May 23, 2019 Korea Morning Focus

Company News & Analysis Major Indices Close Chg Chg (%) LG Electronics (066570/Buy/TP: W99,500) KOSPI 2,064.86 3.61 0.18 5G presents new opportunities KOSPI 200 266.65 0.53 0.20 KOSDAQ 706.93 2.95 0.42

Turnover ('000 shares, Wbn) Volume Value KOSPI 500,633 4,638 KOSPI 200 60,374 2,652 KOSDAQ 712,110 4,222

Market Cap (Wbn) Value KOSPI 1,368,593 KOSDAQ 242,884

KOSPI Turnover (Wbn) Buy Sell Net Foreign 1,300 1,294 5 Institutional 940 1,032 -92 Retail 2,369 2,296 73

KOSDAQ Turnover (Wbn) Buy Sell Net Foreign 458 515 -57 Institutional 231 213 17 Retail 3,505 3,464 41

Program Buy / Sell (Wbn) Buy Sell Net KOSPI 1,056 1,113 -57 KOSDAQ 398 429 -31

Advances & Declines Advances Declines Unchanged KOSPI 390 428 77 KOSDAQ 661 532 89

KOSPI Top 5 Most Active Stocks by Value (Wbn) Price (W) Chg (W) Value 43,500 350 463 KODEX Leverage 11,720 30 303 KODEX 200 Futures 7,860 -20 244 Inverse 2X Hynix 68,900 -1,400 213 KODEX Kosdaq150 10,485 40 141 Leverage

KOSDAQ Top 5 Most Active Stocks by Value (Wbn) Price (W) Chg (W) Value Hyundai IT 18,300 3,000 367 Nexon GT 17,650 650 188 TPLEX 3,150 420 114 ABL Bio 33,250 2,350 100 Kukil Paper 3,980 110 84 Note: As of May 22, 2019

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LG Electronics (066570 KS) 5G presents new opportunities

Technology Strong competitiveness of home appliances/TVs; Potential benefits from US- China trade dispute Company Report We recently hosted LG Electronics (LGE) for meetings with foreign investors. Many May 23, 2019 investors showed strong interest in the home appliance & air solution (H&A) business due to its robust competitiveness, as well as the mobile communications (MC) business due to expected benefits from the US-China trade conflict and Huawei’s recent woes. Components are a key part of the home appliance business’s competitiveness. LGE (Maintain) Buy internally produces components like motors, inverters, and compressors, which allows it to generate high margins. New growth items are also doing well. The sales mix of air Target Price (12M, W) 99,500 purifiers, electric dryers, cordless vacuums, and stylers has been rising, providing a boost to margins. Share Price (05/22/19, W) 73,100 While there are worries about US safeguard tariffs, the company is addressing the issue through the operation of its Tennessee plant (which began in 4Q18). The home Expected Return 36% appliance rental business also looks promising. Rental subscribers have continued to grow thanks to the strong popularity of the company’s water and air purifiers. In addition, there are high expectations on the company’s HomeBrew machine and hair OP (19F, Wbn) 2,895 growth devices. LGE recently installed WiFi modules on all of its appliances to prepare Consensus OP (19F, Wbn) 2,824 for the upcoming big data era.

EPS Growth (19F, %) 23.7 The smartphone business is continuing to struggle. However, we believe 5G presents new opportunities for LGE, which has an extensive list of 5G-related patents. The initial Market EPS Growth (19F, %) -19.5 response to the company’s 5G smartphones has so far been positive. In particular, LGE P/E (19F, x) 8.6 looks well-positioned to capture opportunities in markets that are actively introducing Market P/E (19F, x) 11.6 5G, such as Korea and the US. KOSPI 2,064.86 In addition, the smartphone business may benefit from Huawei’s troubles in the US. Market Cap (Wbn) 11,963 Meanwhile, prices of components such as semiconductors and multilayer ceramic Shares Outstanding (mn) 181 capacitors (MLCCs) have been falling, leading to cost improvements. The company Free Float (%) 65.7 could also see labor cost savings from 4Q19, when the relocation of the Pyeongtaek Foreign Ownership (%) 32.8 plant to Vietnam is set to be completed. Beta (12M) 1.34 The home entertainment (HE) business faces a number of headwinds, including rising 52-Week Low 59,400 panel prices, slowing growth in emerging markets, and the absence of major sports 52-Week High 98,700 events. In our view, increasing the mix of OLED TVs is critical, and we expect that to happen after LG Display’s Guangzhou fab goes into operation in 2H19. The vehicle (%) 1M 6M 12M component solutions (VS) business is LGE’s next growth driver. Order backlog currently Absolute -0.5 5.6 -25.9 stands at over W40tr. We project orders to gradually translate into revenue from 2H19. Relative 6.8 5.9 -11.6 Maintain Buy and TP of W99,500; Steeply undervalued 110 LG Electronics KOSPI We maintain our Buy rating and target price of W99,500 on LGE. The stock looks 100 steeply undervalued, currently trading at a 12-month forward P/E of 7.6x and P/B of 90 0.81x. The company has a market value of just W12tr, even though the home appliance 80 and TV businesses alone generate more than W3tr in annual operating profit. We also 70 expect the smartphone business to benefit from US-China trade disputes and capture 60 opportunities in 5G. 50 5.18 9.18 1.19 5.19

Mirae Asset Daewoo Co., Ltd.

[ Telecom Equipment/Electronic FY (Dec.) 12/16 12/17 12/18 12/19F 12/20F 12/21F Components] Revenue (Wbn) 55,367 61,396 61,342 63,512 68,371 73,602

Wonjae Park OP (Wbn) 1,338 2,469 2,703 2,895 3,473 4,150 +822-3774-1426 OP margin (%) 2.4 4.0 4.4 4.6 5.1 5.6 [email protected] NP (Wbn) 77 1,726 1,240 1,535 2,147 2,726

EPS (W) 425 9,543 6,858 8,487 11,872 15,072

ROE (%) 0.7 13.7 9.0 10.3 12.9 14.4

P/E (x) 121.4 11.1 9.1 8.6 6.2 4.9 P/B (x) 0.8 1.4 0.8 0.8 0.7 0.7

Dividend yield (%) 0.8 0.4 1.2 1.0 1.1 1.1

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

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

Mirae Asset Daewoo Research Key Universe Valuations May 23, 2019

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

19F Earnings growth Mkt Cap Price P/E (x) P/B (x) ROE (%) Ticker Company Div Yield OP EPS (Wbn) (W) (%) 19F 20F 19F 20F 19F 20F 19F 20F 19F 20F 005930 Samsung Electronics 259,686 43,500 3.3 -54.2 38.9 -46.7 34.7 13.5 10.1 1.2 1.1 8.8 11.1 000660 SK Hynix 50,159 68,900 2.2 -78.7 60.6 -78.6 55.5 15.1 9.7 1.0 0.9 6.9 10.1 005380 Hyundai Motor 27,136 127,000 3.1 40.1 30.5 139.2 15.0 9.9 8.6 0.5 0.5 5.1 5.7 068270 Celltrion 23,677 184,500 - - - - 0.0 0.0 051910 LG Chem 23,437 332,000 1.8 -13.1 52.7 -15.4 63.6 20.9 12.8 1.4 1.3 7.1 10.9 055550 Shinhan Financial Group 21,837 46,050 12.5 3.1 10.5 0.7 6.3 6.2 0.6 0.5 9.4 8.8 017670 SK Telecom 20,429 253,000 4.0 5.8 9.8 -34.9 53.0 10.0 6.6 0.8 0.7 8.8 12.5 005490 POSCO 20,358 233,500 4.7 -16.7 1.8 69.3 2.3 7.1 7.0 0.4 0.4 6.5 6.3 012330 20,110 211,000 1.7 9.1 10.2 27.0 7.4 8.6 8.0 0.6 0.6 7.5 7.6 051900 LG H&H 20,023 1,282,000 0.9 12.5 9.5 15.3 10.4 25.4 23.0 5.5 4.7 19.9 18.8 105560 KB Financial Group 19,317 46,200 9.7 3.8 10.8 4.0 5.7 5.5 0.5 0.5 9.3 9.0 035420 NAVER 18,624 113,000 0.3 -15.1 26.3 -31.4 68.6 41.8 24.8 2.7 2.4 8.2 12.5 028260 Samsung C&T 18,153 95,700 2.1 5.4 20.1 -4.2 20.7 14.4 11.9 0.7 0.6 5.2 5.9 034730 SK Holdings 16,781 238,500 2.0 13.3 12.9 -32.3 20.1 11.1 9.2 0.9 0.8 8.9 9.8 000270 Motors 16,681 41,150 1.9 20.5 19.7 54.5 16.7 9.3 8.0 0.6 0.5 6.3 7.0 032830 Samsung Life 16,160 80,800 - - - - 0.0 0.0 015760 KEPCO 16,113 25,100 ------0.2 0.2 - - 018260 Samsung SDS 16,017 207,000 1.4 11.6 16.5 12.7 15.4 22.6 19.6 2.4 2.2 11.3 12.0 096770 SK Innovation 15,488 167,500 4.8 -29.5 18.8 -40.7 27.9 16.0 12.5 0.8 0.8 5.3 6.7 006400 Samsung SDI 14,647 213,000 0.5 16.8 45.7 -1.0 42.4 21.6 15.2 1.1 1.1 5.6 7.5 033780 KT&G 13,867 101,000 4.2 12.8 5.6 17.5 5.1 13.1 12.5 1.6 1.5 12.7 12.6 000810 Samsung F&M 13,123 277,000 - - - - 0.0 0.0 003550 LG Corp. 12,372 71,700 3.2 17.2 15.4 5.5 15.6 6.4 5.5 0.6 0.6 10.5 11.1 066570 LG Electronics 11,963 73,100 1.0 7.1 20.0 23.7 39.9 8.6 6.2 0.8 0.7 10.3 12.9 090430 AmorePacific 11,136 190,500 0.7 6.0 20.7 6.9 22.4 31.3 25.6 2.8 2.6 7.8 8.9 086790 Hana Financial Group 11,124 37,050 8.6 8.1 9.5 8.2 4.5 4.2 0.4 0.4 9.0 9.1 036570 NCsoft 10,684 487,000 1.2 32.4 26.4 49.5 17.4 17.1 14.6 3.2 2.7 23.9 23.1 035720 10,467 125,500 0.1 167.0 116.1 127.8 160.4 89.8 34.5 2.0 1.9 2.2 5.6 251270 9,870 115,500 44.5 59.7 57.2 39.0 33.0 23.8 2.0 1.9 6.6 8.5 010950 S-Oil 9,356 83,100 3.0 60.1 77.0 99.7 139.4 18.8 7.9 1.4 1.2 7.7 16.5 011170 Lotte Chemical 9,066 264,500 4.0 -34.3 31.9 -35.0 35.1 8.8 6.5 0.7 0.6 7.8 9.9 091990 Celltrion Healthcare 8,485 59,000 - 192.4 1119.2 156.4 60.9 23.7 4.5 3.9 8.2 18.6 010130 Korea Zinc 8,180 433,500 2.5 8.9 6.0 19.1 2.4 13.0 12.7 1.2 1.1 9.7 9.3 024110 Industrial Bank of Korea 8,020 13,950 7.5 4.5 5.4 3.6 5.0 4.8 0.4 0.4 8.6 8.3 009540 HHI 7,714 109,000 - 594.6 - - - 64.8 0.7 0.6 - 1.0 009150 Samsung Electro-Mechanics 7,283 97,500 1.1 -19.1 28.9 -17.5 31.2 14.0 10.7 1.4 1.2 10.7 12.6 030200 KT 7,115 27,250 4.0 2.0 3.0 28.2 5.6 8.1 7.6 0.5 0.5 6.5 6.6 032640 LG Uplus 6,527 14,950 4.3 -2.9 11.7 2.0 18.2 13.3 11.2 0.9 0.9 7.0 7.9 034220 LG Display 6,047 16,900 - - - - - 19.0 0.4 0.4 - 2.3 018880 Hanon Systems 5,872 11,000 - - - - 0.0 0.0 086280 Hyundai Glovis 5,719 152,500 2.2 8.8 2.2 20.2 8.7 10.9 10.0 1.2 1.1 11.8 11.7 000720 Hyundai E&C 5,579 50,100 1.0 24.6 6.1 20.7 0.6 12.1 12.1 0.8 0.8 7.2 6.8 004020 5,458 40,900 1.8 2.5 16.1 42.1 23.3 9.6 7.8 0.3 0.3 3.3 3.8 Hyundai Heavy Industries 267250 4,984 306,000 6.0 78.7 2.1 154.0 4.5 7.3 7.0 0.6 0.5 8.6 8.5 Holdings 010140 SamsungHvyInd 4,801 7,620 - - - - - 62.1 0.6 0.6 - 1.2 128940 Hanmi Pharmaceutical 4,744 408,500 0.1 37.5 -0.2 141.7 -12.3 78.8 89.9 6.1 5.7 8.2 6.8 023530 Lotte Shopping 4,583 162,000 3.2 6.5 3.9 - 10.5 11.4 10.3 0.4 0.4 3.4 3.7 005830 DB Insurance 4,283 60,500 - - - - 0.0 0.0 035760 CJ ENM 4,193 191,200 - - - - 0.0 0.0 097950 CJ CheilJedang 4,185 278,000 1.3 15.4 12.7 -64.8 23.7 14.6 11.8 0.9 0.8 6.3 7.3 Source: Mirae Asset Daewoo Research

Mirae Asset Daewoo Research Market Data May 23, 2019

※All data as of close May 22, 2019, unless otherwise noted.

Other Major Indices Economic Indicators Close Net Chg 1D (%) YTD (%) Close 1D ago 1M ago 1Y ago MSCI Korea* 410.62 2.46 0.60 -4.27 USD/KRW 1,193.30 1,192.90 1,137.10 1,080.00 KOSPI 2,064.86 3.61 0.18 2.73 JPY100/KRW 1,079.27 1,083.91 1,016.04 974.33 KOSDAQ 706.93 2.95 0.42 5.61 EUR/KRW 1,332.20 1,332.23 1,278.44 1,270.89 Dow Jones* 25,877.33 197.43 0.77 10.93 3Y Treasury 1.67 1.66 1.77 2.25 S&P 500* 2,864.36 24.13 0.85 14.12 3Y Corporate 2.14 2.14 2.24 2.86 NASDAQ* 7,785.72 83.34 1.08 16.80 DDR2 1Gb* 1.05 1.05 1.06 1.35 Philadelphia Semicon* 1,374.21 28.63 2.13 17.93 NAND MLC 64G* 2.38 2.42 2.50 3.68 FTSE 100* 7,328.92 18.04 0.25 8.83 Oil (Dubai)* 71.64 72.46 71.07 76.43 Nikkei 225 21,283.37 10.92 0.05 8.80 Gold* 1,273.20 1,277.30 1,271.90 1,290.90 Hang Seng* 27,657.24 -130.37 -0.47 10.06 Customer deposits (Wbn)* 25,105 25,648 26,321 27,660 Taiwan (Weighted) 10,457.22 -7.28 -0.07 9.45 Equity type BC (Wbn)(May. 20) 80,777 80,787 84,101 80,338 Note: * as of May 21, 2019 Source: KSDA, FnGuide, DRAMeXchange, MSCI

KOSPI Top 10 Foreign Net Buy / Net Sell (Wbn) KOSPI Top 10 Institutional Net Buy / Net Sell (Wbn) Net Buy Net Sell Net Buy Net Sell Samsung Electronics 76.84 Hynix 44.04 KODEX 200 Futures Inverse 2X 12.33 Samsung Electronics 64.84 Fila Korea 14.49 SEMCO 14.49 Hanwha Chemical 11.20 Fila Korea 15.01 Celltrion 13.63 SK Telecom 10.44 Hotel Shilla 11.00 Hynix 14.69 LG Electronics 9.80 Samsung Electronics (P) 9.50 Hyundai Motor 8.29 NAVER 9.29 6.88 Hyundai Motor 9.50 Samsung Electronics (P) 7.63 KODEX Leverage 7.56 Kakao 5.61 LG Household & Health Care 6.91 Samsung Techwin 7.25 Celltrion 6.56 Shinhan Financial Group 4.65 Hyundai Motor (2P) 6.77 LG Household & Health Care 7.11 KODEX KOSDAQ150 INVERSE 5.81 LG Uplus 4.31 Hotel Shilla 6.00 Hyundai Motor (2P) 6.75 LG Electronics 5.49 Honam Petrochemical 4.17 KEPCO 5.22 KODEX Kosdaq150 Leverage 6.69 SK C&C 4.90 NAVER 4.04 Hanwha Chemical 4.38 Shinhan Financial Group 4.87 S-Oil 4.83 Source: KSDA, FnGuide

KOSDAQ Top 10 Foreign Net Buy / Net Sell (Wbn) KOSDAQ Top 10 Institutional Net Buy / Net Sell (Wbn) Net Buy Net Sell Net Buy Net Sell ABL Bio 7.17 Celltrion Healthcare 30.72 PearlAbyss 5.67 10.92 Spigen Korea 6.75 CHA Biotech 10.54 Nas Media 4.76 Alteogen 4.32 Deutsch Motors 5.33 Cafe24 Corp. 8.09 ABL Bio 4.24 OSSTEM IMPLANT 3.39 Emerson Pacific 4.53 Medy-tox 7.50 Eutilex 3.80 Systems Technology 2.92 OSSTEM IMPLANT 4.35 Posco Chemtech 4.56 EuBio 3.03 Hugel 2.75 PearlAbyss 3.84 RFHIC 4.55 Medy-tox 2.99 ECOPROBM 2.48 IDIS 3.79 Com2us 4.02 KMW 2.75 Nanos 2.36 ECOPROBM 3.06 SangSangIn 2.54 Celltrion Healthcare 2.66 Nepes 1.80 Nexon GT 2.64 Studio Dragon 2.38 Genomictree 2.40 JYP Entertainment 1.68 Hyundai IT 1.97 Sam Chun Dang Pharm. 2.38 Wi-Sol 2.36 Classys 1.48 Source: KSDA, FnGuide

KOSPI Top 10 by Market Cap (Wbn) KOSDAQ Top 10 by Market Cap (Wbn) Close (W) Chg (W) Mkt Cap Close (W) Chg (W) Mkt Cap Samsung Electronics 43,500 350 259,686 Celltrion Healthcare 59,000 0 8,485 Hynix 68,900 -1,400 50,159 CJ ENM 191,200 -2,700 4,193 Samsung Electronics (P) 35,000 200 28,801 SillaJen 57,000 1,700 4,017 Hyundai Motor 127,000 0 27,136 ViroMed 214,500 300 3,423 Celltrion 184,500 3,500 23,677 Posco Chemtech 50,700 0 3,092 LG Chem 332,000 2,500 23,437 HLB 73,300 900 2,876 Shinhan Financial Group 46,050 450 21,837 Medy-tox 445,500 -17,000 2,591 SK Telecom 253,000 -5,000 20,429 PearlAbyss 195,400 5,400 2,544 POSCO 233,500 0 20,358 Studio Dragon 74,300 -5,800 2,084 Samsung Biologics 304,000 10,000 20,114 Celltrion 51,200 900 1,745 Source: Korea Exchange