Internet AI Roadmap: Smart Speakers in B2C and Cloud Services in B2B

Internet AI roadmap: Smart speakers in B2C and cloud services in B2B

Internet firms’ AI businesses taking shape Overweight (Maintain) The artificial intelligence (AI) businesses of global and domestic internet companies are increasingly taking shape and entering the execution phase. The most notable Industry Report development in the B2C space is the launch of AI-based voice-controlled speakers. In the B2B space, cloud services supported by AI are gaining increasing attention. June 19, 2017 B2C: Launch of voice-activated speakers and everyday services

Mirae Asset Daewoo Co., Ltd. An increasing number of everyday services integrated with voice-controlled speakers and AI platforms are coming onto the scene. Amazon (NASDAQ: AMZN, [Internet/Game/Advertising] CP: US$995.17) is the current leader of this market, with its Echo smart speaker and

Jee-hyun Moon Alexa virtual assistant. Last week, the company launched an Alexa-enabled smart +822-3774-1640 shopping device called Dash Wand the same day it announced its US$13.7bn [email protected] acquisition of the Whole Foods grocery chain. Also last week, NAVER’s Japanese subsidiary, LINE, unveiled smart speakers, named Wave and Champ, to which LINE will tie services like shopping and delivery. Domestically, both NAVER (035420 KS, BUY, TP: W1,160,000, CP: W878,000) and Kakao (035720 KQ, BUY, TP: W125,000, CP:

W103,800) plan to release their own voice-controlled speakers this summer.

B2B: Rapid growth of cloud services among firms strong in AI IT companies with strong AI capabilities are seeing rapid growth in their cloud revenue. Amazon , IBM (NYSE: IBM, CP: US$154.84), and Microsoft (NASDAQ: MSFT, CP: US$70.87) - with the Alexa, Watson, and Cortana, respectively - are enjoying double-digit growth in cloud revenue, which now makes up a meaningful percentage of overall revenue at all three companies. Among domestic firms, NAVER kicked off its global B2B cloud services in 2Q17.

NAVER and Kakao deserve attention We think NAVER and Kakao deserve attention, given their increasing presence in AI.

In addition to AI, NAVER’s cloud business is also gaining traction. Following the rollout of its AI platform Clova in March, the company in April unveiled plans to launch its global B2B cloud business. We think a Clova-based smart speaker could come out as early as July in Korea and Japan. We reiterate the stock as our top pick in internet and maintain our target price of W1,160,000.

We expect Kakao’s smart speaker to hit the domestic market in August. In the B2B segment, Kakao has been seeing a pickup in ad revenue. We raise our target price on the stock to W125,000 from W115,000.

AI market leader Amazon expanding presence via M&As; NAVER launching smart speakers, cloud services

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

June 19, 2017 Internet

CONTENTS

I. Voice-activated speakers and everyday services 3 B2C: Everyday services integrated with voice- activated speakers and AI platforms 3

II. Cloud business: Firms with strong AI capabilities grow rapidly 5 Rapid growth of cloud services among firms with strong AI capabilities 5

III. Investment strategy 7 1. NAVER stock to track Amazon’s on greater focus on shopping and AI 7 2. Kakao stock to receive boost from ad revenue and KOSPI relocation 8

Key Recommendations 9 NAVER (035420 KS) 10 Kakao Corp. (035720 KQ) 13

Mirae Asset Daewoo Research 2 June 19, 2017 Internet

I. Voice-activated speakers and everyday services

B2C: Everyday services integrated with voice- activated speakers and AI platforms

1) Hardware device sales

Sales of hardware equipped with voice-recognition AI should increase. Membership and exclusive services for long-term customer retention should constantly generate replacement demand on top of initial demand. These services include Amazon’s Prime membership, SKT’s NUGU, and KT’s Giga Genie (Melon/Genie Music) services.

2) E-commerce revenue

The development of voice-recognition technology should boost revenue from product sales and transaction commissions. The technology could increase traffic to everyday services, including shopping, food delivery, restaurant reservation, and local information search.

Of note, Amazon announced on June 16th that it will acquire the US organic grocery chain Whole Foods. We believe that the acquisition of Whole Foods is a way for Amazon to expand its food business. At its IR meeting, held at its headquarters in 1Q, company spokespersons had mentioned that it would be difficult to expand the food category on Amazon.com, due to the high cost of building a cold chain system and difficulty of food delivery. Amazon is likely to see revenue growth for food and daily necessities by connecting the Whole Foods chain to Dash Wand (Amazon’s smart shopping device).

NAVER’s Shopping Window, booking, and payment services, as well as LINE’s shopping and food delivery services, are expanding and will likely be connected to smart speakers.

Figure 1. NAVER and LINE’s voice-activated speakers (Likely to be launched in July)

Note: Currently being jointly developed by NAVER and LINE Source: LINE, NAVER, Mirae Asset Daewoo Research

Figure 2. Kakao’s voice-activated speaker to be launched in 3Q17

Note: Images of Kakao’s national AI project survey and in-house voice-activated speaker demonstration Source: Kakao, Mirae Asset Daewoo Research

Mirae Asset Daewoo Research 3 June 19, 2017 Internet

3) Cloud services

AI improves recognition capabilities by securing data via voice recognition and learning them for itself. Thus, cloud storage is an essential element of AI technology. Cloud storage space is also necessary for providing new and customized functions to users.

4) Sales through partnership

If a company opens up the ecosystem of its platform, the number of partners – and, hence, sales through such partnerships - should increase; eventually, a platform itself could assume the role of an application store.

Figure 3. NAVER’s Shopping Window/booking/payment, LINE’s shopping/food delivery, and Kakao’s grocery shopping/orders services are expanding

NAVER Shopping Window Order through Kakao, delivered by Emart

Reservation Kakao delivery

Note: LINE DELIMA is a food delivery service. Source: Company data, Mirae Asset Daewoo Research

Figure 4. Amazon’s Alexa Skill ecosystem is growing like an app store

Note: Alexa’s voice-activated functions are called Skills. Source: Amazon, Mirae Asset Daewoo Research

Mirae Asset Daewoo Research 4 June 19, 2017 Internet

II. Cloud business: Firms with strong AI capabilities grow rapidly

Rapid growth of cloud services among firms with strong AI capabilities

1) Combination of AI and cloud services

IBM’s AI service Watson is officially called “Watson on IBM Cloud”. Major AI services, such as machine learning, deep learning, and natural language processing, can be offered only via a cloud infrastructure, and their quality is likely to improve further. IBM is currently expanding its cloud business to include B2B, industry-specific, and B2C services. In 1Q, IBM’s cloud revenue grew 35% YoY, accounting for 19% of its total revenue.

2) Infrastructure as a service (IaaS)

The global cloud market is currently being led by Amazon in infrastructure and Salesforce.com in application. Cloud services are attractive to many firms (including start- ups) that need IT infrastructure, as they incur only operating expenses (OPEX), rather than massive capital expenditures (CAPEX) on hardware, software, and IT services. In 1Q, Amazon’s cloud service Amazon Web Service (AWS) saw revenue growth of +43% YoY, making a double-digit revenue contribution (10%) for the first time in its history.

Figure 5. Note rapid growth of cloud services among firms with strong AI capabilities

43%

35% 31%

19%

11% 10%

Amazon IBM Microsoft Amazon IBM Microsoft Cloud revenue growth Cloud revenue proportion

Note: As of 1Q17; based on YoY growth Source: Company data, Mirae Asset Daewoo Research

Figure 6. Concept map of IBM’s AI service, Watson on IBM Cloud

Source: IBM, Mirae Asset Daewoo Research

Mirae Asset Daewoo Research 5 June 19, 2017 Internet

3) NAVER’s noteworthy move to beef up its cloud services

Following the rollout of its AI platform Clova in March, in April, NAVER unveiled plans to launch its global B2B cloud business. Cloud revenue is likely to be recognized in the IT platform category of NAVER’s new revenue breakdown. If NAVER can drive up cloud revenue, in addition to AI, the company should benefit fully from the global AI-driven IT megatrend.

Figure 7. Overview of NAVER’s cloud platform service

Try our stable cloud service, easily and instantly

Source: NAVER Business Platform, Mirae Asset Daewoo Research

Figure 8. NAVER’s IT platform revenue to rise on expansion of B2B cloud and payment services

(Wbn) 80 IT platform revenue

60 NAVER Pay

0 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17F 3Q17F 4Q17F

Note: IT platform revenue includes NAVER Pay, IT services, and cloud revenues; forecasts are our estimates Source: NAVER, Mirae Asset Daewoo Research

Mirae Asset Daewoo Research 6 June 19, 2017 Internet

III. Investment strategy

1. NAVER to catch up with Amazon by enhancing shopping and AI businesses

NAVER’s stock has seen the smallest gains among global and domestic internet stocks in 1H17. We believe the company’s fundamentals remain robust, supported by the strong growth and profit stability of the parent company and AI-driven expansion (in partnership with its subsidiary LINE) of the company’s platform. Backed by the advance of shopping (among established businesses) and AI/cloud (among new businesses), we think the company could closely follow in Amazon’s footsteps over the medium and long term.

Despite aggressive R&D investments for new businesses, namely AI, the company has maintained strong revenue growth and operating profit stability. Notably, the company is carrying out the global cloud business (B2B) at full throttle, in addition to launching a voice- activated speaker (B2C).

Meanwhile, LINE is strengthening everyday services, like shopping, food delivery, and LINE Pay. In addition, the company plans to launch a wide range of smart speakers ahead of global rivals, including those in Japan.

Figure 9. Comparison of major internet firms’ share performances in 1H17

(Jan 17=100) 160 NAVER Kakao Alphabet (Google) Amazon 150 Rakuten Tencent Alibaba 140

130

120

110

100

90 Jan 17 Feb 17 Mar 17 Apr 17 May 17 Jun 17

Source: Thomson Reuters, Mirae Asset Daewoo Research

Table 1. Earnings forecasts and valuations of global internet firms (Wbn, x, %) Market Revenue Operating profit Net profit P/E EV/EBITDA P/B ROE Companies cap. 17F 18F 17F 18F 17F 18F 17F 18F 17F 18F 17F 18F 17F 18F NAVER (KR) 29,403 4,715 5,467 1,274 1,548 909 1,095 33.0 27.4 18.2 14.8 5.1 4.3 22.1 21.6 Kakao 6,975 1,908 2,104 169 220 130 138 57.5 53.9 25.2 21.8 2.0 1.9 3.5 3.6 Interpark 384 510 530 29 26 19 17 21.2 23.6 7.5 7.4 2.1 2.0 10.5 8.7 Alphabet (US) 744,079 99,424 116,168 41,749 49,189 33,093 39,298 23.1 20.1 13.0 11.1 4.2 3.5 14.8 14.9 Amazon 535,372 188,056 227,330 5,995 10,192 6,970 10,154 81.3 55.9 24.6 18.8 18.7 13.2 19.4 22.2 Facebook 495,132 43,594 55,746 19,369 25,232 18,222 23,184 27.4 21.6 17.1 13.5 6.0 4.8 24.1 24.5 Yahoo 57,134 3,927 3,922 473 415 782 784 74.7 74.2 49.7 44.5 1.5 1.6 2.2 2.4 SNAP 23,454 1,117 2,164 -1,249 -910 -963 -630 - - - - 7.5 9.6 -64.8 -28.8 Twitter 13,816 2,608 2,771 313 399 264 319 50.7 41.9 16.1 14.4 2.6 2.6 5.2 7.2 Yahoo Japan (JP) 27,216 9,388 10,071 2,132 2,363 1,426 1,573 19.0 17.2 9.3 8.3 2.6 2.3 13.6 13.8 Rakuten 20,110 9,188 10,127 1,336 1,455 774 854 25.1 22.5 4.4 4.0 2.7 2.4 10.9 11.2 LINE 9,067 1,710 1,962 241 346 139 210 65.5 43.1 26.8 19.4 5.0 4.5 8.2 10.4 Alibaba (CN) 391,716 37,014 48,729 11,624 16,321 12,925 17,068 30.0 22.9 22.4 17.2 6.5 5.2 20.5 22.5 Tencent 375,595 36,244 47,251 12,012 15,263 9,742 12,552 37.9 29.3 25.9 20.4 9.8 7.6 28.4 27.9 Baidu 68,519 14,105 17,132 1,983 2,752 2,223 3,021 31.1 22.6 22.6 17.0 3.9 3.3 12.2 15.2 JD.com 61,827 58,559 74,139 201 939 597 1,355 123.1 51.7 63.8 31.9 8.4 7.4 -0.8 8.4 Average 41.2 34.0 23.1 17.6 5.5 4.8 13.0 14.3 Note: Mirae Asset Daewoo Research estimates for Korean companies, market consensus for others Source: Bloomberg, Mirae Asset Daewoo Research estimates

Mirae Asset Daewoo Research 7 June 19, 2017 Internet

2. Kakao stock to receive boost from ad revenue and KOSPI relocation

Kakao‘s stock price has displayed the strongest performance among domestic internet firms in 1H. Even on the broader global stage, the company’s shares have only been outperformed by those of a handful of Chinese internet firms.

We think Kakao’s main upside catalyst will come from the recovery of ad revenue. The company’s shares have moved largely in line with the YoY growth trend of its ad business. After five quarters of decline, ad revenue growth finally turned positive YoY in 1Q17. We believe ad revenue will remain on an upward curve in 2H17, on the back of a low base of comparison and a potential launch of Kakao Moment, a performance-based ad platform with enhanced targeting capabilities.

The company is due to complete its relocation to the KOSPI in 3Q17. Its potential inclusion in the KOSPI 200 could boost demand from domestic and global institutional investors.

Figure 10. Recovery in ad revenue to serve as key growth driver for Kakao’s stock

(%) Kakao ad revenue YoY growth (L) (W) 15 Kakao stock price (R) 150,000 New ad platform, Kakao Moment, slated for launch in 3Q17 10 125,000 5

0 100,000

-5 75,000 -10

-15 50,000 1Q15 3Q15 1Q16 3Q16 1Q17 3Q17F

Source: Kakao, Thomson Reuters, Mirae Asset Daewoo Research

Figure 11. Kakao due to complete its relocation to KOSPI in 3Q17

Extraordinary general shareholders' meeting summary Proposal 1. Conditional delisting from the KOSDAQ and relocation to the KOSPI: Approved 1. Resolutions on the agenda Proposal 2. Granting of stock options to employees: Approved 2. Date June 14th, 2017 3. Other matters to consider in making investment decisions - May 30th, 2017: Notice of extraordinary general shareholders' meeting May 2nd, 2017: Resolution calling for extraordinary general shareholders' meeting ※ Related disclosures May 2nd, 2017: Resolution calling for introduction of proposal for approval of delisting from KOSDAQ at extraordinary general shareholders' meeting

Source: FSS, Kakao, Mirae Asset Daewoo Research

Mirae Asset Daewoo Research 8 June 19, 2017 Internet

Key Recommendations

NAVER (035420 KS/Buy) Ideal combination of AI, cloud, and shopping  B2C: Introducing smart speakers in collaboration with LINE  B2B: Global cloud services and rise of shopping as a solution  Our top internet pick; maintain Buy and TP of W1,160,000

Kakao (035720 KQ/Buy) AI-enhanced everyday platform  B2C: Launch of smart speakers and increased chatbot applications  B2B: Ad revenue pickup and release of Kakao Moment  Maintain Buy and raise TP to W125,000

Mirae Asset Daewoo Research 9 June 19, 2017 Internet

NAVER (035420 KS) Ideal combination of AI, cloud, and shopping

B2C: Introducing smart speakers in collaboration with LINE Internet Release of smart speakers: NAVER is carrying out its AI business in collaboration with its subsidiary LINE. The company plans to roll out a voice-activated speaker (Maintain) Buy called Wave, based on its Clova AI platform, as early as July in Korea and Japan. LINE is expected to be the first to launch a wide range of smart speakers in Japan. Target Price (12M, W) 1,160,000 Following the release of Wave, LINE plans to launch another speaker called Champ, which will incorporate LINE characters in its design, as well as a speaker integrated with Gatebox, a holographic virtual assistant developed by recently-acquired Share Price (06/16/17, W) 892,000 startup Vinclu.

Expected Return 30% Integration with everyday services: NAVER’s Shopping Window, booking, and payment services, as well as LINE’s shopping and food delivery services, will be OP (17F, Wbn) 1,274 connected to the smart speakers, which we believe will help NAVER expand its Consensus OP (17F, Wbn) 1,280 platform leverage.

EPS Growth (17F, %) 18.9 B2B: Global cloud services and rise of shopping as solution Market EPS Growth (17F, %) 36.9 Cloud: In addition to AI, NAVER is also beefing up its cloud services. Following the P/E (17F, x) 33.0 rollout of its Clova AI platform in March, the company in April unveiled plans to Market P/E (17F, x) 10.0 launch its global B2B cloud business. Notably, many global IT companies with KOSPI 2,361.83 strong AI capabilities are seeing increasing cloud revenue; we think NAVER is heading in a similar direction. Market Cap (Wbn) 29,403 Shares Outstanding (mn) 33 Shopping: NAVER’s shopping business serves as a growth catalyst for the Free Float (%) 76.6 company’s other services, including search ads (business platform) and payments Foreign Ownership (%) 61.3 (NAVER Pay and IT platform). In particular, services like Shopping Window, booking, Beta (12M) 0.60 and NAVER Pay are developing into solutions that help sellers increase their sales. 52-Week Low 689,000 The shopping search ad service, which launched in November 2016, has appealed 52-Week High 960,000 to sellers because of its lower minimum rate, compared with previous search ad products, while also minimizing consumer resistance by offering points whenever (%) 1M 6M 12M they click on the ads. This is creating a virtuous cycle across the ecosystem, driving Absolute 6.3 10.7 27.2 strong growth at the parent company. Relative 3.3 -4.3 5.2 Our top internet pick; maintain Buy and TP of W1,160,000 160 NAVER KOSPI

140 NAVER’s stock has seen the smallest gains among global and domestic internet stocks in 1H17. We believe fundamentals remain robust, supported by the strong 120 growth and profit stability of the parent company and the AI-driven expansion of

100 the company’s platform. Backed by the advance of shopping (among established businesses) and AI/cloud (among new businesses), we think the company could 80 6.16 10.16 2.17 6.17 follow Amazon closely over the medium and long term. We reaffirm our Buy rating and target price of W1,160,000 and continue to recommend the stock as our top pick in the Internet sector.

FY (12) 12/14 12/15 12/16 12/17F 12/18F 12/19F Revenue (Wbn) 2,758 3,254 4,023 4,715 5,467 6,240 OP (Wbn) 758 830 1,102 1,274 1,548 1,812 OP margin (%) 27.5 25.5 27.4 27.0 28.3 29.0 NP (Wbn) 454 519 749 891 1,073 1,249 EPS (W) 13,787 15,737 22,732 27,025 32,556 37,905 ROE (%) 27.8 26.5 26.2 22.1 21.6 20.5 P/E (x) 51.6 41.8 34.1 33.0 27.4 23.5 P/B (x) 8.7 6.8 5.2 5.1 4.3 3.6 Dividend yield (%) 0.1 0.2 0.1 0.1 0.1 0.2 Note: All figures are based on consolidated K-IFRS; NP refers to net profit attributable to controlling interests Source: Company data, Mirae Asset Daewoo Research estimates

Mirae Asset Daewoo Research 10 June 19, 2017 Internet

Earnings forecasts and key factors

Table 2. NAVER’s earnings trends and forecasts (Wbn, %) 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17F 3Q17F 4Q17F 2016 2017F Revenue 937 987 1,013 1,085 1,082 1,160 1,185 1,287 4,023 4,715 Ads 82 97 98 123 100 117 116 143 400 475 Business platform 450 462 462 491 510 536 536 563 1,866 2,145 IT platform 23 28 31 39 43 53 56 76 121 229 Content services 31 27 23 23 24 25 26 27 103 101 LINE and other platforms 353 373 399 409 406 429 451 478 1,534 1,764 Operating profit 257 273 282 290 291 319 320 345 1,102 1,274 OP margin 27.4 27.6 27.9 26.7 26.9 27.5 27.0 26.8 27.4 27.0 Net profit 165 213 198 183 211 228 229 239 759 909 Net margin 17.6 21.6 19.5 16.9 19.5 19.6 19.3 18.6 18.9 19.3 YoY Revenue 26.6 26.3 20.5 21.7 15.5 17.5 17.0 18.7 23.6 17.2 Ads 22.3 21.0 18.0 16.0 19.0

Business platform 13.3 16.0 16.0 14.7 15.0

IT platform 92.0 90.0 82.0 95.1 90.0

Content services -23.7 -10.0 15.1 20.4 -2.0

LINE and other platforms 15.1 15.0 13.0 16.8 15.0

Operating profit 32.1 44.0 27.6 28.9 13.2 16.9 13.4 18.7 32.7 15.6 Net profit 22.7 71.8 69.5 29.6 27.8 6.8 15.5 30.3 46.8 19.7 Notes: All figures are based on consolidated K-IFRS; revenue was reclassified into five segments: ads, business platform, IT platform, content services, and LINE and other platforms; new classification only applies from 2016; ads include general and shopping display ads and video ads; business platform includes general and shopping search ads; IT platform includes NAVER Pay, IT services, and cloud services; content services include music, Webtoon, and V Live; LINE and other platforms include LINE, Camp Mobile, and Snow Source: Company data, Mirae Asset Daewoo Research estimates

Figure 13. NAVER’s shopping business serves as growth Figure 12. NAVER beefing up global cloud business and AI catalyst for its other services

NAVER NAVER Shopping Fees based on Shopping ad registration search ads Sales Product and clicks Search commissions registration Ad registration ad based on revenue visits + bid

NAVER Pay

Point User accumulates Points can be used on accumulation points based on ad clicks subsequent purchases by users

Payment fees and purchase data collection

Source: NAVER, NAVER Business Platform, Mirae Asset Daewoo Research Source: Mirae Asset Daewoo Research

Figure 14. Share performance: NAVER, Amazon, Alphabet, and Figure 15. 12M-fwd P/E: NAVER, Amazon, Alphabet, and Baidu Baidu since the start of the year

(Jan 17=100) (x) (x) 140 NAVER Amazon 55 NAVER (L) Alphabet (L) 180 Alphabet Baidu Baidu (L) Amazon (R) 130 45 160

120 35 140 110

25 120 100

90 15 100 Jan 17 Feb 17 Mar 17 Apr 17 May 17 Jun 17 Jan 17 Feb 17 Mar 17 Apr 17 May 17 Jun 17

Source: Thomson Reuters, Mirae Asset Daewoo Research Source: Thomson Reuters, Mirae Asset Daewoo Research

Mirae Asset Daewoo Research 11 June 19, 2017 Internet

NAVER (035420 KS/Buy/TP: W1,160,000)

Comprehensive Income Statement (Summarized) Statement of Financial Condition (Summarized) (Wbn) 12/16 12/17F 12/18F 12/19F (Wbn) 12/16 12/17F 12/18F 12/19F Revenue 4,023 4,715 5,467 6,240 Current Assets 4,200 5,421 6,797 8,332 Cost of Sales 0 0 0 0 Cash and Cash Equivalents 1,726 2,486 3,417 4,474 Gross Profit 4,023 4,715 5,467 6,240 AR & Other Receivables 694 823 931 1,063 SG&A Expenses 2,921 3,440 3,919 4,429 Inventories 10 12 14 16 Operating Profit (Adj) 1,102 1,274 1,548 1,812 Other Current Assets 1,770 2,100 2,435 2,779 Operating Profit 1,102 1,274 1,548 1,812 Non-Current Assets 2,171 2,174 2,211 2,276 Non-Operating Profit 30 64 60 59 Investments in Associates 182 216 251 286 Net Financial Income 30 44 58 74 Property, Plant and Equipment 863 735 633 553 Net Gain from Inv in Associates -9 0 0 0 Intangible Assets 112 95 83 73 Pretax Profit 1,132 1,338 1,608 1,871 Total Assets 6,371 7,595 9,008 10,608 Income Tax 361 427 513 597 Current Liabilities 1,804 2,098 2,396 2,703 Profit from Continuing Operations 771 912 1,095 1,275 AP & Other Payables 425 504 584 667 Profit from Discontinued Operations -12 -3 0 0 Short-Term Financial Liabilities 227 227 227 227 Net Profit 759 909 1,095 1,275 Other Current Liabilities 1,152 1,367 1,585 1,809 Controlling Interests 749 891 1,073 1,249 Non-Current Liabilities 437 491 545 601 Non-Controlling Interests 10 18 22 25 Long-Term Financial Liabilities 150 150 150 150 Total Comprehensive Profit 724 909 1,095 1,275 Other Non-Current Liabilities 287 341 395 451 Controlling Interests 733 998 1,202 1,400 Total Liabilities 2,241 2,589 2,942 3,304 Non-Controlling Interests -9 -89 -107 -125 Controlling Interests 3,595 4,453 5,492 6,704 EBITDA 1,265 1,420 1,662 1,901 Capital Stock 16 16 16 16 FCF (Free Cash Flow) 1,010 1,251 1,433 1,574 Capital Surplus 1,217 1,217 1,217 1,217 EBITDA Margin (%) 31.4 30.1 30.4 30.5 Retained Earnings 3,810 4,669 5,707 6,919 Operating Profit Margin (%) 27.4 27.0 28.3 29.0 Non-Controlling Interests 535 553 575 600 Net Profit Margin (%) 18.6 18.9 19.6 20.0 Stockholders' Equity 4,130 5,006 6,067 7,304

Cash Flows (Summarized) Forecasts/Valuations (Summarized) (Wbn) 12/16 12/17F 12/18F 12/19F 12/16 12/17F 12/18F 12/19F Cash Flows from Op Activities 1,164 1,251 1,433 1,574 P/E (x) 34.1 33.0 27.4 23.5 Net Profit 759 909 1,095 1,275 P/CF (x) 18.5 20.5 17.7 15.6 Non-Cash Income and Expense 624 522 565 608 P/B (x) 5.2 5.1 4.3 3.6 Depreciation 146 128 102 80 EV/EBITDA (x) 18.2 18.2 14.8 12.2 Amortization 17 17 13 9 EPS (W) 22,732 27,025 32,556 37,905 Others 461 377 450 519 CFPS (W) 41,966 43,417 50,345 57,114 Chg in Working Capital 88 197 224 209 BPS (W) 150,192 176,242 207,749 244,518 Chg in AR & Other Receivables -56 -89 -90 -92 DPS (W) 1,131 1,200 1,300 1,400 Chg in Inventories 0 -2 -2 -2 Payout ratio (%) 4.3 3.8 3.4 3.2 Chg in AP & Other Payables 11 0 0 0 Dividend Yield (%) 0.1 0.1 0.1 0.2 Income Tax Paid -339 -425 -513 -597 Revenue Growth (%) 23.6 17.2 15.9 14.1 Cash Flows from Inv Activities -942 -426 -432 -444 EBITDA Growth (%) 28.3 12.3 17.0 14.4 Chg in PP&E -97 0 0 0 Operating Profit Growth (%) 32.8 15.6 21.5 17.1 Chg in Intangible Assets -21 0 0 0 EPS Growth (%) 44.4 18.9 20.5 16.4 Chg in Financial Assets -662 -426 -432 -444 Accounts Receivable Turnover (x) 9.1 9.1 9.0 8.9 Others -162 0 0 0 Inventory Turnover (x) 311.2 416.8 412.4 409.4 Cash Flows from Fin Activities 698 -32 -35 -37 Accounts Payable Turnover (x) 0.0 0.0 0.0 0.0 Chg in Financial Liabilities -290 0 0 0 ROA (%) 14.1 13.0 13.2 13.0 Chg in Equity 1,084 0 0 0 ROE (%) 26.2 22.1 21.6 20.5 Dividends Paid -32 -32 -35 -37 ROIC (%) 169.2 389.2 -1,939.1 -400.5 Others -64 0 0 0 Liability to Equity Ratio (%) 54.3 51.7 48.5 45.2 Increase (Decrease) in Cash 913 759 932 1,057 Current Ratio (%) 232.8 258.4 283.6 308.2 Beginning Balance 813 1,726 2,486 3,417 Net Debt to Equity Ratio (%) -73.1 -81.6 -87.9 -92.0 Ending Balance 1,726 2,486 3,417 4,474 Interest Coverage Ratio (x) 181.5 272.0 330.4 386.6 Source: Company data, Mirae Asset Daewoo Research estimates

Mirae Asset Daewoo Research 12 June 19, 2017 Internet

Kakao Corp. (035720 KQ) AI-enhanced everyday platform

B2C: Launch of smart speakers and increased chatbot applications Internet Launch of smart speakers: Kakao’s AI business is being led by both the parent company and its subsidiary Kakao Brain. The company plans to roll out an AI- (Maintain) Buy powered speaker in 3Q17. We think everyday services, like KakaoTalk Grocery Shopping (in partnership with Emart; 139480 KS, BUY, TP: W270,000, CP: W228,000) Target Price (12M, W) 125,000 and KakaoTalk Orders (food delivery), will eventually be built into the company’s smart speakers.

Share Price (06/16/17, W) 102,900 Increased chatbot applications: In May, Kakao unveiled a new version of its Plus Friend service (KakaoTalk accounts for enterprises). While the previous service was Expected Return 21% mostly limited to sending advertising messages, the updated version offers additional features, like chatting and wide messages. Moreover, ordering and OP (17F, Wbn) 174 booking features will be added in the near future. Kakao intends to apply AI Consensus OP (17F, Wbn) 184 chatbots to the service to allow companies to automatically respond to customer inquiries and bookings. EPS Growth (17F, %) 108.9 Market EPS Growth (17F, %) 36.9 B2B: Ad revenue pickup and release of Kakao Moment P/E (17F, x) 56.4 Ad revenue picking up: Kakao’s stock has moved largely in line with the YoY Market P/E (17F, x) 10.0 growth trend of its ad business. After five quarters of decline, ad revenue growth KOSDAQ 670.70 finally turned positive YoY in 1Q17. Daum’s PC ad revenue continued to be negatively affected by initiatives to improve network efficiency, but mobile ad Market Cap (Wbn) 6,975 revenue (Daum mobile and Kakao combined) improved YoY. Shares Outstanding (mn) 68 Free Float (%) 55.7 Release of Kakao Moment: In 2H17, Kakao plans to roll out Kakao Moment, a Foreign Ownership (%) 24.9 performance-based ad platform with enhanced targeting capabilities. Kakao Beta (12M) 0.81 Moment will tap into the massive data collected from the company’s numerous 52-Week Low 71,300 apps and pages to provide targeted ads that are better tailored to the different 52-Week High 109,800 user characteristics of each service (KakaoTalk, individual tabs within KakaoTalk, Daum’s web portal, Kakao Taxi, Kakao Game, etc.). In 2H17, we expect ad revenue (%) 1M 6M 12M growth to continue, further supported by favorable comparisons. Absolute 8.1 32.8 12.8 Relative 3.0 23.1 14.4 Maintain Buy and raise TP to W125,000

120 Kakao KOSDAQ We think Kakao’s main upside catalyst will come from the recovery of ad revenue. 110 The launch of Kakao Moment, combined with a low base of comparison, should 100 sustain ad revenue growth into 2H17. We think the release of newly published 90 games (Onmyoji) and increased application of ad models to new services, like 80 Kakao Taxi and Kakao Driver, also warrant attention. 70 60 The company is due to complete its relocation to the KOSPI in 3Q17. Its potential 6.16 10.16 2.17 6.17 inclusion in the KOSPI 200 could boost demand from domestic and global institutional investors. We maintain our Buy rating and raise our target price to W125,000 from W115,000.

FY (12) 12/14 12/15 12/16 12/17F 12/18F 12/19F Revenue (Wbn) 499 932 1,464 1,911 2,108 2,194 OP (Wbn) 176 89 116 174 221 238 OP margin (%) 35.3 9.5 7.9 9.1 10.5 10.8 NP (Wbn) 150 76 58 124 129 141 EPS (W) 6,116 1,269 874 1,825 1,908 2,079 ROE (%) 11.4 3.0 1.9 3.6 3.6 3.8 P/E (x) 20.2 91.2 88.1 56.4 53.9 49.5 P/B (x) 2.9 2.7 1.5 2.0 1.9 1.8 Dividend yield (%) 0.1 0.1 0.2 0.2 0.2 0.2 Note: All figures are based on consolidated K-IFRS; NP refers to net profit attributable to controlling interests Source: Company data, Mirae Asset Daewoo Research estimates

Mirae Asset Daewoo Research 13 June 19, 2017 Internet

Earnings forecasts and key factors

Table 3. Kakao’s earnings trends and forecasts (Wbn, %) 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17F 3Q17F 4Q17F 2015 2016 2017F Revenue 242 377 391 454 444 472 482 513 932 1,464 1,911 1) Ads 129 136 127 141 133 145 136 153 601 534 567 1-1) PC 71 74 62 68 63 70 62 67 362 275 261 1-2) Mobile 58 63 65 74 71 75 74 86 239 259 306 2) Content 92 190 198 222 222 238 251 263 274 702 974 2-1) Game 70 78 78 93 80 84 87 94 232 320 345 2-2) Music 3 91 96 107 110 121 130 135 15 296 496 2-3) Other 18 22 24 21 31 33 34 34 26 85 132 3) Other 22 50 66 91 89 90 94 98 58 228 370 Operating profit 21 27 30 38 38 40 42 53 89 116 174 OP margin 8.7 7.1 7.7 8.4 8.6 8.5 8.8 10.3 9.5 7.9 9.1 Net profit 11 13 14 29 54 20 23 36 79 65 133 Net margin 4.5 3.5 3.5 6.5 12.3 4.2 4.8 7.0 8.4 4.5 7.0 YoY Revenue 3.5 66.2 70.5 87.8 83.0 25.4 23.0 13.1 3.8 57.1 30.5 1) Ads -11.1 -12.1 -13.5 -7.9 3.0 6.5 7.2 7.8 0.9 -11.1 6.2 1-1) PC -22.3 -22.2 -29.3 -23.8 -12.0 -5.0 -1.0 -1.4 -14.7 -24.0 -5.0 1-2) Mobile 8.2 3.7 10.3 14.1 21.3 20.0 15.0 16.3 39.8 8.4 18.0 2) Content 19.3 215.2 187.2 228.7 142.2 24.8 26.8 18.7 -0.8 156.5 38.8 2-1) Game 0.5 45.0 52.7 63.4 14.2 6.9 11.4 0.7 -9.8 37.8 7.8 2-2) Music 42.7 3350.7 1251.9 3100.6 3164.8 34.0 35.8 26.4 219.7 1824.7 67.5 2-3) Other 306.2 469.1 129.7 204.3 74.3 51.6 41.1 58.1 91.5 229.9 55.0 3) Other 76.8 349.1 377.6 337.9 312.2 79.4 42.3 7.5 111.3 294.6 62.0 Operating profit -47.7 132.8 87.0 84.9 81.8 50.2 40.1 38.5 -57.6 31.1 49.4 Net profit -64.5 -38.0 -7.7 149.2 397.6 50.0 68.3 22.1 -44.3 -16.9 103.4 Note: Music (2-2) in content revenue includes Loen, acquired in Mar. 2016; other (2-3) includes webtoons, fiction, emoticons; other (3) revenue includes Kakao Friends, O2O (mobility) business; net profit attributable to controlling and non-controlling interests Source: Company data, Mirae Asset Daewoo Research estimates

Table 4. Earnings forecast revisions (Wbn, W, %) Previous Revised % chg. Notes 17F 18F 17F 18F 17F 18F Revenue 1,908 2,104 1,911 2,108 0.1 0.2 - Mobile ad estimates revised upwards Operating profit 169 220 174 221 2.7 0.4 - Expense estimates revised downwards Net profit 130 138 133 139 2.4 0.5 - Estimated loss in other revised downwards EPS 1,788 1,908 1,825 1,908 2.1 0.0 OP margin 8.9 10.5 9.1 10.5 Net margin 6.8 6.6 7.0 6.6 Note: Based on consolidated K-IFRS; net profit attributable to controlling and non-controlling interests; EPS attributable to controlling interests Source: Mirae Asset Daewoo Research estimates

Figure 16. Kakao’s AI business plans Figure 17. Ad revenue to drive up share performance

(%) Kakao ad revenue YoY growth (L) (W) 15 Kakao stock price (R) 150,000 New ad platform, Kakao Moment, slated 10 for launch in 3Q17

Voice 125,000 Secretary 5

0 100,000

-5

Secretary Bot 75,000

Kakao Plus Friend Bot -10 Chat Bot

-15 50,000 1Q15 3Q15 1Q16 3Q16 1Q17 3Q17F

Source: Kakao, Mirae Asset Daewoo Research Source: Kakao, Thomson Reuters, Mirae Asset Daewoo Research

Mirae Asset Daewoo Research 14 June 19, 2017 Internet

Kakao Corp. (035720 KQ/Buy/TP: W125,000)

Comprehensive Income Statement (Summarized) Statement of Financial Condition (Summarized) (Wbn) 12/16 12/17F 12/18F 12/19F (Wbn) 12/16 12/17F 12/18F 12/19F Revenue 1,464 1,911 2,108 2,194 Current Assets 1,217 1,444 1,741 2,005 Cost of Sales 0 0 0 0 Cash and Cash Equivalents 642 793 1,029 1,264 Gross Profit 1,464 1,911 2,108 2,194 AR & Other Receivables 251 284 307 320 SG&A Expenses 1,348 1,736 1,887 1,956 Inventories 13 14 16 16 Operating Profit (Adj) 116 174 221 238 Other Current Assets 311 353 389 405 Operating Profit 116 174 221 238 Non-Current Assets 4,267 4,207 4,127 4,041 Non-Operating Profit -16 -49 -31 -31 Investments in Associates 117 132 146 152 Net Financial Income -5 0 0 0 Property, Plant and Equipment 254 224 180 144 Net Gain from Inv in Associates -10 -2 0 0 Intangible Assets 3,733 3,670 3,604 3,540 Pretax Profit 100 125 190 207 Total Assets 5,484 5,650 5,869 6,046 Income Tax 35 -7 51 56 Current Liabilities 806 837 907 938 Profit from Continuing Operations 65 133 139 151 AP & Other Payables 263 297 328 342 Profit from Discontinued Operations 0 0 0 0 Short-Term Financial Liabilities 211 165 166 166 Net Profit 65 133 139 151 Other Current Liabilities 332 375 413 430 Controlling Interests 58 124 129 141 Non-Current Liabilities 975 999 1,020 1,029 Non-Controlling Interests 8 9 9 10 Long-Term Financial Liabilities 796 796 796 796 Total Comprehensive Profit 65 128 139 151 Other Non-Current Liabilities 179 203 224 233 Controlling Interests 58 127 138 150 Total Liabilities 1,781 1,835 1,927 1,967 Non-Controlling Interests 7 1 1 1 Controlling Interests 3,433 3,531 3,649 3,775 EBITDA 230 296 330 338 Capital Stock 34 34 34 34 FCF (Free Cash Flow) 236 222 305 273 Capital Surplus 3,105 3,103 3,103 3,103 EBITDA Margin (%) 15.7 15.5 15.7 15.4 Retained Earnings 304 408 525 652 Operating Profit Margin (%) 7.9 9.1 10.5 10.8 Non-Controlling Interests 270 284 293 304 Net Profit Margin (%) 4.0 6.5 6.1 6.4 Stockholders' Equity 3,703 3,815 3,942 4,079

Cash Flows (Summarized) Forecasts/Valuations (Summarized) (Wbn) 12/16 12/17F 12/18F 12/19F 12/16 12/17F 12/18F 12/19F Cash Flows from Op Activities 317 243 305 273 P/E (x) 88.1 56.4 53.9 49.5 Net Profit 65 133 139 151 P/CF (x) 23.1 22.5 23.3 22.7 Non-Cash Income and Expense 155 177 161 155 P/B (x) 1.5 2.0 1.9 1.8 Depreciation 56 55 44 35 EV/EBITDA (x) 24.3 24.2 20.9 19.7 Amortization 58 67 65 64 EPS (W) 874 1,825 1,908 2,079 Others 41 55 52 56 CFPS (W) 3,339 4,574 4,417 4,523 Chg in Working Capital 115 -38 57 23 BPS (W) 50,777 52,105 53,834 55,713 Chg in AR & Other Receivables -28 -23 -20 -9 DPS (W) 148 180 200 240 Chg in Inventories -8 -2 -1 -1 Payout ratio (%) 15.3 9.2 9.8 10.8 Chg in AP & Other Payables 105 94 11 5 Dividend Yield (%) 0.2 0.2 0.2 0.2 Income Tax Paid -54 -29 -51 -56 Revenue Growth (%) 57.1 30.5 10.3 4.1 Cash Flows from Inv Activities -1,000 15 -45 -20 EBITDA Growth (%) 40.2 28.7 11.5 2.4 Chg in PP&E -80 -20 0 0 Operating Profit Growth (%) 30.3 50.0 27.0 7.7 Chg in Intangible Assets -24 -4 0 0 EPS Growth (%) -31.1 108.8 4.5 9.0 Chg in Financial Assets 61 -50 -45 -20 Accounts Receivable Turnover (x) 11.1 10.3 10.2 9.9 Others -957 89 0 0 Inventory Turnover (x) 163.5 142.9 141.2 137.3 Cash Flows from Fin Activities 924 -66 -11 -13 Accounts Payable Turnover (x) 0.0 0.0 0.0 0.0 Chg in Financial Liabilities 777 -47 1 1 ROA (%) 1.5 2.4 2.4 2.5 Chg in Equity 835 -2 0 0 ROE (%) 1.9 3.6 3.6 3.8 Dividends Paid -11 -10 -12 -14 ROIC (%) 2.6 5.0 5.0 5.3 Others -677 -7 0 0 Liability to Equity Ratio (%) 48.1 48.1 48.9 48.2 Increase (Decrease) in Cash 244 152 236 235 Current Ratio (%) 151.0 172.5 191.9 213.7 Beginning Balance 397 642 793 1,029 Net Debt to Equity Ratio (%) 3.3 -2.9 -9.5 -15.2 Ending Balance 642 793 1,029 1,264 Interest Coverage Ratio (x) 8.1 0.0 0.0 0.0 Source: Company data, Mirae Asset Daewoo Research estimates

Mirae Asset Daewoo Research 15 June 19, 2017 Internet

APPENDIX 1

Important Disclosures & Disclaimers 2-Year Rating and Target Price History

Company (Code) Date Rating Target Price Company (Code) Date Rating Target Price NAVER(035420) 04/04/2017 Buy 1,160,000 No Coverage No Coverage 10/13/2016 Buy 100,000 08/30/2016 Buy 1,050,000 08/11/2016 Buy 110,000 04/28/2016 Buy 900,000 07/15/2016 Buy 120,000 07/30/2015 Buy 820,000 05/12/2016 Buy 135,000 05/04/2015 Buy 890,000 01/26/2016 Buy 150,000 Kakao(035720) 06/18/2017 Buy 125,000 08/16/2015 Buy 170,000 05/11/2017 Buy 115,000 05/15/2015 Buy 130,000 04/04/2017 Buy 105,000

(W) NAVER (W) Kakao 1,500,000 200,000

150,000 1,000,000

100,000

500,000 50,000

0 0 Jun 15 Jun 16 Jun 17 Jun 15 Jun 16 Jun 17

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 Buy Trading Buy Hold Sell 72.86% 15.58% 11.56% 0.00% * Based on recommendations in the last 12-months (as of March 31, 2017)

Disclosures As of the publication date, Mirae Asset Daewoo Co., Ltd. and/or its affiliates do not have any special interest with the subject company and do not own 1% or more of the subject company's shares outstanding.

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 and regulations thereof. Opinions expressed in this publication about the subject securities and companies accurately reflect the personal views of the Analysts primarily responsible for 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. No part of the compensation of the Analysts was, is, or will be directly or indirectly related to the specific recommendations or views contained in this report but, 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 is published 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

Mirae Asset Daewoo Research 16 June 19, 2017 Internet

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 and regulations or subject Mirae Asset Daewoo and 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.

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: This report is distributed in the U.S. by Mirae Asset Securities (USA) Inc., a member of FINRA/SIPC, and is only intended for major institutional investors as defined in Rule 15a-6(b)(4) under the U.S. Securities Exchange Act of 1934. All U.S. persons that receive this document by their acceptance thereof represent and warrant that they are a major 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., which accepts responsibility for the contents of this report in the U.S. 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 document has been approved for distribution in Hong Kong by Mirae Asset Securities (HK) Ltd., 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.

Mirae Asset Daewoo Research 17 June 19, 2017 Internet

Mirae Asset Daewoo International Network

Mirae Asset Daewoo Co., Ltd. (Seoul) Mirae Asset Securities (HK) Ltd. Mirae Asset Securities (UK) Ltd. Global Equity Sales Team Suites 1109-1114, 11th Floor 41st Floor, Tower 42 Mirae Asset Center 1 Building Two International Finance Centre 25 Old Broad Street, 26 Eulji-ro 5-gil, Jung-gu, Seoul 04539 8 Finance Street, Central London EC2N 1HQ Korea Hong Kong United Kingdom China Tel: 82-2-3774-2124 Tel: 852-2845-6332 Tel: 44-20-7982-8000

Mirae Asset Securities (USA) Inc. Mirae Asset Wealth Management (USA) Inc. Mirae Asset Wealth Management (Brazil) CCTVM 810 Seventh Avenue, 37th Floor 555 S. Flower Street, Suite 4410, Rua Funchal, 418, 18th Floor, E-Tower Building New York, NY 10019 Los Angeles, California 90071 Vila Olimpia USA USA Sao Paulo - SP 04551-060 Brasil Tel: 1-212-407-1000 Tel: 1-213-262-3807 Tel: 55-11-2789-2100

PT. Mirae Asset Sekuritas Indonesia Mirae Asset Securities (Singapore) Pte. Ltd. Mirae Asset Securities (Vietnam) LLC Equity Tower Building Lt. 50 6 Battery Road, #11-01 7F, Saigon Royal Building Sudirman Central Business District Singapore 049909 91 Pasteur St. Jl. Jend. Sudirman, Kav. 52-53 Jakarta Selatan Republic of Singapore District 1, Ben Nghe Ward, Ho Chi Minh City 12190 Vietnam Indonesia Tel: 62-21-515-3281 Tel: 65-6671-9845 Tel: 84-8-3911-0633 (ext.110) Mirae Asset Securities Mongolia UTsK LLC Mirae Asset Investment Advisory (Beijing) Co., Ltd Beijing Representative Office #406, Blue Sky Tower, Peace Avenue 17 2401B, 24th Floor, East Tower, Twin Towers 2401A, 24th Floor, East Tower, Twin Towers 1 Khoroo, Sukhbaatar District B12 Jianguomenwai Avenue, Chaoyang District B12 Jianguomenwai Avenue, Chaoyang District Ulaanbaatar 14240 Beijing 100022 Beijing 100022 Mongolia China China

Tel: 976-7011-0806 Tel: 86-10-6567-9699 Tel: 86-10-6567-9699 (ext. 3300) Shanghai Representative Office Ho Chi Minh Representative Office 38T31, 38F, Shanghai World Financial Center 7F, Saigon Royal Building 100 Century Avenue, Pudong New Area 91 Pasteur St. Shanghai 200120 District 1, Ben Nghe Ward, Ho Chi Minh City China Vietnam

Tel: 86-21-5013-6392 Tel: 84-8-3910-7715

Mirae Asset Daewoo Research 18