Monthly Insight Dawn of a New Decade

January 2020 Monthly InsighT Dawn of a new decade

Wonjae Park Chuljoong Kim +822-3774-1426 +822-3774-1464 [email protected] [email protected]

Young-gun Kim Yumi Cha +822-3774-1583 +822-3774-1770 [email protected] [email protected]

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. I. Investment strategy • Korean IT plays to gain competitive edge in 2020, with earnings improving steadily; Heightened expectations largely reflected

II. Sector view

III. Think big

IV. Global IT navigation

V. Spotlight stocks & other notable stocks

2| Monthly InsighT Mirae Asset Daewoo Research I. Investment strategy

Mirae Asset Daewoo IT universe share performance

December: 17.2% for spotlight stocks vs. 11.8% for other notable stocks Monthly InsighT returns

Avg. of spotlight stocks 17.2 Cumulative returns

MCNEX 40.1 Avg. of spotlight stocks 178.1 Avg. of notable stocks -16.6 SK Hynix 16.3 KOSPI 40.2 KOSDAQ -1.4 (%)

LG Innotek 14.8 -100 0 100 200 Note: September 2014-December 2019

SEMCO 12.6 -1Y

Samsung SDI 2.2 Avg. of spotlight stocks 39.7 Avg. of notable stocks 13.0 Avg. of notable stocks 11.8 KOSPI 7.7 KOSDAQ -0.8 (%)

SSC 22.6 -20-100 1020304050

December SEC 10.9 Avg. of spotlight stocks 17.2 LGD 10.5 Avg. of notable stocks 11.8 KOSPI 5.3

LGE 3.1 (%) KOSDAQ 5.8 (%)

01020 -5 0 5 10 15 20 25 30 35 40 45

3| Monthly InsighT Mirae Asset Daewoo Research I. Investment strategy

Korean IT plays to gain competitive edge in 2020, with earnings improving steadily; Heightened expectations largely reflected ■ IT sector update - Display: LCD panel prices are rebounding; we expect 1Q20 prices to rise, as Chinese Share performance & OP consensus revision rates for Korean IT large caps LCD panel makers have demanded ASP hikes. OLED investments are projected to increase, with China’s OLED investments continuing and Samsung Display likely to (%) (%) resume investments in its A5 flexible OLED fab. Share performance (1M, L) 4Q19 consensus revision rate (R) - Batteries: The BEV market remains sluggish. However, we expect market sentiment 30 50 to improve in 1H20 (Model 3 sales in China and new releases such as the Tesla Model Y and Volkswagen ID) and earnings to recover in 2H20 (ESS earnings 15 25 stabilization and EV battery revenue expansion). 0 0 - Semiconductors: DRAM spot prices have begun to rebound, and contract price hikes are likely to follow, leading to a sustained price uptrend. -15 -25 - Handsets/components: Smartphone demand has remained soft, with 1.34mn units being sold in November (-3.0% YoY, -2.7% QoQ). SEC and Apple are expected to see -30 -50 increased sales in 2020 (foldables, 5G technology, and the iPhone SE 2). - TVs/home appliances: Competition is growing in the TV market. While the home appliance market is expanding, 4Q is traditionally a slow season. ■ Strategies 1) OLED equipment makers to benefit from China’s OLED investments and Samsung Display’s A5 fab investments 2) Foldable display market to bloom; focus on OLED materials/parts makers with bright Source: WISEfn, Mirae Asset Daewoo Research earnings prospects for 1Q20 (SKC Kolon PI) 3) Semiconductor share prices may look high following recent advances, but upcoming spot and contract price hikes should provide another tailwind. 4) Handset and component providers deserve continued attention, as SEC’s and Apple’s earnings are expected to rebound. We advise investors to look for the beneficiaries of Huawei’s woes, foldable displays, and the iPhone SE 2. ■ Spotlight stocks - SK Hynix, Samsung SDI, SEMCO, LG Innotek, Seoul Semiconductor Korean IT large caps Current price Share performance (%) P/E (x) P/B (x) ROE (%) Company Rating TP (W) Upside (%) (W, 12/30) 1W 1M 19F 20F 19F 20F 19F 20F SK Hynix Buy 115,000 94,100 22.2 -0.5 16.3 28.1 12.8 1.3 1.2 5.1 10.7 Samsung SDI Buy 315,000 236,000 33.5 3.5 2.2 31.9 17.6 1.3 1.2 4.3 7.3 SEMCO Buy 151,000 125,000 20.8 4.6 12.6 16.2 18.0 1.8 1.6 11.8 9.6 LG Innotek Buy 171,000 140,000 22.1 4.1 14.8 18.3 12.1 1.4 1.3 8.2 11.3 SSC Buy 21,300 16,250 31.1 6.6 22.6 22.7 19.7 1.4 1.3 6.3 7.0 SEC Buy 70,000 55,800 25.4 0.5 10.9 17.5 13.0 1.5 1.4 8.8 11.1 LGE Buy 89,900 72,100 24.7 -0.6 3.2 15.0 9.4 0.9 0.8 5.9 8.9 LGD Buy 20,000 16,250 23.1 1.6 10.5 -3.7 -23.9 0.5 0.5 -11.8 -1.9 Source: WISEfn, Mirae Asset Daewoo Research

4| Monthly InsighT Mirae Asset Daewoo Research I. Investment strategy

Earnings forecast revisions for large-cap IT plays (Wbn, %)

Previous Revised % chg. Notes 4Q19F 2019F 2020F 4Q19F 2019F 2020F 4Q19F 2019F 2020F SK Hynix Revenue 6,339 26,402 30,466 6,339 26,402 30,466 0.0 0.0 0.0 OP 476 2,953 7,398 476 2,953 7,398 0.0 0.0 0.0 NP 314 2,259 5,422 314 2,259 5,422 0.0 0.0 0.0 Samsung SDIRevenue 2,982 10,259 11,798 2,975 10,252 11,370 -0.2 -0.1 -3.6 Cut earnings estimates for OP 37 479 1,001 33 475 900 -11.5 -0.9 -10.0 cylindrical batteries and ESS NP 42 432 864 30 437 769 -28.4 1.2 -11.1 SEMCO Revenue 1,969 8,323 8,904 1,973 8,327 8,836 0.2 0.1 -0.8 OP 116 684 803 140 708 840 20.9 3.5 4.6 HDIbusiness suspension NP 84 621 603 -138 398 641 TTR -35.8 6.3 LG Innotek Revenue 2,703 8,040 8,498 2,739 8,075 8,786 1.3 0.4 3.4 Robust Apple product sales OP 177 371 415 181 375 418 2.2 1.0 0.6 NP 77 164 275 72 158 277 -7.1 -3.4 0.8 SSC Revenue 277 1,125 1,135 281 1,129 1,167 1.3 0.4 2.9 Favorable F/X movements OP 10 46 73 10 45 74 -2.2 -1.2 1.8 NP 7 41 49 6 40 50 -12.4 -2.7 1.8 SEC Revenue 58,685 229,201 245,561 58,685 229,201 245,561 0.0 0.0 0.0 OP 6,968 27,576 38,876 6,968 27,576 38,876 0.0 0.0 0.0 NP 5,583 21,860 29,985 5,583 21,860 29,985 0.0 0.0 0.0 LGE Revenue 16,229 62,474 66,979 16,265 62,510 66,117 0.2 0.1 -1.3 OP 255 2,589 2,992 197 2,532 2,882 -22.7 -2.2 -3.7 Intensifying competition in TVs NP -153 754 1,561 -190 717 1,482 RR -4.9 -5.1 Delays to recognition of depreciation expenses LGD Revenue 5,748 22,803 20,912 5,748 22,802 20,911 0.0 0.0 0.0 for the Guangzhou plant OP -677 -1,614 -203 -536 -1,474 69 RR RR -134.1 LCD panel price hikes NP -489 -1,518 -344 -426 -1,455 -365 0.0 RR RR Source: Mirae Asset Daewoo Research

5| Monthly InsighT Mirae Asset Daewoo Research I. Investment strategy

Consensus vs. Mirae Asset Daewoo estimates (Wbn, %)

Mirae Asset Daewoo Consensus % diff. Notes 4Q19F 2019F 2020F 4Q19F 2019F 2020F 4Q19F 2019F 2020F SK Hynix Revenue 6,339 26,402 30,466 6,739 26,804 31,007 -5.9 -1.5 -1.7 OP 476 2,953 7,398 432 2,912 7,024 10.1 1.4 5.3 NP 314 2,259 5,422 384 2,437 5,365 -18.2 -7.3 1.1 Samsung SDIRevenue 2,975 10,252 11,370 2,924 10,210 12,184 1.7 0.4 -6.7 OP 33 475 900 41 483 958 -19.2 -1.7 -6.0

NP 30 437 769 141 520 942 -78.8 -15.9 -18.4 Lower equity-method gains (Samsung Display) SEMCO Revenue 1,973 8,327 8,836 1,985 8,332 8,935 -0.6 -0.1 -1.1 OP 140 708 840 123 683 802 14.4 3.7 4.7

NP -138 398 641 84 599 540 TTB -33.5 18.7 HDI business sell-off LG Innotek Revenue 2,739 8,075 8,786 2,718 8,055 9,004 0.8 0.3 -2.4

OP 181 375 418 162 355 452 11.6 5.5 -7.7 Conservative estimates for Apple sales NP 72 158 277 93 181 275 -23.5 -12.7 0.9 SSC Revenue 281 1,129 1,167 277 1,124 1,156 1.4 0.5 1.0

OP 10 45 74 11 46 67 -14.0 -0.9 10.7 Expectations for TV BLU NP 6 40 50 8 42 48 -20.6 -4.2 3.5 SEC Revenue 58,685 229,201 245,561 61,032 231,457 255,054 -3.8 -1.0 -3.7 OP 6,968 27,576 38,876 6,596 27,173 37,804 5.6 1.5 2.8 NP 5,583 21,860 29,985 4,880 21,710 29,195 14.4 0.7 2.7 LGE Revenue 16,265 62,510 66,117 16,427 62,667 65,618 -1.0 -0.3 0.8

OP 197 2,532 2,882 286 2,619 2,914 -31.0 -3.3 -1.1 Intensifying competition in TVs NP -190 717 1,482 -92 868 1,391 RR -17.4 6.6 LGD Revenue 5,748 22,802 20,911 6,236 23,290 23,869 -7.8 -2.1 -12.4 OP -536 -1,474 69 -608 -1,545 -63 RR RR -209.7 NP -426 -1,455 -365 -591 -1,575 -243 RR RR RR

Source: WISEfn, Mirae Asset Daewoo Research

6| Monthly InsighT Mirae Asset Daewoo Research I. Investment strategy

II. Sector view • Display: Beginning of recovery in business environment/investments • Batteries: Sentiment to recover in 1H20; Earnings to expand in 2H20 • Semicon.: Early signs of improvement • Handsets/components: SEC and Apple to see increased sales in 2020; Parts makers diverging

III. Think big

IV. Global IT navigation

V. Spotlight stocks & other notable stocks

7| Monthly InsighT Mirae Asset Daewoo Research Display II. Sector view

Beginning of recovery in business environment/investments

■ Events and issues LCD panel price trends - LCD TV panel prices rebounded in December; IT panel prices continued falling. 1) TV panels: +1.7% for 39.5”; flat for other panel sizes (%) 2) IT panels: -0.2% for laptops; -0.6% for monitors 6.0 Notebook Monitor TV (FHD) TV (UHD) - Samsung Display made additional investments in two areas: 1) QD-OLED and 2) Y- 4.0 OCTA and hole-in-active-area (HIAA) technology. Such investments should benefit ICD, Wonik IPS, etc. 2.0 - Samsung Display placed purchase orders for QD-OLED equipment (Dec.-Jan.). 0.0 - Chinese players’ 6G OLED equipment bid invitations: 67 in December (vs. 72 in Nov.) -2.0 - BOE started investments in its B12 flexible OLED fab (30-45,000 sheets/month) in Chongqing. -4.0 ■ Implications -6.0 - LCD TV panel prices have started to rebound. -8.0 1) Some Chinese makers (including BOE) have demanded LCD price hikes. 2) Holiday season TV sales were strong (Singles' Day in China, Black Friday in the 1/14 7/14 1/15 7/15 1/16 7/16 1/17 7/17 1/18 7/18 1/19 7/19 1/20 US). Source: WitsView, Mirae Asset Daewoo Research - Most panel prices are around 10% below cash cost levels; thus, LCD panel prices are projected to turn upwards in 1Q20. - Higher LCD panel prices should benefit BOE, AUO (Taiwan), and Innolux (Taiwan). LCD TV panel cash costs and prices - Samsung Display will focus on widening its gap with latecomers in the OLED (US$) segment. 200 Global panel makers avg. cash costs December LCD price 1) Y-OCTA front-end process technology and an end to A3 line depreciation should help cut production costs by at least 15%. 2) R&D projects on new processes/equipment (OCR, etc.) are underway to further 150 Relative to reduce production costs. cash costs: Relative to. Relative to - Among OLED equipment makers, we favor companies that stand to benefit from -9% to -13% cash costs: their major customers’ focus on cost competitiveness: AP Systems (exclusive 100 cash costs: +2% to -6% -5% to -10% supplier of ELA) and ICD (Y-OCTA) Relative to. - Among OLED materials suppliers, we favor companies that are projected to report cash costs: 50 Relative to stable earnings in 1H20 (SKC Kolon PI). -11% to -16% cash costs: -8% to -14% Check point 0 LCD: Pace of price increases and China’s LCD/OLED investments 32" HD 43" FHD 50" UHD 55" UHD 65" UHD OLED: Foldable display yield and operation schedule of the Guangzhou OLED lines Source: Industry data, Mirae Asset Daewoo Research

8| Monthly InsighT Mirae Asset Daewoo Research Display II. Sector view

Key charts

LCD TV shipments and growth OLED TV sales by size

(mn units) (%) ('000 units) 100 LCD TV shipments (L) YoY growth (R) 10 2,000 88" 77" 75" 65" 55" 48"

2019F: 217mn units 2019F: 3mn units 75 5 1,500 2020F: 221mn units 2020F: 4.5mn units

50 0 1,000

25 -5 500

0 -10 0 1Q17 3Q17 1Q18 3Q18 1Q19 3Q19 1Q20F 3Q20F 1Q17 3Q17 1Q18 3Q18 1Q19 3Q19 1Q20F 3Q20F

Source: IHS, Mirae Asset Daewoo Research Source: IHS, Mirae Asset Daewoo Research

No. of 6G OLED tender invitations by Chinese panel makers OLED investment schedule ( Orders Installation Production) Facility Ph. Tech. Gen. Max./mo. 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 120 1LTPS6 32 B12 Chongqing 2LTPS6 32 3LTPS6 32 1LTPS6 32 B7 AMOLED 2LTPS6 32 3LTPS6 32 BOE 1 LTPS/LTPO 6 32 Mianyang B11 2 LTPS/LTPO 6 32 80 AMOLED 3 LTPS/LTPO 6 32 1LTPS6 32 Fuqing B15 OLED 2LTPS6 32 3LTPS6 32 1LTPS6 30 CEC Panda Nanking AMOLED 2LTPS6 30 1LTPS6 30 40 CSOT T4 OLED 2LTPS6 30 3LTPS6 30 Shanghai 1 2 LTPS 4 15 EDO 1LTPS6 30 Shanghai 2 2LTPS6 30 1LTPS6 30 Wuhan AMOLED 2LTPS6 30 0 Tianma 1LTPS6 32 Xianmen OLED 2LTPS6 32 1/17 7/17 1/18 7/18 1/19 7/19 3LTPS6 32 1LTPS6 30 Gu’an V2 2LTPS6 30 Source: China Bidding, Mirae Asset Daewoo Research Source: IHS, Mirae1LTPS6 Asset Daewoo 30 Research Visionox V3 Hefei 2LTPS6 30 1LTPS6 30 V4 TBD 2LTPS6 30 9| Monthly InsighT Mirae Asset Daewoo Research Batteries II. Sector view

Sentiment to recover in 1H20; Earnings to expand in 2H20

■ Events and issues Monthly EV sales trends - Global EV sales volume in November: 419,000 units (-19.5% YoY) ('000 units) BEV sales (L) HEV sales (L) PHEV sales (L) (%) 1) BEV: 155,000 units (-33.3% YoY) 2) HEV: 219,000 units (+0.8% YoY) 400 BEV YoY (R) HEV YoY (R) PHEV YoY (R) 150 3) PHEV: 45,000 units (-36.4% YoY) - China and the US continued to display EV market slumps. 1) China: 142,000 units (-37.7% YoY) 300 100 2) US: 64,000 units (-9.2% YoY) 3) Europe: 110,000 units (+23.9% YoY) 200 50 - December: Cobalt prices fell 8.4% MoM, while nickel prices advanced 1.4% MoM. ■ Implications 100 0 - EV sales are sluggish in the US and China due to subsidy cuts; EV sales remain relatively strong in Europe, aided by the Tesla Model 3 release. - Battery-related firms likely began a gradual earnings recovery in 4Q19. 0 -50 1/19 4/19 7/19 10/19 - Market sentiment is anticipated to recover in 1H20. 1) Tesla’s sales in China and the Model Y release Source: SNE Research, Mirae Asset Daewoo Research 2) Sales of Volkswagen’s ID (modular electric drive matrix, or MEB) 3) Tightening emission standards in Europe ( EV sales to recover YoY) - Earnings should start to grow full swing in 2H20, aided by the lifting of Samsung SDI’s OP profit trends by division uncertainties (ESS) and the expansion of EV revenue/profits. (Wbn) - Among battery cell makers, our top picks are Samsung SDI and LG Chem. 500 Small-sized Mid/large-sized Electronic materials Other - Among battery materials suppliers, we favor those with 1) low ESS exposure and 2) high exposure to Samsung SDI/copper foils (Iljin 400 Materials). 300 200 100 0 -100 -200 Check point 1Q16 1Q17 1Q18 1Q19 1Q20F 4Q19 EV battery profits of LG Chem and Samsung SDI Source: Company data, Mirae Asset Daewoo Research

10| Monthly InsighT Mirae Asset Daewoo Research Batteries II. Sector view

Key charts

Nickel and cobalt prices Cathode material prices

(US$/tonne) (US$/tonne) (RMB/tonne) (RMB/tonne) 20,000 Nickel price (L) 40,000 170,000 NCM 622 price (L) 250,000 Cobalt price (R) LCO price (R) 18,000 36,000 230,000 160,000 16,000 32,000 210,000 14,000 28,000 150,000 190,000 12,000 24,000

10,000 20,000 140,000 170,000 5/19 6/19 7/19 8/19 9/19 10/19 11/19 12/19 7/19 7/19 8/19 9/19 10/19 11/19

Source: KOMIS, Mirae Asset Daewoo Research Source: KOMIS, Mirae Asset Daewoo Research

NCM imports and exports NCM imports and exports price trends

(Tonnes) (US$/kg) 8,000 NCM imports 40 Export price Import price NCM exports 6,000 30

4,000

20 2,000

0 10 1/19 2/19 3/19 4/19 5/19 6/19 7/19 8/19 9/19 10/19 11/19 1/19 2/19 3/19 4/19 5/19 6/19 7/19 8/19 9/19 10/19 11/19

Source: KITA, Mirae Asset Daewoo Research Source: KITA, Mirae Asset Daewoo Research

11| Monthly InsighT Mirae Asset Daewoo Research Semicon. II. Sector view

Early signs of improvement

PC DRAM DDR4 8Gb spot price trends ■ Events and issues - DRAM spot prices have begun to rebound. (US$) (%) DDR4 8Gb (1Gx8) prices have soared 10.9% from their recent low (US$2.731 as of 12 Premium (R) Spot (L) Contract (L) 45 Dec. 5th).  Signs of inventory normalization for SEC’s 1xnm DRAM, coupled with expectations for server DRAM price hikes, prompted sellers to hold inventory and buyers to make purchases earlier than planned. 9 30 - Earnings releases/outlook November revenue of Taiwanese companies: 1) Server ODM: Only companies with significant exposure to cloud servers 6 15 continued to report MoM growth (Wiwynn, Wistron, and Quanta). 2) Foundry: TSMC and UMC reported revenue growth of 9.7% and 21.0%, respectively, both surpassing previous monthly records. 3 0 3) SSD controller (Phison): -6.7% MoM, +23.3% YoY Micron forecasts DRAM and NAND demand to outgrow supply in 2020, with the industry hitting a cyclical trough in FY2Q20 (Dec.-Feb.). 0 -15 4/16 9/16 2/17 7/17 12/17 5/18 10/18 3/19 8/19 1/20 ■ Implications (L) - We expect memory spot prices to rise, spurred by higher demand for cloud-use Source: DRAMeXchange, Mirae Asset Daewoo Research server DRAM and SSDs and a downstream boom (foundry/logic).

■ Market forecasts PC DRAM price outlook changes - Price negotiations should continue until quarterly contract prices are set in January. As prices are anticipated to rise further, we expect memory purchases to keep (US$) 2018.1010/18 月 growing. 10.0 - DRAM spot and contract prices are projected to rise in tandem, leading to a 2018.1111/18 月 sustained price uptrend. 2018.1212/18 月 7.5 2019.11/19 月 2019.22/19 月 5.0 2019.44/19 月 2019.66/19 月 2019.77/19 月 2.5 2019.1111/19 月 Check point 2019.1212/19 月 0.0 - DRAM and NAND contract prices at end-January 1/17 7/17 1/18 7/18 1/19 7/19 1/20 7/20

Source: DRAMeXchange, Mirae Asset Daewoo Research

12| Monthly InsighT Mirae Asset Daewoo Research Semicon. II. Sector view

Key charts

Server DRAM prices 128GB NAND prices (US$) 32GB MoM (R) 16GB MoM (R) (%) (US$) (%) 400 8GB MoM (R) 32GB REGDIMM (L) 75 10 1D% (R) MLC spot (L) MLC contract (L) 3.0 16GB REGDIMM (L) 8GB REGDIMM (L)

300 50 8 1.5

200 25 5 0.0

100 0 3 -1.5

0 -25 0 -3.0 1/15 7/15 1/16 7/16 1/17 7/17 1/18 7/18 1/19 7/19 1/16 7/16 1/17 7/17 1/18 7/18 1/19 7/19

Source: DRAMeXchange, Mirae Asset Daewoo Research Source: DRAMeXchange, Mirae Asset Daewoo Research

DRAM prices by application NAND price outlook changes

(%) (US$) 40 Mobile DRAM 6.0 Nov. 2019 PC DRAM Oct. 2019 Server DRAM 20 4.5 Sep. 2019 Aug. 2019 0 3.0 Jul. 2019 Jun. 2019 -20 1.5 Apr. 2019 *Mobile: LPDDR3, LPDDR4, 4X Feb. 2019 *PC DRAM: DDR4 SO-DIMM 8GB -40 *Server DRAM: DDR4 REGDIMM 32GB 0.0 10/15 3/16 8/16 1/17 6/17 11/17 4/18 9/18 2/19 7/19 12/19 1/17 7/17 1/18 7/18 1/19 7/19 1/20 7/20

Source: DRAMeXchange, Mirae Asset Daewoo Research Source: DRAMeXchange, Mirae Asset Daewoo Research

13| Monthly InsighT Mirae Asset Daewoo Research Semicon. II. Sector view

Key charts

Global OEM server shipments and demand Global ODM direct server shipments and demand

('000 units) Expected replacement demand (L) (%) ('000 units) Expected replacement demand (L) (%) 2,400 Global OEM server shipments (L) 40 1,200 Global ODM direct server shipments (L) 120 YoY growth (R) YoY growth (R) 1,800 20 900 80

1,200 0 600 40

600 -20 300 0

0 -40 0 -40 1Q02 1Q05 1Q08 1Q11 1Q14 1Q17 1Q20F 1Q08 1Q11 1Q14 1Q17 1Q20F

Source: IDC, Mirae Asset Daewoo Research Source: IDC, Mirae Asset Daewoo Research

NAND: Global smartphone content per unit trends NAND: Chinese smartphone content per unit trends (GB) (GB) 160.0 SEC 160.0 Apple Apple Huawei Huawei Oppo 120.0 120.0 Xiaomi Vivo

80.0 80.0

40.0 40.0

0.0 0.0 1Q14 4Q14 3Q15 2Q16 1Q17 4Q17 3Q18 2Q19 1Q14 4Q14 3Q15 2Q16 1Q17 4Q17 3Q18 2Q19

Source: IDC, Mirae Asset Daewoo Research Source: IDC, Mirae Asset Daewoo Research

14| Monthly InsighT Mirae Asset Daewoo Research Handsets/ components II. Sector view

SEC and Apple to see increased sales in 2020; Parts makers diverging

SEC smartphone sales and M/S ■ Events and issues Smartphone shipments (L) - The global smartphone market continues to mature. IDC data for 3Q19: (mn units) (%) YoY growth (R)  Handsets: 467mn units (-1.2% YoY), US$116.7bn (-3.7%), ASP US$250 (-2.6%) 100 45  Smartphones: 358mn units (+0.8% YoY), US$114.7bn (-3.5%), ASP US$320 (-4.2%) SEC M/S (R) - Nov. shipments (Counterpoint): 163mn handsets (-4.8% YoY, -3.5% MoM) 75 30 134mn smartphones (-3.0% YoY, -2.7% MoM) - November shipments and M/S of top five smartphone makers (Counterpoint) 1. SEC: 25.2mn units (-0.6% YoY, -3.6% MoM), 18.8% 50 15 2. Apple: 22.3mn units (-5.0% YoY, -2.0% MoM), 16.7% 3. Huawei: 18.9mn units (+0.4% YoY, -6.3% MoM), 14.1% 4. Oppo: 11.4mn units (+16.1% YoY, +4.2% MoM), 8.5% 25 0 5. Xiaomi: 11.3mn units (+10.9% YoY, -5.8% MoM), 8.4% [8. LGE: 2.5mn units (-19.2% YoY, +2.4% MoM), 1.9%] ■ Implications 0 -15 1Q11 1Q13 1Q15 1Q17 1Q19 - SEC has beefed up its mid-end product lineup (A series); earnings and ASP are expected to improve in 2020 on the back of foldable product sales. Source: Company data, Counterpoint, Mirae Asset Daewoo Research - LGE’s shipments and margins remain sluggish; 5G and the Huawei issue could be the last opportunity for LGE to stage a rebound in handsets. Apple iPhone shipments and M/S - Apple’s M/S expanded on new product releases. Huawei continued to struggle outside China. (mn units) iPhone shipments (L) (%) ■ Strategy 100 YoY growth (R) 45 Apple M/S (R) - Korean players stand to benefit from the US-China trade dispute. With Huawei’s struggles likely to continue in 2020, SEC and Apple will likely gain market share. 75 30 - We advise investors to find beneficiaries of SEC’s strategy to increase the revenue mix of high-end models (foldable phones). - Apple’s volume growth strategy should lead to services/accessories revenue 50 15 expansion (SE 2 in 1H20, 5G in 2H20).

25 0

Check point 0 -15 SEC and Apple to rebound in 2020; Chinese brands to see a slowdown 1Q11 1Q13 1Q15 1Q17 1Q19 Smartphone-related stocks deserve attention; note diverging performances in 1Q20 Source: Company data, FactSet, Mirae Asset Daewoo Research

15| Monthly InsighT Mirae Asset Daewoo Research Handsets/ components II. Sector view

Key charts

US quarterly smartphone M/S trends Huawei smartphone shipments and M/S (%) (mn units) Huawei shipments (L) YoY growth (R) Huawei M/S (R) (%) 60 Apple SEC LGE ZTE Motorola 100 45

45 75 30

30 50 15

15 25 0

0 0 -15 1Q11 1Q12 1Q13 1Q14 1Q15 1Q16 1Q17 1Q18 1Q19 4Q13 4Q14 4Q15 4Q16 4Q17 4Q18

Source: IDC, Mirae Asset Daewoo Research Source: Counterpoint, Mirae Asset Daewoo Research

China monthly smartphone M/S trends India monthly smartphone M/S trends

(%) (%) 60 Oppo + Vivo Huawei Apple Xiaomi SEC 45 SEC Xiaomi Huawei + Vivo + Oppo Micromax + Lava

45 30

15 15

0 0 9/14 3/15 9/15 3/16 9/16 3/17 9/17 3/18 9/18 3/19 9/19 1/15 7/15 1/16 7/16 1/17 7/17 1/18 7/18 1/19 7/19

Source: Counterpoint, Mirae Asset Daewoo Research Source: Counterpoint, Mirae Asset Daewoo Research

16| Monthly InsighT Mirae Asset Daewoo Research Handsets/ components II. Sector view

Key charts

Global smartphone shipment and market growth Global monthly smartphone M/S trends

(bn units) (%) (%) 2.0 90 Smartphone shipments (L) Shipments YoY (R) Value YoY (R) 40 SEC Apple Huawei Xiaomi Oppo Vivo

1.5 60 30

1.0 30 20 5.4 -4.0 0.5 0 10 -4.3 -2.2 0.0 -30 0 2006 2009 2012 2015 2018 9/13 3/14 9/14 3/15 9/15 3/16 9/16 3/17 9/17 3/18 9/18 3/19 9/19

Source: IDC, Mirae Asset Daewoo Research Source: Counterpoint, Mirae Asset Daewoo Research

Oppo + Vivo smartphone shipments and M/S Xiaomi smartphone shipments and M/S

(mn units) (%) (mn units) Xiaomi shipments (L) YoY growth (R) Xiaomi M/S (R) (%) 80 Oppo + Vivo shipments (L) 45 40 45 YoY growth (R) Oppo + Vivo M/S (R) 60 30 30 30

40 15 20 15

20 0 10 0

0 -15 0 -15 3Q11 3Q13 3Q15 3Q17 3Q19 4Q13 4Q14 4Q15 4Q16 4Q17 4Q18

Source: Counterpoint, Mirae Asset Daewoo Research Source: Counterpoint, Mirae Asset Daewoo Research

17| Monthly InsighT Mirae Asset Daewoo Research I. Investment strategy

II. Sector view

III. Think big • CES 2020 preview

IV. Global IT navigation

V. Spotlight stocks & other notable stocks

18| Monthly InsighT Mirae Asset Daewoo Research IV. Think big: CES 2020 preview

CES 2020 Flagship products presented in the past ■ CES: Over 50 years of showcasing IT trends - First held in New York in 1967, CES now takes place in in Las Vegas each January. 1967: First CES This year marks the event’s 54th anniversary. - In recent years, CES has served as a showcase for new products and technologies such as smartwatches (2012); UHD TVs (2013); curved TVs and wearables (2014); IoT (2015); smart cars and VR devices (2016); autonomous vehicles (2017); smart cities 1970: VCR (Philips) (2018); and AI and 5G (2019). - CES is where global IT technology trends—including AI, 5G, futuristic concept cars, and IoT—are revealed. 1981: CDs & camcorders (Sony) - In 2020, participants from Asia include SEC, LGE, Hyundai Motor, Doosan, SK 1996: DVDs Telecom, Toyota, Huawei, and Lenovo. - CES 2020 will take place from January 7th to 10th. According to the Consumer Technology Association (CTA), keywords for this year’s event include: 1) 8K TVs; 2) micro LED; 3) China’s participation in CES; 4) 5G; and 5) digital healthcare.

1998: HDTVs

SEC’s 2019 MicroLED TV: The Wall 2001: Xbox (Microsoft)

2008: OLED TVs (Panasonic)

2011: Tablets

2017: AI robots

2018: VR headsets

Source: Press materials Source: Press materials , Mirae Asset Daewoo Research

19| Monthly InsighT Mirae Asset Daewoo Research IV. Think big: CES 2020 preview

CES 2020 Royole FlexPai presented at CES 2019

■ CES by the numbers - CES serves as a gathering place for more than 170,000 attendees, 2,500 exhibiting companies, and 1,100 industry thought leaders. - Attendees at the show conduct an average of 33 meetings. - Attendance by senior level executives has increased by more than 100% since 2008, with more than 79,000 senior executives at CES 2019. - CES is the place where B2B and B2C brands go to make decisions, build relationships, and form partnerships. About 48% of attendees intend to make a purchase or form a strategic partnership at CES. - The CES Conference Program will host more than 300 sessions featuring top executives from SEC, Lenovo, AARP, American Express Travel, TCL, NFL, Discovery, and SoftBank Robotics.

Source: Press materials, Mirae Asset Daewoo Research

CES 2019 Hyundai Mobis’s booth at CES 2020

Source: Press materials, CTA Source: Hyundai Mobis, Mirae Asset Daewoo Research

20| Monthly InsighT Mirae Asset Daewoo Research IV. Think big: CES 2020 preview

CES 2020: Keynote addresses

■ Kim Hyun-suk, President and CEO of SEC’s consumer electronics division [January 6, 2020]

- Kim Hyun-suk will present the company’s vision for revolutionizing consumer lifestyles.

■ Ola Källenius, Chairman of the Board of Management of Daimler AG [January 6, 2020]

- Ola Källenius will present a groundbreaking concept car inspired by one of the most innovative entertainment brands, envisioninga completely new form of interaction between humans, technology, and nature.

■ Gary Shapiro, President and CEO of CTA, and Karen Chupka, EVP of CTA [January 7, 2020]

- Gary Shapiro and Karen Chupka will lead a CTA State of the Industry Address highlighting the latest tech trends and innovations on display at CES 2020.

■ Ed Bastian, CEO of Delta [January 7, 2020]

- Ed Bastian will demonstrate how travel has become an essential part of our lives, and how technology and innovation will transform the future travel experience for customers across all points of the journey.

■ Meg Whitman, CEO of Quibi, and Jeffrey Katzenberg, founder of Quibi [January 8, 2020]

- Meg Whitman and Jeffrey Katzenberg will showcase how Quibi is uniquely bringing together Hollywood and Silicon Valley to enable new ways to tell stories and give the audience a sneak peek of their highly anticipated mobile entertainment platform.

21| Monthly InsighT Mirae Asset Daewoo Research IV. Think big: CES 2020 preview

① Intense TV market competition and MicroLED

■ Consumer electronics to remain the major exhibition category SEC’s 8K QLED - At CES 2019, LGE unveiled a rollable TV, while SEC showcased a MicroLED TV (“The Wall”). The two tech giants are expected to exhibit TVs with higher picture quality and new form factors. - With the 8K TV market taking off ahead of the Tokyo 2020 Summer Olympics, competition among TV makers should intensify as players fight for an early lead. - Once existing TV models’ penetration reaches 50-60%, TV makers tend to launch next-generation models with higher resolution in order to gain share in the high-end TV market. - Widespread access to true 8K UHD content is still a long way off. That said, a rise in high-resolution TV penetration has historically led to the spread of related content. - SEC remains dominant in the 8K TV market, with a market share of 85%. However, LGE and Chinese makers are likely to increase their presence in the 8K space, as they are pursuing margin growth via large, high-priced, high- resolution products.

- Large IT firms at home and abroad (including SEC) will unveil new MicroLED TVs Source: Press materials, Mirae Asset Daewoo Research at CES 2020.

MicroLED Global MicroLED TV market trend

(US$’000) 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 2019 2020 2021 2022 2023 2024 2025 2026

Source: CNET, Mirae Asset Daewoo Research Source: IHS, Mirae Asset Daewoo Research

22| Monthly InsighT Mirae Asset Daewoo Research IV. Think big: CES 2020 preview

② 5G: Smartphones, smart homes, and autonomous vehicles

■ Changes that 5G will bring about in 2020 OnePlus teases a “special event” at CES 2020 - In 2020, the proliferation and stabilization of 5G services should continue to support related market growth. - At CES 2020, Chinese smartphone makers OnePlus and Vivo are expected to unveil concept phones (a foldable phone and the bezel-less Apex 2020, respectively). - Full-fledged commercialization of autonomous vehicles is highly likely to start in 2020. - CES 2020 will showcase the latest versions of autonomous vehicles and concept cars (Mercedes-Benz). - At the trade show, SK Telecom plans to unveil a variety of new mobility technologies (e.g., semiconductor, battery, 5G-based self-driving) alongside its core group affiliates (e.g., SK Innovation, SK Hynix, SKC) and set up an exhibition booth eight times the size of its CES 2019 booth.

Source: OnePlus, Mirae Asset Daewoo Research

Toyota to showcase its single-seat mobility service concept at CES 2020 Mercedes-Benz’s Vision EQS, an electric sedan concept

Source: Toyota, Mirae Asset Daewoo Research Source: Mercedes-Benz, Mirae Asset Daewoo Research

23| Monthly InsighT Mirae Asset Daewoo Research IV. Think big: CES 2020 preview

③ Digital therapeutics

■ Healthcare market evolving due to digital healthcare technology Sugentech’s Surearly Smart - AI-based healthcare technologies for early diagnosis and disease control, as well as health management/diet/fitness, are being introduced; such technologies are expected to have various treatment applications going forward. - “Digital therapeutics,” one of the key technology trends to watch at CES 2020, refers to direct software-based therapeutic interventions that can prevent, control, and treat medical disorders and diseases. - The convergence of VR and healthcare technologies has helped train doctors in many areas of healthcare (e.g., diagnosis, treatment, surgery, etc.); doctors can now use VR as practice for medical emergencies. - TouchPoint Solution is expected to showcase a neuroscience-backed wearable device designed to alleviate abdominal pain and headache using haptic micro- vibrations. - At CES 2020, various digital healthcare products/technologies related to fitness, wellness, sleep, and wearables are expected to be unveiled. Source: Sugentech, Mirae Asset Daewoo Research

Global digital healthcare market size Deep Medi’s blood pressure monitoring app (US$bn) 250 206 200 172 142 150 118 96 100 79

0 2015 2016 2017 2018 2019 2020

Source: IRS, Mirae Asset Daewoo Research Source: Press materials, Mirae Asset Daewoo Research

24| Monthly InsighT Mirae Asset Daewoo Research IV. Think big: CES 2020 preview ④ Decline in Chinese firms attending CES

■ Implications of the ongoing US-China trade dispute Major firms attending CES 2020 - The number of Chinese firms that attended CES 2019 was 1,211 (representing a sharp decline from 1,551 at CES 2018). Amid the ongoing US-China trade dispute, we expect the number of Chinese attendees and China-related exhibition space to decrease further at CES 2020. - For Huawei, only its US subsidiary will attend the trade show, and its exhibition space will be nearly 30% smaller than at CES 2019. - Korean firms attending CES 2020 • At CES 2020, SEC is set to unveil a new AI product named NEON, which is the firm’s next-generation AI assistant used in a variety of smart home appliances (e.g., TVs, refrigerators). The firm is also expected to showcase the latest versions of its AI robots (e.g., Samsung Bot Chef, Samsung Bot Clean). • LGE is expected to display a wide range of products that support its AI platform ThinQ, enabling visitors to experience its AI services. • HMC plans to present its human-centered future mobility vision at CES 2020 and unveil its innovative smart mobility solutions, including personal air vehicles (PAVs), purpose-built vehicles (PBVs), and the HUB. • Doosan Group has announced its first-ever attendance at the trade show; a Source: Press materials, Mirae Asset Daewoo Research number of start-ups are expected to attend the show.

CES 2020 to showcase SEC’s AI project named NEON LGE to unveil its indoor vegetable cultivator at CES 2020

Source: Press materials, Mirae Asset Daewoo Research Source: LGE, Mirae Asset Daewoo Research

25| Monthly InsighT Mirae Asset Daewoo Research I. Investment strategy

II. Sector view

III. Think big

IV. Global IT navigation

V. Spotlight stocks & other notable stocks

26| Monthly InsighT Mirae Asset Daewoo Research IV. Global IT navigation

IT stocks to continue to advance in 2020

■ Global industry performance Global IT index performance table (12/30) - MSCI IT World (+3.7%), MSCI IT Korea (+3.8%), MSCI IT Japan (+11.1%), and MSCI IT China (+10.1%) all posted MoM gains. Performance (%) Index - MSCI IT World continued to advance rapidly. Going forward, expectations for 1W 1M 3M 6M 12M memory chips and data center investments should drive the performances of Dow Jones 28,462 0.0 1.5 5.7 7.0 23.4 related firms; CPU suppliers, including AMD and KLA, are anticipated to post particularly strong earnings. New smartphone releases in 1H20 should benefit NASDAQ 8,946 0.2 3.2 11.8 11.7 35.9 companies in the supply chain (camera modules, film, LED, etc.). KOSPI 2,198 -0.3 5.3 6.5 3.1 7.7 - Positive market momentum is projected to continue into 2020. KOSDAQ 670 3.1 5.8 7.7 -3.0 -0.9 ■ Sector performance World 310 0.2 3.7 13.3 15.6 46.8 - Display (+12.2%): TV sales volume increased on the back of brisk OLED TV sales US 367 0.5 3.8 13.5 16.3 48.2 (thanks to Black Friday promotions); display stocks, which had been weighed down by market concerns, rebounded. Korea 1,406 -0.1 11.1 13.6 19.1 41.3 MSCI IT - LED (+6.4%): Stocks appear to have climbed on rumors that SEC and Apple may Japan 176 0.0 3.4 14.2 19.7 39.9 release products with micro-LED displays. Taiwan 249 0.8 8.2 20.4 30.7 42.9 ■ Company performance China 701 1.2 10.1 17.1 22.0 42.0 - Lumens (+38.74%): The firm successfully mass-produced micro-LED modules. Source: Bloomberg, Mirae Asset Daewoo Research Other tailwinds include: 1) increased supply of TV backlight modules (BLU) for SEC and 2) new demand for mini-LED BLU modules. December sector performance (MoM) December share performance (MoM)

(%) 20 (%) 60 40 10 20 0 0 -20 -10 TCL SSC AAC BOE Kuka Nanya Melfas LiB O-Film Epistar PCs LED Corning Lumens Toshiba Seagate Skyworks Electrolux Broadcom Panasonic Memory Foundry Materials Taiyo Yuden Taiyo Handsets EMS/ODM Appliances Distribution Automation Wonik Holdings Components Non-memory Screen Holdings Display glass Display Touchscreens equip. Display Display panels Display Semicon. equip. Display components Display

Source: Bloomberg, Mirae Asset Daewoo Research Source: Bloomberg, Mirae Asset Daewoo Research

27| Monthly InsighT Mirae Asset Daewoo Research IV. Global IT navigation

Key charts

MSCI World and MSCI World IT MSCI IT performance by country

(1/1/12=100) (1/1/12=100) 400 MSCI World MSCI World IT 440 MSCI US IT MSCI Korea IT MSCI Japan IT MSCI Taiwan IT 360 380 320 320 280 240 260

200 200 160 140 120 80 80 2/12 2/13 2/14 2/15 2/16 2/17 2/18 2/19 2/12 2/13 2/14 2/15 2/16 2/17 2/18 2/19

Source: Bloomberg, Mirae Asset Daewoo Research Source: Bloomberg, Mirae Asset Daewoo Research

IT sector P/E comparison (2019F) IT sector P/B-ROE comparison (2019F)

(x) P/B (x) 30 8 US 26.1 23.5 23.3 21.6 21.6 6 19.2 20 World 4 China 10 Japan 2 Taiwan

Korea ROE (%) 0 0 World US Japan China Taiwan Korea 0 1020304050

Source: Bloomberg, Mirae Asset Daewoo Research Source: Bloomberg, Mirae Asset Daewoo Research

28| Monthly InsighT Mirae Asset Daewoo Research I. Investment strategy

II. Sector view

III. Think big

IV. Global IT navigation

V. Spotlight stocks & other notable stocks • SK Hynix, Samsung SDI, SEMCO, LG Innotek, SSC

29| Monthly InsighT Mirae Asset Daewoo Research Spotlight stocks SK Hynix (000660 KS)

On an uncharted path

■ Recovery has just begun (Maintain) Buy - Inventory revaluation likely • NAND ASP may pick up earlier than expected. Target Price (12M, W) ▲115,000 • A higher sales mix of products with large memory capacity in 2H20 may drive bit growth; we may see the NAND unit swing Share price (12/30/19,W) 94,100 to a profit in 2020, with valuation increasing. - Potential for higher operating leverage effects Expected Return 22% • In 2020, we forecast the company’s capex to decrease 35% YoY to W8.3tr. • Server DRAM prices have started to rise; the price uptrend is forecast to continue throughout the year. OP (19F, Wbn) 2,953  Margins are likely to surge around 3Q20 thanks to ASP hikes. Consensus OP (19F, Wbn) 2,912 ■ Maintain Buy rating and raise TP to W115,000 (from W110,000) EPS Growth (19F, %) -85.5 - The coming up cycle should be stronger than the one seen in 2016, justifying our valuation (12-month forward P/B of 1.3x) Market EPS Growth (19F, %) -33.5 in spite of a relatively low ROE. P/E (19F, x) 30.3 1) We see strong upside for DRAM prices (prices tripled during the 2016-18 upcycle). Market P/E (19F, x) 15.1 2) A concurrent rise in DRAM spot and contract prices should lead to a sustained price uptrend. KOSPI 2,197.67 Market Cap (Wbn) 68,505 Shares Outstanding (mn) 728

Free Float (%) 73.9 180 FY (Dec.) 12/16 12/17 12/18 12/19F 12/20F 12/21F SK Hynix KOSPI Revenue (Wbn) 17,198 30,109 40,445 26,402 30,466 35,155 Foreign Ownership (%) 50.3 160 Beta (12M) 1.72 OP (Wbn) 3,277 13,721 20,844 2,953 7,398 9,065 140 OP margin (%) 19.1 45.6 51.5 11.2 24.3 25.8 52-Week Low 57,700 NP (Wbn) 2,954 10,642 15,540 2,259 5,422 6,621 52-Week High 96,000 120 EPS (W) 4,057 14,617 21,346 3,103 7,448 9,094 (%) 1M 6M 12M 100 ROE (%) 13.0 36.8 38.5 4.7 10.7 11.9 16.3 35.4 55.5 Absolute 80 P/E (x) 11.0 5.2 2.8 30.3 12.6 10.3 Relative 10.5 31.3 44.5 18.12 19.4 19.8 19.12 P/B (x) 1.3 1.6 0.9 1.3 1.2 1.1 Notes: All figures are based on consolidated K-IFRS; NP refers to net profit attributable to controlling Young-gun Kim interests +822-3774-1583 Source: Mirae Asset Daewoo Research estimates [email protected]

30| Monthly InsighT Mirae Asset Daewoo Research Spotlight stocks SK Hynix (000660 KS)

Earnings table (Wbn, %) 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19F 1Q20F 2Q20F 3Q20F 4Q20F 2018 2019F 2020F Revenue 8,720 10,371 11,417 9,938 6,773 6,452 6,839 6,339 6,347 7,300 8,207 8,613 40,445 26,402 30,466 QoQ/YoY -3.4 18.9 10.1 -13.0 -31.9 -4.7 6.0 -7.3 0.1 15.0 12.4 4.9 34.3 -34.7 15.4 DRAM 6,881 8,321 9,201 7,968 5,353 4,804 5,047 4,820 4,724 5,235 5,776 6,010 32,371 20,025 21,745 NAND 1,694 1,870 2,046 1,812 1,155 1,256 1,317 1,519 1,624 2,065 2,430 2,603 7,421 5,247 8,721 Operating profit 4,367 5,574 6,472 4,430 1,366 638 473 476 774 1,565 2,338 2,721 20,844 2,953 7,398 QoQ/YoY -2.2 27.6 16.1 -31.6 -69.2 -53.3 -25.8 0.6 62.5 102.3 49.4 16.4 51.9 -85.8 150.5 DRAM 4,163 5,214 6,034 4,559 2,333 1,419 1,195 1,013 1,169 1,752 2,315 2,590 19,970 5,959 7,825 NAND 311 342 473 -97 -829 -789 -723 -537 -396 -187 23 131 1,029 -2,878 -428 OP margin 50.1 53.7 56.7 44.6 20.2 9.9 6.9 7.5 12.2 21.4 28.5 31.6 51.5 11.2 24.3 DRAM 60.5 62.7 65.6 57.2 43.6 29.5 23.7 21.0 24.8 33.5 40.1 43.1 61.7 29.8 36.0 NAND 18.3 18.3 23.1 -5.4 -71.8 -62.9 -54.9 -35.3 -24.4 -9.0 1.0 5.0 13.9 -54.9 -4.9 US$/W 1,073 1,079 1,122 1,127 1,125 1,167 1,193 1,185 1,185 1,180 1,170 1,170 1,100 1,167 1,176 DRAM (1Gb eq.) Shipments (mn units) 6,624 7,666 8,064 7,871 7,281 8,212 10,068 10,522 10,311 10,930 11,695 11,929 30,225 36,083 44,865 Bit growth -5.1 15.7 5.2 -2.4 -7.5 12.8 22.6 4.5 -2.0 6.0 7.0 2.0 19.8 19.4 24.3 ASP (US$) 0.97 1.01 1.02 0.90 0.66 0.50 0.42 0.39 0.39 0.41 0.42 0.43 1.07 0.55 0.48 QoQ 8.6 3.9 1.1 -11.4 -26.5 -24.3 -16.2 -8.0 0.0 5.0 4.0 2.0 18.1 -48.2 -12.7 Operating costs 0.41 0.41 0.39 0.43 0.41 0.41 0.38 0.36 0.34 0.32 0.30 0.29 0.41 0.39 0.31 QoQ -0.5 -1.2 -3.1 10.3 -4.2 -0.6 -7.2 -5.4 -4.7 -7.6 -7.1 -3.1 -4.2 -5.0 -20.4 NAND (16Gb eq.) Shipments (mn units) 2,548 3,042 3,599 3,969 3,751 5,237 5,184 5,677 5,620 6,351 7,113 7,468 13,158 19,849 26,551 Bit growth -10.0 19.4 18.3 10.3 -5.5 39.6 -1.0 9.5 -1.0 13.0 12.0 5.0 36.6 50.8 33.8 ASP (US$) 0.62 0.57 0.51 0.40 0.28 0.21 0.21 0.23 0.24 0.28 0.29 0.30 0.56 0.26 0.33 QoQ -1.3 -8.6 -10.4 -20.6 -31.8 -25.3 3.6 6.0 8.0 13.0 6.0 2.0 -18.3 -53.1 24.3 Operating costs 0.54 0.50 0.44 0.48 0.53 0.39 0.39 0.36 0.36 0.35 0.34 0.33 0.49 0.41 0.34 QoQ 0.0 -7.5 -13.0 10.1 10.0 -26.2 0.8 -8.0 -0.8 -1.3 -4.5 -2.2 -10.3 -15.7 -15.8 Source: Company data, Mirae Asset Daewoo Research

31| Monthly InsighT Mirae Asset Daewoo Research Spotlight stocks Samsung SDI (006400 KS)

Taking a step back to move forward; Shares hit a bottom

■ 4Q19 preview: One-off expenses to weigh on earnings (Maintain) Buy - We expect around W200bn in one-off expenses to be recorded as a result of the ESS fires. - Equity-method gains should decline due to Samsung Display’s dismal LCD performance. Target Price (12M, W) 315,000 - EV battery earnings are projected to expand full swing (Xi’an and Hungary plants).

Share price (12/30/19, W) 236,500 ■ Growth to resume - EV battery plant in Hungary reporting higher margins than rivals (prismatic batteries)  EV batteries likely to have reached Expected Return 33% breakeven in 4Q19 - Samsung Display’s production of foldable panels to increase Samsung SDI’s earnings visibility over the medium/long term OP (19F, Wbn) 475 - Foldable display materials (new materials such as OCA and PSA) to expand  Continued growth of OLED materials - Consensus OP (19F, Wbn) 483 What’s needed: Revaluation of OLED materials and equity-method earnings EPS Growth (19F, %) -37.7 ■ Shares at bottom of trading range; Battery sector sentiment to recover in 1H20 Market EPS Growth (19F, %) -33.5 - We view a 12-month forward P/B of 1.15x (W223,000)—which is not too far from the current price—as the stock’s bottom. - P/E (19F, x) 38.0 We thus recommend accumulating shares on any correction. Market P/E (19F, x) 15.1 KOSPI 2,197.67 Market cap (Wbn) 16,228 Shares outstanding (mn) 70 Free float (%) 74.6 120 Samsung SDI KOSPI FY (Dec.) 12/16 12/17 12/18 12/19F 12/20F 12/21F Foreign ownership (%) 43.3 Revenue (Wbn) 5,201 6,347 9,158 10,252 11,370 13,190 110 Beta (12M) 0.71 OP (Wbn) -926 117 715 475 900 1,247 OP margin (%) -17.8 1.8 7.8 4.6 7.9 9.5 52-week low 201,000 100 NP (Wbn) 219 657 701 437 769 1,082 52-week high 255,000 90 EPS (W) 3,117 9,338 9,962 6,211 10,919 15,377 (%) 1M 6M 12M ROE (%) 2.0 6.0 6.0 3.6 5.9 7.9 Absolute 2.2 -0.2 7.8 80 P/E (x) 35.0 21.9 22.0 38.0 21.6 15.3 Relative -2.9 -3.3 0.1 18.12 19.4 19.8 19.12 P/B (x) 0.7 1.2 1.3 1.3 1.2 1.1 Notes: All figures are based on consolidated K-IFRS; NP refers to net profit attributable to Chuljoong Kim controlling interests +822-3774-1464 Source: Mirae Asset Daewoo Research estimates [email protected]

32| Monthly InsighT Mirae Asset Daewoo Research Spotlight stocks Samsung SDI (006400 KS)

Earnings table (Wbn, %)

1Q19 2Q19 3Q19 4Q19F 1Q20F 2Q20F 3Q20F 4Q20F 2018 2019F 2020F Revenue 2,304 2,404 2,568 2,975 2,397 2,510 2,899 3,564 9,157 10,251 11,370 LIB 1,731 1,823 1,954 2,379 1,851 1,965 2,313 2,929 6,951 7,886 9,057 Small-sized (IT) 1,135 1,155 1,062 1,112 1,011 1,050 1,116 1,153 4,118 4,464 4,332 Mid/large-sized (EV, ESS) 596 668 892 1,267 839 915 1,196 1,775 2,833 3,423 4,726 Electronic materials 573 581 614 597 546 545 587 635 2,204 2,365 2,313 Operating profit 119 157 166 33 124 147 283 346 715 475 900 LIB 35 67 70 129 48 67 186 240 412 300 541 Small-sized (IT) 138 145 132 129 94 100 127 128 535 544 450 Mid/large-sized (EV, ESS) -104 -78 -63 0 -47 -33 59 112 -122 -244 91 Electronic materials 84 91 96 104 76 80 97 106 303 375 359 Other 0 -200 0 OP margin 5.2 6.5 6.5 1.1 5.2 5.9 9.8 9.7 7.8 4.6 7.9 LIB 2.0 3.7 3.6 5.4 2.6 3.4 8.1 8.2 5.9 3.8 6.0 Small-sized (IT) 12.2 12.6 12.4 11.6 9.3 9.5 11.4 11.1 13.0 12.2 10.4 Mid/large-sized (EV, ESS) -17.4 -11.7 -7.0 0.0 -5.5 -3.6 4.9 6.3 -4.3 -7.1 1.9 Electronic materials 14.7 15.6 15.7 17.4 13.9 14.7 16.5 16.8 13.7 15.8 15.5 Source: Company data, Mirae Asset Daewoo Research

33| Monthly InsighT Mirae Asset Daewoo Research Spotlight stocks Samsung Electro-Mechanics (009150 KS)

Across-the-board improvement in 2020

■ 4Q19 preview: OP of W140.2bn (-52.2% YoY) (Maintain) Buy - For 4Q19, we forecast SEMCO to post revenue of W1.97tr (-1.0% YoY, -13.2% QoQ) and operating profit of W140.2bn (-52.2% YoY, -22.2% QoQ). Target Price (12M, W) ▲151,000 - We revised up our OP forecast by 20.5% (vs. previous estimate of W116.4bn), reflecting F/X effects and the discontinuation of the HDI business. - Substrate solutions: The discontinuation of Kunshan operations (subsidiary) should help cut the unit’s quarterly operating Share price (12/30/19, W) 125,000 loss by W20bn (to be reflected in the profits/losses from discontinued operations in 4Q19). - Component solutions: Stabilization in MLCC margins is positive. Inventory is normalizing to around 1.5 months. Expected Return 21% - Module solutions: The positive impact of robust Galaxy Note 10 sales should weaken, but the unit is still anticipated to deliver a solid OP margin of around 4%. OP (19F, Wbn) 708 ■ OP to reach W839.8bn in 2020 (revised up from previous estimate of W803.2bn) Consensus OP (19F, Wbn) 683 - Component solutions: MLCC demand should recover, as the firm’s automotive-use MLCC plant will be brought online at EPS Growth (19F%) -39.3 end-2Q20  Positive for 2H20 earnings - Module solutions: SEC’s Galaxy S11 to feature SEMCO’s folded camera modules  ASP hikes Market EPS Growth (19F, %) -33.5 - Substrate solutions: Semiconductor packaging sales to remain strong; discontinuation of the HDI unit  Positive earnings P/E (19F, x) 24.3 variable for 2020 Market P/E (19F, x) 15.1 ■ Retain Buy and raise 12-month TP to W151,000 KOSPI 2,197.67 - The substrate and camera module businesses are now normalizing. MLCC earnings have begun to expand. - Market cap (Wbn) 9,337 We raise our target price from W143,000 to W151,000, corresponding to 1.83x (40% premium to five-year avg. P/B) our 2020F BPS of W82,790. Shares outstanding (mn) 78

Free float (%) 73.4 130 FY (Dec.) 12/16 12/17 12/18 12/19F 12/20F 12/21F SEMCO KOSPI Foreign ownership (%) 28.5 120 Revenue (Wbn) 6,033 6,838 8,193 8,327 8,836 9,725 Beta (12M) 1.28 110 OP (Wbn) 24 306 1,018 708 840 991 OP margin (%) 0.4 4.5 12.4 8.5 9.5 10.2 52-week low 84,600 100 NP (Wbn) 15 162 656 398 641 752 52-week high 125,500 90 EPS (W) 190 2,084 8,457 5,135 8,262 9,694 (%) 1M 6M 12M 80 ROE (%) 0.3 3.8 14.5 7.6 10.7 11.4 Absolute 12.6 27.8 20.8 70 P/E (x) 268.0 48.0 12.2 24.3 15.1 12.9 Relative 7.0 23.9 12.2 18.12 19.4 19.8 19.12 P/B (x) 0.9 1.8 1.6 1.7 1.5 1.4 Notes: All figures are based on consolidated K-IFRS; NP refers to net profit attributable to controlling Wonjae Park interests +822-3774-1426 Source: Mirae Asset Daewoo Research estimates [email protected]

34| Monthly InsighT Mirae Asset Daewoo Research Spotlight stocks Samsung Electro-Mechanics (009150 KS)

Earnings table

(Wbn, %, %p)

2019F 2020F Previous 2019F 2020F YoY QoQ Diff. 1Q 2Q 3Q 4QF 1QF 2QF 3QF 4QF (4Q19F)

Revenue Module solutions 951.2 824.2 941.0 798.3 1,056.0 821.2 922.9 825.8 3,514.7 3,625.9 16.2 -15.2 755.5 5.7 Component 836.3 786.7 820.1 774.2 788.4 879.9 1,046.7 980.1 3,217.3 3,695.0 -13.6 -5.6 766.9 1.0 solutions Substrate solutions 328.9 346.8 511.0 400.6 301.8 308.5 466.4 438.9 1,587.3 1,515.5 6.4 -21.6 446.9 -10.4

Others 7.9 0.0 0.0 0.0 0.0 0.0 0.0 0.0 7.9 0.0 0.0 0.0 0.0 0.0

Total 2,124.3 1,957.7 2,272.1 1,973.1 2,146.2 2,009.6 2,436.0 2,244.8 8,327.2 8,836.5 -1.0 -13.2 1,969.3 0.2

Operating Module solutions 119.9 44.6 65.3 29.3 78.2 45.5 64.5 34.6 259.1 222.8 326.1 -55.2 27.5 6.2 profit Component 192.3 125.9 87.8 92.9 102.5 140.8 188.4 141.1 498.9 572.8 -68.1 5.9 84.4 10.1 solutions Substrate solutions -69.7 -25.3 27.1 18.0 9.1 12.3 14.0 8.8 -49.9 44.2 TTB -33.4 4.5 303.4

Total 242.5 145.2 180.2 140.2 189.8 198.6 266.9 184.5 708.0 839.8 -52.2 -22.2 116.4 20.5

OP margin Module solutions 12.6 5.4 6.9 3.7 7.4 5.5 7.0 4.2 7.4 6.1 2.7 -3.3 3.6 0.0 Component 23.0 16.0 10.7 12.0 13.0 16.0 18.0 14.4 15.5 15.5 -20.5 1.3 11.0 1.0 solutions Substrate solutions -21.2 -7.3 5.3 4.5 3.0 4.0 3.0 2.0 -3.1 2.9 5.9 -0.8 1.0 3.5

Total 11.4 7.4 7.9 7.1 8.8 9.9 11.0 8.2 8.5 9.5 -7.6 -0.8 5.9 1.2

Pretax profit 171.8 437.1 162.3 -178.5 187.5 196.5 264.5 179.9 592.8 828.4 TTR TTR 108.2 TTR

Net profit 129.8 303.6 103.5 -138.5 145.5 152.3 204.0 139.3 398.4 641.1 TTR TTR 83.9 TTR

Pretax margin 8.1 22.3 7.1 -9.0 8.7 9.8 10.9 8.0 7.1 9.4 -21.0 -16.2 5.5 -14.5

Net margin 6.1 15.5 4.6 -7.0 6.8 7.6 8.4 6.2 4.8 7.3 -16.3 -11.6 4.3 -11.3 Source: Company data, Mirae Asset Daewoo Research

35| Monthly InsighT Mirae Asset Daewoo Research Spotlight stocks Samsung Electro-Mechanics (009150 KS)

Earning forecast revisions (Wbn, W, %, %p) Previous Revised % chg.

2019F 2020F 2021F 2019F 2020F 2021F 2019F 2020F 2021F

Revenue 8,323 8,904 9,730 8,327 8,836 9,725 0.0 -0.8 -0.1

Operating profit 684 803 946 708 840 991 3.5 4.6 4.8

Pretax profit 879 779 921 593 828 972 -32.6 6.3 5.5

Net profit 621 603 713 398 641 752 -35.8 6.3 5.6

EPS 8,000 7,772 9,184 5,135 8,262 9,694 -35.8 6.3 5.6

OP margin 8.2 9.0 9.7 8.5 9.5 10.2 0.3 0.5 0.5

Net margin 7.5 6.8 7.3 4.8 7.3 7.7 -2.7 0.5 0.4 Source: Company data, Mirae Asset Daewoo Research

36| Monthly InsighT Mirae Asset Daewoo Research Spotlight stocks LG Innotek (011070 KS)

A good year to be followed by a better one

■ 4Q19 preview: Solid OP of W180.8bn (+74.5% YoY, -3.0% QoQ) (Maintain) Buy - For 4Q19, we forecast LG Innotek to deliver revenue of W2.74tr (+12.7% YoY, +12.0% QoQ) and operating profit of W180.8bn (+74.5% YoY, -3.0% QoQ). Target Price (12M, W) 171,000 - The optical solutions unit (camera modules and 3D sensing modules) should continue to post robust results.  Two of the three new iPhones adopted triple cameras, supporting a rise in ASP. We expect to see only marginal inventory adjustments in 4Q19. Share price (12/30/19, W) 140,000 - Discontinuation of HDI business: Non-OP losses in 4Q vs. OP expansion in 2020  Positives to outweigh negatives Losses should continue at the automotive electronic components and LED units. However, US$/W rate movements in 4Q19 Expected Return - 22% are positive.

OP (19F,Wbn) 375 ■ Rising expectations for Apple effects; Seasonality to ease in 1H20 - Expectations surrounding Apple are rising among foreign investors due to the expected release of the iPhone SE 2 in 1H20, Consensus OP (19F, Wbn) 355 as well as the adoption of 5G technology and time-of-flight (ToF) modules in 2H20 (ToF modules may be used in a new iPad EPS Growth (19F,%) -2.9 model scheduled to hit the market in 1H20). - For 2020, we project revenue of W8.79tr (+8.8%) and operating profit of W417.6bn (+11.4%)  Record revenue and Market EPS Growth (19F, %) -33.5 operating profit for two consecutive years P/E (19F, x) 20.9 ■ Maintain Buy with 12-month TP of W171,000 Market P/E (19F, x) 15.1 - New smartphone releases in 1H20 should reduce seasonality, while the adoption of ToF modules in 2H20 could also boost KOSPI 2,197.67 ASP per unit. Market cap (Wbn) 3,313 Shares outstanding (mn) 24

Free float (%) 59.2 180 LG Innotek KOSPI FY (Dec.) 12/16 12/17 12/18 12/19F 12/20F 12/21F Revenue (Wbn) 5,755 7,641 7,982 8,075 8,786 9,263 Foreign ownership (%) 32.3 160 Beta (12M) 0.99 OP (Wbn) 105 296 264 375 418 430 140 OP margin (%) 1.8 3.9 3.3 4.6 4.8 4.6 52-week low 81,300 NP (Wbn) 5 175 163 158 277 267 52-week high 140,000 120 EPS (W) 209 7,385 6,891 6,691 11,713 11,300 (%) 1M 6M 12M 100 ROE (%) 0.3 9.4 8.0 7.2 11.5 10.0 Absolute 14.8 28.4 62.0 80 P/E (x) 422.4 19.5 12.5 20.9 12.0 12.4 Relative 9.0 24.5 50.5 18.12 19.4 19.8 19.12 P/B (x) 1.2 1.7 1.0 1.5 1.3 1.2 Source: Mirae Asset Daewoo Research estimates Wonjae Park Notes: All figures are based on consolidated K-IFRS; NP refers to net profit attributable to controlling +822-3774-1426 interests [email protected]

37| Monthly InsighT Mirae Asset Daewoo Research Spotlight stocks LG Innotek (011070 KS)

Earnings table (Wbn, %, %p) 2019F 2020F Previous 2019F 2020F YoY QoQ Diff. 1Q 2Q 3Q 4QF 1QF 2QF 3QF 4QF (4Q19F) Revenue Optical solutions 666.1 830.1 1,682.4 2,023.8 818.3 1,045.9 1,795.1 2,159.4 5,202.4 5,818.7 20.9 20.3 1,988.0 1.8 Substrates & materials 256.9 277.0 305.9 277.2 227.6 264.6 324.0 293.7 1,117.0 1,109.9 -10.6 -9.4 277.2 0.0 LED 104.4 92.0 91.3 62.3 63.7 56.8 56.1 37.8 350.0 214.3 -34.0 -31.8 62.3 0.0 Automotive components 272.9 264.7 293.3 292.9 317.8 327.8 351.3 363.8 1,123.8 1,360.8 10.7 -0.1 292.9 0.0 Other 68.3 58.5 73.0 82.4 68.0 58.6 74.1 81.8 282.2 282.6 -6.0 12.8 82.4 0.0 Total 1,368.6 1,522.3 2,445.9 2,738.6 1,495.5 1,753.7 2,600.7 2,936.5 8,075.4 8,786.4 12.7 12.0 2,702.8 1.3 OP Optical solutions -26.6 0.8 159.8 192.3 16.4 10.5 143.6 151.2 326.3 321.6 85.3 20.3 188.9 1.8 Substrates & materials 25.3 34.5 58.6 21.7 38.8 42.6 63.1 37.0 140.0 181.5 10.5 -63.0 21.7 0.0 LED -10.4 -10.1 -20.1 -21.8 -12.7 -11.4 -11.2 -9.5 -62.4 -44.8 RR RR -21.8 0.0 Automotive components 0.0 -5.6 -7.1 -6.4 -2.7 -6.9 -8.4 -7.9 -19.0 -25.9 TTR RR -6.4 0.0 Other 0.4 -0.9 -4.7 -4.9 -4.1 -3.6 -3.7 -3.6 -10.1 -14.9 RR RR -4.9 0.0 Total -11.4 18.8 186.5 180.8 35.6 31.3 183.5 167.2 374.7 417.6 74.5 -3.0 177.4 1.9 OP Optical solutions -4.0 0.1 9.5 9.5 2.0 1.0 8.0 7.0 6.3 5.5 3.3 0.0 9.5 0.0 margin Substrates & materials 9.8 12.4 19.1 7.8 17.0 16.1 19.5 12.6 12.5 16.4 1.5 -11.3 7.8 0.0 LED -10.0 -11.0 -22.0 -35.0 -20.0 -20.0 -20.0 -25.0 -17.8 -20.9 -14.5 -13.0 -35.0 0.0 Automotive components 0.0 -2.1 -2.4 -2.2 -0.8 -2.1 -2.4 -2.2 -1.7 -1.9 -2.4 0.2 -2.2 0.0 Other 0.5 -1.5 -6.5 -6.0 -6.0 -6.1 -4.9 -4.4 -3.6 -5.3 -4.7 0.5 -6.0 0.0 Total -0.8 1.2 7.6 6.6 2.4 1.8 7.1 5.7 4.6 4.8 2.3 -1.0 6.6 0.0 Pretax profit -47.6 -9.3 153.2 89.4 18.6 14.5 167.1 146.3 185.8 346.5 55.3 -41.6 96.0 -6.9 Net profit -33.0 -5.2 125.0 71.5 14.9 11.6 133.7 117.1 158.4 277.2 13.1 -42.8 76.8 -6.9 Pretax margin -3.5 -0.6 6.3 3.3 1.2 0.8 6.4 5.0 2.3 3.9 0.9 -3.0 3.6 -0.3 Net margin -2.4 -0.3 5.1 2.6 1.0 0.7 5.1 4.0 2.0 3.2 0.0 -2.5 2.8 -0.2

Source: Company data, Mirae Asset Daewoo Research

38| Monthly InsighT Mirae Asset Daewoo Research Spotlight stocks LG Innotek (011070 KS)

Earning forecast revisions (Wbn, W, %, %p) Previous Revised % chg.

2019F 2020F 2021F 2019F 2020F 2021F 2019F 2020F 2021F

Revenue 8,040 8,498 8,917 8,075 8,786 9,263 0.4 3.4 3.9

Operating profit 371 415 428 375 418 430 0.9 0.7 0.5

Pretax profit 192 344 332 186 347 334 -3.4 0.8 0.6

Net profit 164 275 266 158 277 267 -3.2 0.8 0.6

EPS 6,915 11,617 11,235 6,691 11,713 11,300 -3.2 0.8 0.6

OP margin 4.6 4.9 4.8 4.6 4.8 4.6 0.0 -0.1 -0.2

Net margin 2.0 3.2 3.0 2.0 3.2 2.9 -0.1 -0.1 -0.1 Source: Mirae Asset Daewoo Research

39| Monthly InsighT Mirae Asset Daewoo Research Spotlight stocks Seoul Semiconductor (046890 KQ)

Weakness fully priced in; Better days ahead in 2020

■ 4Q19 preview: OP of W9.8bn (-69.5% YoY, -18.5% QoQ) (Maintain) Buy - For 4Q19, we forecast SSC to post revenue of W280.7bn (-6.0% YoY, -1.0% QoQ) and operating profit of W9.8bn (-69.5% YoY, -18.5% QoQ). Target Price (12M, W) ▲ 21,300 - Weak demand and price cuts have continued; general lighting sales have remained sluggish. However, F/X effects have been more favorable than anticipated. - Automotive lighting revenue should expand, but automotive interior lighting margins will likely deteriorate amid Share price (12/30/19, W) 16,250 intensifying competition.

Expected Return 31% ■ Effects of industry-wide restructuring to materialize in 2020 - For 2020, we expect revenue of W1.17tr (+3.4%) and operating profit of W74.3bn (+13.1%). The firm’s TV BLU sales should be boosted by major sporting events in 2020 (Olympics and UEFA Euro 2020). OP (19F, Wbn) 45 - - The possibility of tablet PCs adopting mini-LED backlighting is also positive. Consensus OP (19F, Wbn) 46 - Other positives include: 1) a slowdown at established LED makers; 2) Chinese suppliers’ patent issues; and 3) the firm’s EPS Growth (19F, %) -36.4 competitive edge and patents. Market EPS Growth (19F, %) -33.5 ■ Maintain Buy rating and raise 12-month TP to W21,300 P/E (19F, x) 23.7 - Earnings were decent in 2019 despite unfavorable market conditions; the firm even strengthened its competitiveness. - The stock slid 16.0% in 2019 (vs. +64.5% for Sanan and +27.7% for Epistar). Market P/E (19F, x) 15.1 - While another weak quarter is expected in 1Q20, we think now is an opportune time to start investing in the stock. We raise KOSDAQ 669.83 our 12-month target price from W18,300 to W21,300 (P/B of 1.7x). Market cap (Wbn) 947 Shares outstanding (mn) 58 Free float (%) 67.4 130 SSC KOSDAQ FY (Dec.) 12/16 12/17 12/18 12/19F 12/20F 12/21F Foreign ownership (%) 11.3 Revenue (Wbn) 954 1,110 1,194 1,129 1,167 1,219 110 Beta (12M) 1.04 OP (Wbn) 58 98 95 45 74 92 OP margin (%) 6.1 8.8 8.0 4.0 6.3 7.5 52-week low 12,950 90 NP (Wbn) 36 40 63 40 50 63 52-week high 25,050 EPS (W) 621 692 1,077 684 856 1,080 70 (%) 1M 6M 12M ROE (%) 6.1 6.7 10.1 6.0 7.2 8.6 Absolute 22.6 -10.0 -16.0 50 P/E (x) 25.1 40.3 18.0 23.7 19.0 15.1 Relative 15.9 -7.2 -15.3 18.11 19.3 19.7 19.11 P/B (x) 1.5 2.7 1.7 1.4 1.3 1.2 Notes: All figures are based on consolidated K-IFRS; NP refers to net profit attributable to Wonjae Park controlling interests +822-3774-1426 Source: Mirae Asset Daewoo Research estimates [email protected]

40| Monthly InsighT Mirae Asset Daewoo Research Spotlight stocks Seoul Semiconductor (046890 KQ)

Earnings table (Wbn, W, %)

2019F 2020F Previous 2019F 2020F YoY QoQ Diff. 1Q 2Q 3Q 4QF 1QF 2QF 3QF 4QF (4Q19F) Revenue 281.9 283.3 283.4 280.7 285.2 290.6 293.5 298.1 1,129.2 1,167.4 -6.6 -1.0 276.7 1.4

Operating profit 17.1 6.6 12.0 9.8 17.5 19.1 22.2 15.6 45.5 74.3 -69.5 -18.5 10.4 -6.1

Pretax profit 18.9 9.0 19.6 8.7 16.5 18.1 21.3 14.8 56.2 70.8 -59.4 -55.6 9.4 -7.9

Net profit 16.0 4.0 13.8 6.1 11.6 12.8 15.0 10.4 39.9 49.9 -78.5 -55.6 6.7 -8.2

EPS 274 68 237 105 199 219 258 179 684 856 -78.5 -55.6 115 -8.2

OP margin 6.0 2.3 4.2 3.5 6.1 6.6 7.6 5.2 4.0 6.4 -7.2 -0.8 3.8 -0.3

Pretax margin 6.7 3.2 6.9 3.1 5.8 6.2 7.3 5.0 5.0 6.1 -4.0 -3.8 3.4 -0.3

Net margin 5.7 1.4 4.9 2.2 4.1 4.4 5.1 3.5 3.5 4.3 -7.3 -2.7 2.4 -0.2

Source: Company data, Mirae Asset Daewoo Research

41| Monthly InsighT Mirae Asset Daewoo Research Spotlight stocks Seoul Semiconductor (046890 KQ)

Earning forecast revisions (Wbn, W, %, %p) Previous Revised % chg.

2019F 2020F 2021F 2019F 2020F 2021F 2019F 2020F 2021F

Revenue 1,125 1,135 1,185 1,129 1,167 1,219 0.4 2.9 2.8

Operating profit 46 73 90 45 74 92 -1.3 1.8 2.0

Pretax profit 57 70 87 56 71 89 -1.3 1.7 2.2

Net profit 41 49 62 40 50 63 -1.5 1.3 1.8

EPS 695 845 1,060 684 856 1,080 -1.5 1.3 1.8

OP margin 4.1 6.4 7.6 4.0 6.4 7.6 -0.1 -0.1 -0.1

Net margin 3.6 4.3 5.2 3.5 4.3 5.2 -0.1 -0.1 -0.1 Source: Company data, Mirae Asset Daewoo Research

42| Monthly InsighT Mirae Asset Daewoo Research Other notable stocks Samsung Electronics (005930 KS)

Profit growth to resume in 2020

■ 4Q19 preview: Solid operating profit of W6.97tr (-35.5% YoY, -10.4% QoQ) (Maintain) Buy - For 4Q19, we expect SEC to post revenue of W58.69tr (-1.0% YoY) and operating profit of W6.97tr (-35.5% YoY); market estimates are revenue of W61tr and operating profit of W6.57tr. Target Price (12M, W) 70,000 - By division, we look for operating profit of: 1) W0.63tr for the CE unit (home appliances including TVs); 2) W2.74tr (vs. our previous estimate of W2.25tr; inclusive of W0.23tr for networks) for the IM unit (smartphones); 3) W3.18tr (vs. W3.03tr) for semiconductors; and 4) W0.34tr for display panels. Share price (12/30/19, W) 55,800 - We raised our OP projections for the semiconductor and smartphone divisions; for semiconductors, we believe DRAM prices declined at a slower pace than previously anticipated. Expected Return 25% - IM margins will likely be stronger than expected thanks to scale effects. - F/X moves were also favorable. OP (19F, Wbn) 27,576 ■ OP results to switch from QoQ declines in 2019 to QoQ increases in 2020 Consensus OP (19F, Wbn) 27,173 - For 2019, we estimate that SEC delivered revenue of W229.2tr (-6.0%) and operating profit of W27.58tr (-53.2%). - OP from the semiconductor division is estimated to have dropped sharply YoY to W13.75tr in 2019 (from W44.57tr) owing to EPS Growth (19F, %) -46.6 plunging semiconductor prices. Market EPS Growth (18F, %) -33.5 - For 2020, we forecast revenue of W245.56tr (+7.1%) and operating profit of W38.88tr (+41.0%); the semiconductor division should drive the firm’s OP expansion. P/E (19F, x) 17.3 - The IM unit will likely enjoy ASP hikes (foldable phones); the display unit should see growing small-sized OLED sales to China. Market P/E (19F, x) 15.1 - 4Q19 preview: Amid positive DRAM ASP movements, we revised up our semiconductor OP forecast by 5.2% to W3.18tr. KOSPI 2,197.67 ■ Reiterate Buy and 12-month TP of W70,000 Market Cap (Wbn) 333,114 - Starting from 1Q20, SEC’s operating results should continue to improve YoY; foldable phones are anticipated to boost the competitiveness of the IM division. Shares Outstanding (mn) 6,793 Free Float (%) 78.8 150 SEC KOSPI FY (Dec.) 12/16 12/17 12/18 12/19F 12/20F 12/21F Foreign Ownership (%) 56.8 140 Revenue (Wbn) 201,867 239,575 243,771 229,201 245,561 261,970 Beta (12M) 1.58 130 OP (Wbn) 29,241 53,645 58,887 27,576 38,876 52,570 OP margin (%) 14.5 22.4 24.2 12.0 15.8 20.1 52-Week Low 37,450 120 110 NP (Wbn) 22,416 41,345 43,891 21,860 29,985 40,167 52-Week High 56,700 100 EPS (W) 2,735 5,421 6,024 3,218 4,414 5,913 (%) 1M 6M 12M 90 ROE (%) 12.5 21.0 19.6 8.7 11.1 13.5 Absolute 10.9 18.7 44.2 80 P/E (x) 13.2 9.4 6.4 17.3 12.6 9.4 Relative 5.4 15.1 33.9 18.12 19.4 19.8 19.12 P/B (x) 1.5 1.8 1.1 1.5 1.3 1.2

Wonjae Park Notes: All figures are based on consolidated K-IFRS; NP refers to net profit attributable to controlling interests +822-3774-1426 Source: Mirae Asset Daewoo Research estimates [email protected]

43| Monthly InsighT Mirae Asset Daewoo Research Other notable stocks Samsung Electronics (005930 KS)

Earnings table (Wbn, %)

1Q19 2Q19 3Q19 4Q19F 1Q20F 2Q20F 3Q20F 4Q20F 2019F 2020F 2021F Revenue 52,386 56,127 62,004 58,685 58,160 58,726 65,023 63,652 229,201 245,561 261,970 QoQ -11.6 7.1 10.5 -5.4 -0.9 1.0 10.7 -2.1 YoY -13.5 -4.0 -5.3 -1.0 11.0 4.6 4.9 8.5 -6.0 7.1 6.7 IM 27,200 25,860 29,250 26,345 30,227 26,894 30,090 28,480 108,655 115,691 128,139 CE 10,040 11,070 10,930 12,097 10,076 10,875 11,201 11,820 44,137 43,973 42,927 Semiconductors 14,470 16,090 17,590 16,742 16,960 18,124 19,510 19,961 64,892 74,554 80,177 Display 6,123 7,619 9,260 8,609 6,046 7,740 9,897 8,888 31,611 32,571 34,011 COGS 32,746 35,511 38,528 37,081 34,392 35,091 37,805 37,498 143,866 144,786 146,541 Gross profit 19,639 20,616 23,476 21,604 23,769 23,635 27,217 26,154 85,336 100,775 115,429 Gross margin 37.5 36.7 37.9 36.8 40.9 40.2 41.9 41.1 37.2 41.0 44.1 SG&A 13,406 14,019 15,698 14,636 16,386 15,147 15,567 14,798 57,759 61,898 62,859 Operating profit 6,233 6,597 7,778 6,968 7,383 8,487 11,650 11,356 27,576 38,876 52,570 QoQ -42.3 5.8 17.9 -10.4 6.0 15.0 37.3 -2.5 YoY -60.2 -55.6 -55.7 -35.5 18.4 28.7 49.8 63.0 -53.2 41.0 35.2 IM 2,270 1,560 2,920 2,738 2,902 2,140 3,333 2,811 9,488 11,186 13,690 CE 540 710 550 632 552 688 558 583 2,432 2,380 2,179 Semiconductors 4,120 3,401 3,050 3,182 4,054 5,121 6,137 6,844 13,753 22,155 32,956 Display -560 750 1,170 342 -192 474 1,533 1,047 1,702 2,862 3,461 OP margin 11.9 11.8 12.5 11.9 12.7 14.5 17.9 17.8 12.0 15.8 20.1 IM 8.3 6.0 10.0 10.4 9.6 8.0 11.1 9.9 8.7 9.7 10.7 CE 5.4 6.4 5.0 5.2 5.5 6.3 5.0 4.9 5.5 5.4 5.1 Semiconductors 28.5 21.1 17.3 19.0 23.9 28.3 31.5 34.3 21.2 29.7 41.1 Display -9.1 9.8 12.6 4.0 -3.2 6.1 15.5 11.8 5.4 8.8 10.2 Pretax profit 6,913 7,179 8,621 7,764 8,142 9,210 12,385 12,191 30,477 41,928 56,183 QoQ -40.4 3.9 20.1 -9.9 4.9 13.1 34.5 -1.6 YoY -57.3 -53.4 -52.0 -33.1 17.8 28.3 43.7 57.0 -50.2 37.6 34.0 Pretax margin 13.2 12.8 13.9 13.2 14.0 15.7 19.0 19.2 13.3 17.1 21.4 Net profit 5,107 5,065 6,105 5,583 5,863 6,516 8,863 8,743 21,860 29,985 40,167 QoQ -38.7 -0.8 20.5 -8.5 5.0 11.1 36.0 -1.4 YoY -56.0 -53.9 -52.9 -33.0 14.8 28.7 45.2 56.6 -50.2 37.2 34.0 Net margin 9.7 9.0 9.8 9.5 10.1 11.1 13.6 13.7 9.5 12.2 15.3 Source: Company data, Mirae Asset Daewoo Research

44| Monthly InsighT Mirae Asset Daewoo Research Other notable stocks Samsung Electronics (005930 KS)

Shipments by business

2019F 2020F (%) 2019F 2020F 2021F 1Q19 2Q19 3Q19 4Q19F 1Q20F 2Q20F 3Q20F 4Q20F IM shipments (mn units) 83 88 90 88 88 89 99 98 349 375 401 QoQ -1.6 5.1 2.9 -1.9 -0.4 1.4 11.4 -1.2 YoY -9.9 5.9 9.3 4.4 5.6 1.9 10.4 11.1 2.1 7.3 6.9 Smartphone shipments (mn units) 72 76 78 76 78 79 89 87 303 333 364 ASP 254 207 227 219 259 220 226 213 226 229 240 QoQ 12.5 -18.6 9.8 -3.5 18.3 -15.0 2.4 -5.4 YoY 16.0 4.7 7.9 -3.0 2.1 6.5 -0.7 -2.7 6.0 1.2 5.0 DRAM shipments (1Gb eq., mn) 10,547 12,234 16,027 16,268 15,617 15,929 16,407 16,407 56,965 80,896 127,885 QoQ/YoY -0.4 16.0 31.0 1.5 -4.0 2.0 3.0 0.0 19.0 42.0 58.1 ASP (US$) 0.6 0.5 0.4 0.4 0.4 0.4 0.4 0.4 0.7 0.7 0.7 QoQ/YoY -26.4 -21.0 -19.0 -7.0 0.0 2.0 4.0 2.0 -26.4 -5.0 13.4 NAND shipments (16Gb eq., mn) 12,370 16,204 17,987 18,346 18,897 21,353 23,916 25,351 66,481 116,562 227,487 QoQ/YoY 3.5 31.0 11.0 2.0 3.0 13.0 12.0 6.0 38.7 75.3 95.2 ASP (US$) 0.3 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.3 0.2 0.3 QoQ/YoY -26.4 -15.0 -6.0 2.0 4.0 2.0 3.0 0.0 -40.6 -11.3 5.0 LCD shipments (‘000 m2) 6,539 7,720 6,332 6,453 5,945 6,979 5,738 5,852 27,044 24,515 23,363 QoQ/YoY -14.3 18.1 -18.0 1.9 -7.9 17.4 -17.8 2.0 -9.3 -9.4 -4.7 ASP (US$/m2) 205 194 194 190 194 187 193 200 196 193 201 QoQ/YoY -7.7 -5.5 -0.1 -2.0 1.9 -3.2 2.9 3.6 -16.1 -1.4 4.0 OLED shipments (mn units) 76 103 126 115 81 113 145 132 419 471 531 QoQ/YoY -22.0 36.2 22.1 -9.1 -29.2 40.0 27.6 -9.1 7.4 12.3 12.8 ASP (US$/unit) 54.0 51.0 55.5 56.0 52.0 49.0 53.0 51.0 54.3 51.3 48.0 QoQ/YoY -18.6 -5.6 8.8 0.9 -7.1 -5.8 8.2 -3.8 -5.3 -5.4 -6.5 FPD TV shipments (mn units) 10 10 12 15 11 11 12 13 46 47 45 QoQ/YoY -31.0 5.0 15.0 32.0 -30.0 5.0 5.0 15.0 7.6 1.7 -5.1 ASP (US$) 520 494 474 426 469 474 469 446 472 463 460 QoQ/YoY 11.9 -5.0 -4.0 -10.0 10.0 1.0 -1.0 -5.0 -1.3 -1.8 -0.8 Source: Company data, Mirae Asset Daewoo Research

45| Monthly InsighT Mirae Asset Daewoo Research Other notable stocks LG Electronics (066570 KS)

Spring has not arrived yet

■ 4Q19 preview: OP of W197.2bn (+160.5% YoY); Negative seasonality (Maintain) Buy - For 4Q19, we expect LGE to deliver revenue of W16.27tr (+3.1% YoY, +3.6% QoQ) and operating profit of W197.2bn (+160.5% YoY, -74.8% QoQ). Target Price (12M, W) 89,900 - By business division, we look for: 1) an operating loss of W272.6bn (vs. our previous estimate of -W227.2bn) for mobile communications (MC); 2) operating profit of W189.4bn (vs. W213.1bn) for home entertainment (HE); 3) operating profit of W132bn (vs. W154bn) for home appliance & air solution (H&A); 4) an operating loss of W61.6bn for vehicle component Share price (12/30/19, W) 72,100 solutions (VS); and 5) operating profit of W43.5bn for business solutions (BS). - We expect another operating loss for the VS division and increased marketing spending for the MC division. Expected Return 25% ■ 2020 OP of W2.88tr (+13.9%); HE earnings and MC competitiveness to be key drivers OP (19F, Wbn) 2,532 - For 2020, we forecast revenue of W66.12tr (+5.8%) and operating profit of W2.88tr (+13.9%). Consensus OP (19F, Wbn) 2,619 - The H&A and HE divisions should deliver strong earnings thanks to new product releases and major sporting events (Olympics and UEFA Euro 2020). EPS Growth (19F, %) -42.2 - HE panel prices and OLED TV sales volume should be the key variables for LGE’s profit growth. Market EPS Growth (19F, %) -33.5 - Losses continue at the MC unit; a pickup in smartphone sales will be needed for the unit to turn around. P/E (19F, x) 18.2 Market P/E (19F, x) 15.1 ■ Maintain Buy and 12-month TP of W89,900 - LGE’s earnings are determined by the HE division, while share prices are driven by the MC division. KOSPI 2,197.67 - The fourth quarter is typically a weak season. Earnings are projected to recover in 1H20; thus, we advise investors to start Market cap (Wbn) 11,799 buying the stock in 1Q20. Shares outstanding (mn) 181 Free float (%) 65.7 130 LG Electronics KOSPI FY (Dec.) 12/16 12/17 12/18 12/19F 12/20F 12/21F Foreign ownership (%) 33.8 120 Revenue (Wbn) 55,367 61,396 61,342 62,510 66,117 68,199 Beta (12M) 0.97 110 OP (Wbn) 1,338 2,469 2,703 2,532 2,882 3,257 OP margin (%) 2.4 4.0 4.4 4.1 4.4 4.8 52-week low 59,200 100 NP (Wbn) 77 1,726 1,240 717 1,482 1,903 52-week high 82,600 90 EPS (W) 425 9,543 6,858 3,965 8,195 10,525 (%) 1M 6M 12M 80 ROE (%) 0.7 13.7 9.0 4.9 9.4 11.0 Absolute 3.1 -9.1 15.7 70 P/E (x) 121.4 11.1 9.1 18.2 8.8 6.9 Relative -2.0 -11.9 7.5 18.11 19.3 19.7 19.11 P/B (x) 0.8 1.4 0.8 0.9 0.8 0.7 Wonjae Park Notes: All figures are based on consolidated K-IFRS; NP refers to net profit attributable to controlling interests +822-3774-1426 Source: Mirae Asset Daewoo Research estimates [email protected]

46| Monthly InsighT Mirae Asset Daewoo Research Other notable stocks LG Electronics (066570 KS)

Earnings table (Wbn, ‘000 units, %, %p) 2019F 2020F Previous 2019F 2020F YoY QoQ Diff. 1Q 2Q 3Q 4QF 1QF 2QF 3QF 4QF (4Q19F) MC Revenue 1,510.4 1,613.3 1,522.3 1,514.4 1,513.8 1,595.9 1,552.0 1,498.0 6,160.4 6,159.8 -9.6 -0.5 1,514.4 0.0 (Mobile OP -203.5 -313.0 -161.2 -272.6 -196.8 -239.4 -232.8 -254.7 -950.3 -923.6 RR RR -227.2 RR Communications) OP margin -13.5 -19.4 -10.6 -18.0 -13.0 -15.0 -15.0 -17.0 -15.4 -15.0 1.0 -7.4 -15.0 -3.0 HE Revenue 4,023.7 3,671.2 3,866.2 4,736.0 4,322.6 3,808.7 4,551.1 4,399.9 16,297.1 17,082.2 3.2 22.5 4,736.0 0.0 (Home OP 346.5 205.6 318.0 189.4 345.8 266.6 283.3 132.0 1,059.5 1,027.7 -7.9 -40.4 213.1 -11.1 Entertainment) OP margin 8.6 5.6 8.2 4.0 8.0 7.0 6.2 3.0 6.5 6.0 -0.5 -4.2 4.5 -0.5 H&A Revenue 5,465.9 6,102.8 5,330.7 4,399.4 5,629.9 6,593.0 5,594.3 4,435.7 21,298.8 22,252.9 1.7 -17.5 4,399.4 0.0 (Home Appliance OP 727.6 717.5 428.9 132.0 712.0 736.4 495.1 133.1 2,006.0 2,076.5 17.2 -69.2 154.0 -14.3 & Air Solution) OP margin 13.3 11.8 8.0 3.0 12.6 11.2 8.9 3.0 9.4 9.3 0.4 -5.0 3.5 -0.5 VC Revenue 1,347.0 1,423.1 1,340.1 1,541.1 1,484.0 1,567.9 1,476.4 1,624.1 5,651.3 6,152.5 10.2 15.0 1,541.1 0.0 (Vehicle OP -15.4 -55.8 -60.1 -61.6 -14.8 -23.5 19.2 21.1 -192.9 1.9 RR RR -61.6 RR Components) OP margin -1.1 -3.9 -4.5 -4.0 -1.0 -1.5 1.3 1.3 -3.4 0.0 -2.0 0.5 -4.0 0.0 B2B Revenue 625.6 675.5 698.7 725.5 761.0 824.7 854.4 888.9 2,725.3 3,329.0 21.4 3.8 725.5 0.0 OP 55.5 58.1 66.8 43.5 67.5 70.9 81.7 53.3 223.9 273.5 192.2 -34.8 43.5 0.0 OPM 8.9 8.6 9.6 6.0 8.9 8.6 9.6 6.0 8.2 8.2 3.5 -3.6 6.0 0.0 Internal & other Revenue 937.3 1,064.2 836.9 1,121.4 1,014.2 1,151.9 912.0 1,141.8 3,959.8 4,219.8 -4.3 34.0 1,121.4 0.0 OP -1.5 36.5 7.5 -11.6 11.5 40.6 12.8 -14.2 30.9 50.7 RR TTR -11.6 0.0 OP margin -0.2 3.4 0.9 -1.0 1.1 3.5 1.4 -1.2 0.8 1.2 0.7 -1.9 -1.0 0.0 LG Innotek Revenue 1,368.6 1,522.3 2,446.0 2,738.6 1,495.5 1,753.7 2,600.7 2,936.5 8,075.5 8,786.4 12.7 12.0 2,702.8 1.3 OP -11.4 18.8 186.5 180.8 35.6 31.3 183.5 167.2 374.7 417.6 74.5 -3.0 147.6 33.2 Total Revenue 14,915.1 15,629.2 15,700.7 16,264.8 15,779.3 16,761.5 17,117.3 16,459.1 62,509.8 66,117.3 3.1 3.6 16,229.0 0.2 OP 900.6 652.3 781.4 197.2 953.6 862.2 827.7 239.0 2,531.4 2,882.5 160.5 -74.8 255.1 -22.7 OP margin 6.0 4.2 5.0 1.2 6.0 5.1 4.8 1.5 4.0 4.4 0.7 -3.8 1.6 -0.4 LGE Revenue 13,728.2 14,328.5 13,424.8 13,782.0 14,504.7 15,274.9 14,728.4 13,755.5 55,263.5 58,263.5 1.7 2.7 13,782.0 0.0 (excluding OP 910.6 641.2 597.4 17.7 921.6 841.3 651.8 71.2 2,166.9 2,485.8 -158.2 -97.0 108.8 -83.7 LG Innotek) OP margin 6.6 4.5 4.4 0.1 6.4 5.5 4.4 0.5 3.9 4.3 0.4 -4.3 0.8 -0.7 Pretax profit 754.4 227.1 434.0 -276.3 734.1 620.4 731.6 79.6 1,139.2 2,165.7 RR TTR -223.1 RR Pretax margin 5.1 1.5 2.8 -1.7 4.7 3.7 4.3 0.5 7.6 50,761.5 -0.9 -4.5 -1.4 -0.3 Net profit 570.9 91.6 244.2 -189.8 501.9 401.3 528.2 50.5 716.9 1,481.9 RR TTR -153.2 RR Net margin 3.8 0.6 1.6 -1.2 3.2 2.4 3.1 0.3 4.8 2.9 -0.1 -2.7 -0.9 -0.2 Handset sales volume 7,680 7,450 7,600 7,461 7,910 7,823 8,360 7,834 30,191 31,927 -10.0 -1.8 7,461 0.0 -Smartphones 7,500 7,300 7,500 7,303 7,758 7,674 8,219 7,700 29,603 31,351 -9.8 -2.6 7,303 0.0 TV sales volume 6,800 6,000 6,700 7,650 6,650 5,891 7,281 7,398 27,150 27,220 -5.6 14.2 7,650 0.0 -OLED TV 380 350 330 679 551 508 479 984 1,739 2,521 30.0 105.6 679 0.0

Source: Company data, Mirae Asset Daewoo Research

47| Monthly InsighT Mirae Asset Daewoo Research Other notable stocks LG Electronics (066570 KS)

Earning forecast revisions (Wbn, W, %, %p) Previous Revised % chg.

2019F 2020F 2021F 2019F 2020F 2021F 2019F 2020F 2021F

Revenue 62,474 66,979 70,115 62,510 66,117 68,199 0.1 -1.3 -2.7

Operating profit 2,589 2,992 3,424 2,531 2,882 3,257 -2.2 -3.7 -4.9

Pretax profit 1,192 2,281 2,982 1,139 2,166 2,832 -4.5 -5.0 -5.0

Net profit 754 1,561 2,003 717 1,482 1,903 -4.9 -5.1 -5.0

EPS 4,167 8,631 11,079 3,965 8,195 10,525 -4.9 -5.1 -5.0

OP margin 4.1 4.5 4.9 4.0 4.4 4.8 -0.1 -0.1 -0.1

Net margin 1.2 2.3 2.9 1.1 2.2 2.8 -0.1 -0.1 -0.1 Source: Company data, Mirae Asset Daewoo Research

48| Monthly InsighT Mirae Asset Daewoo Research Other notable stocks LG Display (034220 KS)

LCD panel prices to rebound; OLED operations to normalize in 2H20

■ 4Q19 preview: Sluggishness to continue (Maintain) Buy - LCD panel prices continued to fall, and shipments have declined due to LCD TV panel utilization adjustments. - One-off expenses related to LCD will likely be recognized. Target Price (12M, W) 20,000 - Expenses have increased with the start of recognition of depreciation expenses related to small/medium-sized OLED.

Share price (12/30/19, W) 16,250 ■ LCD ASP may rebound 1) LCD panel prices are projected to rebound in 1Q20; prices are currently 10-15% below cash cost levels. Expected Return 23% 2) ) Once LCD panel prices pick up, LCD TV set prices are unlikely to fall further.  Solid OLED TV sales in 2H20 3) Depreciation expenses should weigh on plastic OLED (POLED) earnings in 2020 (higher costs than rivals). OP (19F,Wbn) -1,474 4) We expect the operation of the firm’s large-sized OLED fab in Guangzhou to normalize in 2Q20. Consensus OP (19F, Wbn) -1,545 ■ OLED normalization to drive share prices EPS Growth (19F,%) - - LGD’s LCD line shutdown should weigh on earnings in the short term; however, we believe LGD’s restructuring efforts will Market EPS Growth (19F, %) -33.5 provide downside support for its stock. - We expect earnings to normalize around 2Q20, followed by a secular rise in share prices. P/E (19F, x) -  Normalization of the Guangzhou fab and steady order flow for POLED need to be confirmed. Market P/E (19F, x) 15.1 KOSPI 2,197.67 Market cap (Wbn) 5,815 Shares outstanding (mn) 358

Free float (%) 62.1 130 FY (Dec.) 12/15 12/16 12/17 12/18 12/19F 12/20F LG Display KOSPI Foreign ownership (%) 20.6 120 Revenue (Wbn) 26,504 27,790 24,337 22,802 20,911 23,420 Beta (12M) 1.83 110 OP (Wbn) 1,311 2,462 93 -1,474 69 586 OP margin (%) 4.9 8.9 0.4 -6.5 0.3 2.5 52-week low 12,500 100 90 NP (Wbn) 907 1,803 -207 -1,455 -365 31 52-week high 22,100 80 EPS (W) 2,534 5,038 -579 -4,065 -1,019 86 (%) 1M 6M 12M 70 ROE (%) 7.2 13.2 -1.5 -10.9 -2.9 0.2 Absolute 10.5 -9.0 -10.0 60 P/E (x) 12.4 5.9 - - - 188.4 Relative 5.0 -11.7 -16.4 18.12 19.4 19.8 19.12 P/B (x) 0.9 0.7 0.5 0.5 0.5 0.5 Notes: All figures are based on consolidated K-IFRS; NP refers to net profit attributable to controlling Chuljoong Kim interests +822-3774-1464 Source: Mirae Asset Daewoo Research estimates [email protected]

49| Monthly InsighT Mirae Asset Daewoo Research Other notable stocks LG Display (034220 KS)

Earnings table

(Wbn, %)

1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19F 1Q20F 2Q20F 3Q20F 4Q20F 2018 2019F 2020F

Shipment area ('000 m2) 10,082 10,261 10,802 11,049 9,805 9,896 9,492 8,911 7,425 7,195 7,492 7,474 42,195 38,105 29,586

ASP (US$/m2) 522 501 500 559 528 456 513 547 547 571 613 663 520 511 599

Revenue 5,675 5,611 6,103 6,948 5,879 5,353 5,822 5,748 4,795 4,848 5,420 5,848 24,337 22,802 20,911

Notebook 1,103 1,071 1,220 1,555 1,286 1,179 1,246 1,146 1,089 1,100 1,132 1,164 4,949 4,857 4,485

Monitor 890 937 1,099 966 1,001 978 1,062 956 900 918 962 915 3,892 3,998 3,694

TV 2,415 2,344 2,526 2,463 2,103 2,187 1,877 1,690 1,393 1,389 1,502 1,562 9,748 7,858 5,846

S/M 1,267 1,258 1,258 1,964 1,490 1,008 1,637 1,956 1,413 1,442 1,824 2,207 5,747 6,090 6,885

COGS 5,133 5,145 5,214 5,760 5,246 4,872 5,520 5,362 4,170 4,118 4,493 4,887 21,251 20,999 17,668

SG&A 640 695 749 908 765 850 738 923 784 824 782 782 2,992 3,276 3,173

Operating profit -98 -229 140 280 -132 -370 -436 -536 -160 -93 144 178 93 -1,473 69

OP margin -1.7 -4.1 2.3 4.0 -2.2 -6.9 -7.5 -9.3 -3.3 -1.9 2.7 3.0 0.4 -6.5 0.3

Source: Company data, Mirae Asset Daewoo Research

50| Monthly InsighT Mirae Asset Daewoo Research Important Disclosures & Disclaimers 2-Year Rating and Target Price History

Company (Code) Date Rating Target Price Company (Code) Date Rating Target Price SK Hynix(000660) 04/23/2019 Buy 156,000 01/01/2020 Buy 115,000 03/20/2019 Buy 139,000 09/30/2019 Buy 110,000 01/27/2019 Buy 122,000 07/26/2019 Buy 100,000 01/01/2019 Buy 126,000 02/01/2019 Hold - 09/30/2018 Buy 177,000 01/25/2019 Trading Buy 79,000 07/25/2018 Buy 210,000 01/01/2019 Buy 79,000 06/11/2018 Buy 184,000 10/29/2018 Buy 86,000 06/01/2018 Buy 180,000 09/02/2018 Buy 110,000 04/25/2018 Buy 162,000 04/30/2018 Buy 120,000 04/02/2018 Buy 167,000 12/31/2017 No Coverage 01/24/2018 Buy 180,000 Samsung SDI(006400) 01/01/2018 Buy 210,000 10/01/2019 Buy 315,000 Seoul Semiconductor(046890) 01/14/2019 Buy 350,000 01/01/2020 Buy 21,300 07/30/2018 Buy 330,000 11/01/2019 Buy 18,300 07/17/2018 Buy 310,000 10/01/2019 Buy 18,600 10/31/2017 Buy 270,000 08/01/2019 Buy 21,300 Samsung Electro-Mechanics(009150) 06/30/2019 Buy 24,500 01/01/2020 Buy 151,000 04/29/2019 Buy 29,500 10/24/2019 Buy 143,000 04/08/2019 Buy 29,100 03/25/2019 Buy 133,000 01/30/2019 Buy 30,500 01/01/2019 Buy 150,000 01/18/2019 Buy 27,300 09/30/2018 Buy 195,000 01/01/2019 Buy 26,700 07/25/2018 Buy 193,000 09/30/2018 Buy 26,000 07/01/2018 Buy 183,000 07/01/2018 Buy 23,500 05/27/2018 Buy 162,000 05/01/2018 Buy 28,100 04/27/2018 Buy 148,000 04/02/2018 Buy 29,100 01/31/2018 Buy 134,000 01/30/2018 Buy 36,200 07/23/2017 Buy 131,000 11/30/2017 Buy 37,800 LG Innotek(011070) Samsung Electronics(005930) 11/25/2019 Buy 171,000 12/26/2019 Buy 70,000 10/29/2019 Buy 166,000 10/01/2019 Buy 60,000 10/01/2019 Buy 147,000 03/18/2019 Buy 56,000 06/30/2019 Buy 139,000 02/01/2019 Buy 57,000

51| Monthly InsighT Mirae Asset Daewoo Research Company (Code) Date Rating Target Price Company (Code) Date Rating Target Price 01/01/2019 Buy 50,800 04/01/2018 Buy 40,000 09/21/2018 Buy 63,000 10/25/2017 Buy 42,000 07/31/2018 Buy 64,000 SKC Kolon PI(178920) 07/01/2018 Buy 70,000 10/28/2019 Buy 51,000 05/03/2018 Buy 73,000 04/30/2019 Buy 43,000 12/31/2017 No Coverage 10/22/2018 Buy 57,000 LG Electronics(066570) 01/29/2018 Buy 52,000 07/30/2019 Buy 89,900 10/23/2017 Buy 42,500 03/29/2019 Buy 99,500 ICD(040910) 03/03/2019 Buy 89,100 11/12/2019 Buy 22,000 02/01/2019 Buy 86,000 10/06/2019 Buy 19,000 01/01/2019 Buy 89,000 02/17/2019 Buy 16,000 09/30/2018 Buy 99,000 11/07/2018 Buy 12,000 09/02/2018 Buy 110,000 05/29/2018 Buy 14,000 07/01/2018 Buy 123,000 03/06/2018 After 1yr 06/01/2018 Buy 138,000 03/06/2017 Buy 21,000 04/27/2018 Buy 149,000 Wonik IPS(240810) 04/01/2018 Buy 147,000 01/01/2020 Buy 37,000 02/18/2018 Buy 131,000 12/31/2017 No Coverage 01/01/2018 Buy 129,000 AP Systems(265520) LG Display(034220) 02/01/2019 Buy 42,000 10/23/2019 Buy 20,000 04/14/2018 Buy 36,000 09/01/2019 Buy 22,000 09/24/2017 Buy 55,000 03/03/2019 Buy 26,500 Iljin Materials(020150) 01/30/2019 Trading Buy 22,500 11/15/2019 Buy 59,000 10/24/2018 Buy 22,500 08/16/2019 After 1yr 07/01/2018 Buy 27,000 08/16/2018 Buy 64,000 04/25/2018 Buy 36,000 06/03/2018 Buy 55,000

(W) SK Hynix (W) Samsung SDI (W) Samsung Electro-Mechanics(W) LG Innotek (W) Seoul Semiconductor

150,000 400,000 250,000 250,000 40,000

200,000 200,000 300,000 30,000 100,000 150,000 150,000 200,000 20,000 100,000 100,000 50,000 100,000 10,000 50,000 50,000

0 0 0 0 0 Jan 18 Jan 19Jan Jan 18 20 Jan 19Jan Jan 18 20 Jan 19Jan Jan 18 20 Jan 19Jan Jan 18 20 Jan 19 Jan 20

52| Monthly InsighT Mirae Asset Daewoo Research (W) Samsung Electronics(W) LG Electronics (W) LG Display (W) SKC Kolon PI (W) ICD

80,000 200,000 50,000 60,000 25,000

40,000 50,000 20,000 60,000 150,000 40,000 30,000 15,000 40,000 100,000 30,000 20,000 10,000 20,000 20,000 50,000 10,000 10,000 5,000

0 0 0 0 0 Jan 18 Jan 19Jan Jan 18 20 Jan 19Jan Jan 18 20 Jan 19Jan Jan 18 20 Jan 19Jan Jan 18 20 Jan 19 Jan 20

(W) Wonik IPS (W) AP Systems (W) Iljin Materials

40,000 60,000 80,000

50,000 30,000 60,000 40,000

20,000 30,000 40,000

20,000 10,000 20,000 10,000

0 0 0 Jan 18 Jan 19Jan Jan 18 20 Jan 19Jan Jan 18 20 Jan 19 Jan 20

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 Mirae Asset Daewoo Co., Ltd., 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 & Investment Banking Services Buy Trading Buy Hold Sell Equity Ratings Distribution 84.05% 9.82% 6.13% 0.00% Investment Banking Services 76.67% 13.33% 10.00% 0.00% * Based on recommendations in the last 12-months (as of December 31, 2019)

Disclosures As of the publication date, Mirae Asset Daewoo Co., Ltd. has acted as a liquidity provider for equity-linked warrants backed by shares of SK Hynix, Samsung Electronics, Samsung SDI, Samsung Electro-Mechanics, LG Innotek, LG Display, LG Electronics as an underlying asset; other than this, Mirae Asset Daewoo has no other special interests in the covered companies. As of the publication date, Mirae Asset Daewoo Co., Ltd. and/or its affiliates own 1% or more of Samsung Electro-Mechanics`s shares outstanding.

53| Monthly InsighT Mirae Asset Daewoo Research 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 or regulations thereof. Each Analyst responsible for the preparation of this report certifies that (i) all views expressed in this report accurately reflect the personal views of the Analyst about any and all of the issuers and securities named in this report and (ii) no part of the compensation of the Analyst was, is, or will be directly or indirectly related to the specific recommendations or views contained in this report. Mirae Asset Daewoo Co., Ltd. (“Mirae Asset Daewoo”) 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. Like all employees of Mirae Asset Daewoo, the Analysts receive compensation that is determined 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 Mirae Asset Daewoo except as otherwise stated herein.

Disclaimers This report was prepared by Mirae Asset 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 in good faith and from sources believed to be reliable, but such information has not been independently verified and Mirae Asset 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. In case of 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. 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 or regulations or subject Mirae Asset Daewoo or any of its affiliates to registration or licensing requirements in any jurisdiction shall receive or make any use hereof. This report is for general information purposes only and it is not and shall not be construed as an offer or a solicitation of an offer to effect transactions in any securities or other financial instruments. The report does not constitute investment advice to any person and such person shall not be treated as a client of Mirae Asset Daewoo by virtue of receiving this report. This report does not take into account the particular investment objectives, financial situations, or needs of individual clients. The report is not to be relied upon in substitution for the exercise of independent judgment. Information and opinions contained herein are as of the date hereof and are subject to change without notice. The price and value of the investments referred to in this report and the income from them may depreciate or appreciate, and investors may incur losses on investments. Past performance is not a guide to future performance. Future returns are not guaranteed, and a loss of original capital may occur. Mirae Asset Daewoo, its affiliates and their directors, officers, employees and agents do not accept any liability for any loss arising out of the use hereof. Mirae Asset Daewoo may have issued other reports that are inconsistent with, and reach different conclusions from, the opinions presented in this report. The reports may reflect different assumptions, views and analytical methods of the analysts who prepared them. Mirae Asset Daewoo may make investment decisions that are inconsistent with the opinions and views expressed in this research report. Mirae Asset 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. Mirae Asset 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. 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 Mirae Asset Daewoo.

54| Monthly InsighT Mirae Asset Daewoo Research Distribution United Kingdom: This report is being distributed by Mirae Asset Securities (UK) 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: Mirae Asset Daewoo is not a registered broker-dealer in the United States and, therefore, is not subject to U.S. rules regarding the preparation of research reports and the independence of research analysts. This report is distributed in the U.S. by Mirae Asset Securities (USA) Inc., a member of FINRA/SIPC, to “major U.S. institutional investors” in reliance on the exemption from registration provided by Rule 15a-6(b)(4) under the U.S. Securities Exchange Act of 1934, as amended. All U.S. persons that receive this document by their acceptance hereof represent and warrant that they are a major U.S. institutional investor and have not received this report under any express or implied understanding that they will direct commission income to Mirae Asset 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 Mirae Asset Securities (USA) Inc. Mirae Asset Securities (USA) Inc. accepts responsibility for the contents of this report in the U.S., subject to the terms hereof, to the extent that it is delivered to a U.S. person other than a major U.S. institutional investor. Under no circumstances should any recipient of this research report effect any transaction to buy or sell securities or related financial instruments through Mirae Asset Daewoo. 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 report is distributed in Hong Kong by Mirae Asset Securities (HK) Limited, 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 Mirae Asset 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 Mirae Asset Daewoo and its affiliates to any registration or licensing requirement within such jurisdiction.

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