12/13F 1,000 97 9.7 68 2,092 110 40 9.3 6.7 0.6 4.6 50 12/14F 1,149 114 9.9 82 2,529 128 46 10.5 5.5 0.6 3.7 8/11 12/11 4/12 8/12 Notes: 2010 Figures are based on K-GAAP; 2011~2014F Figures are based on consolidated K-IFRS Source: Company data, KDB Daewoo Securities Research estimates

Media CJ E&M (130960 KQ) Daewoo Securities Co., Ltd. Jee-hyun Moon Broadcasting operations: The lone bright spot +822-768-3615 [email protected] Trim TP to W28,000; Maintain Trading Buy call

We maintain our Trading Buy call on CJ E&M but trim our target price to W28,000

(from W30,000). Our target price cut is mainly due to the fact that we lowered our 2012 EPS estimate by 4.9% to reflect the companyÊs 2Q results.

CJ E&M has made massive investments since 2H11 to enhance the competitiveness of its programs. And, in 2Q, the companyÊs broadcasting operations delivered revenue growth on the back of this improved competitiveness. Trading Buy (Maintain) However, all of the companyÊs non-broadcasting operations incurred operating Target Price (12M, W) 28,000 losses in the quarter. And the outlooks for these operations are likely to stay murky Share Price (08/09/12, W) 24,150 Expected Return (%) 15.9 until the success of their content (e.g., games, movies) and expenses are confirmed. EPS Growth (12F, %) -30.6 Market EPS Growth (12F, %) 12.9 Growth story of broadcasting operations unfolding P/E (12F, x) 20.0 CJ E&MÊs consolidated revenues increased 2.6% YoY in 2Q. However, the Market P/E (12F, x) 10.1 companyÊs consolidated operating profit plunged 72.9% YoY, affected by increased KOSDAQ 474.05 production expenses and sluggish earnings at non-broadcasting operations. Market Cap (Wbn) 916 Shares Outstanding (mn) 38 1) The broadcasting operationÊs 2Q revenues soared 20% YoY, making a 54% Avg Trading Volume (60D, '000) 302 contribution to revenues. The unitÊs operating profit also leaped QoQ despite an Avg Trading Value (60D, Wbn) 8 increase in production costs. Because the division saw an increase in highly-rated Dividend Yield (12F, %) 0.0 programs (which command premium ad rates), advertising revenues rose. A Free Float (%) 56.0 52-Week Low (W) 22,000 GentlemanÊs Dignity, a drama produced by CJ E&M, is being aired by a terrestrial 52-Week High (W) 54,800 broadcaster, and overseas program sales expanded in 2Q. Beta (12M, Daily Rate of Return) 1.03 Price Return Volatility (12M Daily, %, SD) 3.3 2) However, the companyÊs game and movie divisions saw plunges in revenues Foreign Ownership (%) 3.6 (down 20% YoY and 40% YoY, respectively). Both units swung to negative in 2Q. Major Shareholder(s) The game unit suffered a decline in revenues and an increase in expenses. And the CJ. et al (42.96%) movie unit saw a fall in ticket sales due to its weak movie lineup and delays to the opening of a film.

Price Performance Earnings momentum to pick up in 4Q (%) 1M 6M 12M We expect CJ E&MÊs broadcasting operations to see earnings improvements in 2H. Absolute -6.9 -23.0 -35.3 Relative -12.6 -19.3 -43.1 The company is scheduled to air the singing competition Superstar K 4 starting on th Key Business August 17 . We expect related ad revenues to expand by at least 10% (vs. the Dominant domestic cable TV program previous seasonÊs). And an increasing number of the companyÊs programs produced provider; Domestic paid content market using set seasons are seeing ad revenue growth. leader The game unitÊs new releases are seeing delays. But we expect the unit to generate new revenues in 4Q. And all of the companyÊs units should see strong seasonality in 4Q. Thus, we expect CJ C&MÊs earnings momentum to rise until year-end.

Share price FY Revenues OP OP Margin NP EPS EBITDA FCF ROE P/E P/B EV/EBITDA 130 KOSDAQ (Wbn) (Wbn) (%) (Wbn) (Won) (Wbn) (Wbn) (%) (X) (X) (X) 110 12/10 98 19 19.5 6 1,208 51 -35 1.9 28.6 1.7 10.1 90 12/11 1,143 70 6.1 57 1,745 361 -127 7.7 17.4 1.8 3.7 70 12/12F 1,439 36 2.5 46 1,211 572 170 3.9 20.0 1.0 1.6 50 12/13F 1,548 100 6.5 60 1,584 482 106 4.8 15.3 0.9 1.7

30 12/14F 1,664 124 7.4 77 2,019 473 89 5.8 12.0 0.8 1.6 8/11 12/11 4/12 8/12 Notes: All figures are based on consolidated K-IFRS; NP refers to net profit attributable to controlling interests Source: Company data, KDB Daewoo Securities Research estimates

Auto parts S&T Motiv (064960 KS) Daewoo Securities Co., Ltd. Michael Yun Normalization to take some time +822-768-4169 [email protected] Downgrade rating to Hold Young-ho Park +822-768-3033 We downgrade our rating on S&T Motiv to Hold (from Buy). In our view, although [email protected] the companyÊs well-diversified product portfolio appears attractive, it will take some

time for the companyÊs profitability to meet market expectations. Also, we have lowered our 2012 and 2013 EPS estimates by 29.8% and 20.6%, respectively, to reflect the delays to the companyÊs margin turnaround and slower-than-anticipated top-line growth. In addition, we believe that S&T Motors (a subsidiary) will continue Hold (Downgrade) to suffer from the weak macro environment, as its motorcycle exports are being Target Price (12M, W) - heavily impacted by the European crisis. Share Price (08/09/12, W) 20,900 Expected Return (%) - Furthermore, S&T DynamicsÊ valuations levels are not as attractive as those of other EPS Growth (12F, %) -33.2 parts makers. Indeed, the companyÊs shares are trading at a 2012F P/E of 11.5x and Market EPS Growth (12F, %) 12.9 a 12-month forward P/E of 8.4x. P/E (12F, x) 11.5 Market P/E (12F, x) 10.1 2Q Review: S&T Motors swung to negative KOSPI 1,940.59 Market Cap (Wbn) 243 S&T MotivÊs 2Q consolidated revenues and operating profit came in at W235bn (up Shares Outstanding (mn) 12 0.6% YoY) and W8.9bn (down 27.9% YoY), respectively, falling short of our Avg Trading Volume (60D, '000) 36 expectations. While the companyÊs parent business showed QoQ improvement, it Avg Trading Value (60D, Wbn) 1 still failed to live up to its performances in 2011 and earlier. Dividend Yield (12F, %) 2.4 Free Float (%) 54.6 S&T Motors suffered from declining demand in Europe and South America amid 52-Week Low (W) 18,250 rising competition. As such, the subsidiary swung to negative in the quarter, 52-Week High (W) 36,950 generating an operating loss. Beta (12M, Daily Rate of Return) 0.76 Price Return Volatility (12M Daily, %, SD) 2.4 Normalization to take some time Foreign Ownership (%) 4.8 Major Shareholder(s) S&T MotivÊs non-consolidated earnings improved on the back of easing raw material S&T Holdings et al. (32.75%) prices, which hurt margins during 4Q11~1Q12. And we expect the companyÊs Korea Investment et al. (13.36%) margins to improve in 2H on the arrival of a strong season for the high-margin NPS (9.27%) defense business. However, due to structural margin deterioration at GM (a major Price Performance customer) and poor earnings contributions from S&T Motors, we believe that S&T (%) 1M 6M 12M Absolute 8.3 -32.3 -36.9 MotivÊs margin normalization will take more time than previously anticipated. Relative 2.6 -28.6 -44.6 Key Business S&T Motiv is a key auto parts maker for GM Korea, The company has recently diversified its customer base by supplying motors to HMC and Kia. The company also provides small firearms to the Korean army.

Share price FY Revenues OP OP Margin NP EPS EBITDA FCF ROE P/E P/B EV/EBITDA 110 KOSPI (Wbn) (Wbn) (%) (Wbn) (Won) (Wbn) (Wbn) (%) (X) (X) (X) 100 90 12/10 681 48 7.0 33 2,257 65 -1 8.5 14.0 1.1 6.2 80 12/11 911 62 6.8 40 2,721 56 -7 9.3 11.3 1.0 7.8 70 12/12F 974 38 3.9 27 1,817 51 3 5.9 11.5 0.7 6.4 60 50 12/13F 1,098 60 5.5 42 2,835 76 20 8.7 7.4 0.6 4.2 40 12/14F 1,207 71 5.8 49 3,324 80 32 9.4 6.3 0.6 3.8 8/11 12/11 4/12 8/12 Notes: 2010 Figures are based on K-GAAP; 2011~2014F Figures are based on consolidated K-IFRS Source: Company data, KDB Daewoo Securities Research estimates

Market Data August 10, 2012

※All data as of close September 2, 2010, unless otherwise noted.

Other Major Indices Economic Indicators Close Net Chg 1D (%) YTD (%) Close 1D ago 1M ago 1Y ago MSCI Korea* 399.16 8.67 2.22 11.44 USD/KRW 1,126.20 1,128.00 1,142.40 1,092.20 KOSPI 1,946.40 5.81 0.30 6.57 JPY100/KRW 1,432.64 1,438.23 1,435.63 1,417.61 KOSDAQ 475.51 1.46 0.31 -6.17 EUR/KRW 1,385.28 1,395.67 1,407.49 1,569.44 Dow Jones* 13,165.19 -10.45 -0.08 7.76 3Y Treasury 2.79 2.82 3.22 3.45 S&P 500* 1,402.80 0.58 0.04 9.85 3Y Corporate 3.38 3.41 3.79 4.18 NASDAQ* 3,018.64 7.39 0.25 13.97 DDR2 1Gb* 1.22 1.22 1.24 1.06 Philadelphia Semicon* 403.98 2.83 0.71 9.60 NAND 16Gb* 1.87 1.87 1.97 2.61 FTSE 100* 5,851.51 5.59 0.10 2.66 Oil (Dubai) (Aug. 8) 106.54 106.54 96.17 100.89 Nikkei 225 8,891.44 -87.16 -0.97 3.87 Gold* 1,617.10 1,612.90 1,589.10 1,740.00 Hang Seng* 20,269.47 203.95 1.02 7.37 Customer deposits (Wbn)* 17,365 17,838 17,106 21,275 Taiwan (Weighted) 7,441.12 7.42 0.10 7.03 Equity type BC (Wbn)(Aug. 8) 99,986 99,945 98,992 101,483 Note: * as of August 9, 2012 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 168.27 NHN 75.65 LG Electronics 14.87 Samsung Electronics 97.64 Kia Motors 76.92 NCsoft 9.32 NHN 12.63 KODEX INVERSE 52.94 Hyundai Motor 48.66 GS Construction 5.07 LG Display 8.81 Kia Motors 27.73 Hyundai Mobis 32.68 Hyundai Department Store 4.45 Amore Pacific 6.99 S-Oil 21.02 S-Oil 28.72 Hanjin Shipping 3.45 Hynix 6.54 Hyundai Motor 17.74 SK Energy 19.84 Amore Pacific 2.51 SK Telecom 5.75 SK Energy 14.75 POSCO 16.46 Kangwon Land 2.50 POSCO 4.81 Hyundai Heavy Industries 14.18 Shinhan Financial Group 15.10 Orion 2.24 KB Financial Group 4.78 SK Corp. 12.59 LG Corp. 14.88 LG Household & Health Care 2.02 GS Construction 4.41 SEMCO 12.30 Hyundai Heavy Industries 13.68 Yuhan 1.45 Korea Zinc 4.29 Samsung Heavy Ind. 10.16 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 Sung Kwang Bend 1.88 Kornic Systems 5.88 SFA Engineering 3.14 JCE 8.87 Celltrion 1.57 SFA Engineering 2.07 SEEGENE 2.63 Wemade 3.25 TK Corp. 1.37 SM 1.69 Medy-tox 2.33 Daum Communications 2.61 CrucialTec 1.14 Duk San Hi Metal 1.39 Gamevil 2.09 SM 2.33 Vitzrosys 0.62 Viatron 1.15 HaanSoft 1.56 Kornic Systems 1.79 JCE 0.57 OCI Materials 1.05 POSCO ICT 1.25 TERA SEMICON 1.42 Paradise 0.54 ICD 0.77 NEPES 1.17 Partrion 1.28 SK Coms 0.40 ATTO 0.73 Duk San Hi Metal 1.16 SK Broadband 1.25 Interflex 0.35 Com2us 0.72 CJ O Shopping 1.07 Webzen 1.20 SEEGENE 0.28 Simmtech 0.63 BH,LTD. 0.63 Sung Woo HiTech 1.18 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 1,348,000 8,000 198,560 Celltrion 28,500 500 4,975 Hyundai Motor 247,000 3,000 54,408 Daum Communications 102,500 -1,100 1,383 POSCO 385,000 4,000 33,567 Seoul Semiconductor 22,000 -200 1,283 Kia Motors 78,800 800 31,943 AHNLAB 122,800 1,400 1,230 Hyundai Mobis 315,000 4,000 30,663 Paradise 13,050 -50 1,187 LG Chem 324,500 -3,000 21,505 CJ O Shopping 185,400 400 1,150 Samsung Life Insurance 96,200 200 19,240 POSCO ICT 7,150 350 980 Hyundai Heavy Industries 245,500 -2,500 18,658 SM 47,100 -1,600 962 Samsung Electronics (P) 787,000 0 17,970 Dongsuh 31,700 0 945 Shinhan Financial Group 36,950 250 17,522 GemVax 37,850 400 925 Source: Korea Exchange