Morning Meeting Daily

Head of Research Seok Yun, CFA seok_yun@.com February 2, 2012

MARKET INDICATORS (KRX index, %) Feb 1 1-mo chg 3-mo chg Today’s comments Chemicals 4,894 12.0 3.5 Iron & Metal Products 6,442 12.0 6.7  Daelim Industrial (BUY): Expecting improvement in 2012 (KS Kang) Distribution 518 5.5 (1.6) Food & Beverage 3,086 (0.6) 3.9 Transport Equipment 2,696 4.4 (5.4) Transport & Storage 2,586 11.8 1.7 Electrical & Electronic Equip 9,006 6.0 10.6 Banks 246 4.1 (8.5) Securities 2,095 23.4 13.5 Communication 240 (5.6) (9.0) Electricity & Gas 888 7.6 10.9 Rates (%) Feb 1 1-mo ago 3-mo ago 3-month CD 3.58 3.58 3.59 3-year corporate bond 4.23 4.21 4.32 Call rate 3.25 3.27 3.25 KRW/USD 1,126 1,153 1,121 JPY/USD 76 78 78 Korea CDS spread (bps) 191 191 103

FUND FLOW (KOSPI) (KRWb) Feb 1 Jan 31 Jan 30 Foreign Buying 1,651 2,351 1,636 Selling 1,236 2,210 1,712 Net 416 140 (76) Domestic Buying 1,315 1,063 1,176 Selling 1,593 1,103 1,376 Net (277) (40) (200) Retail Buying 3,842 3,116 3,257 Selling 4,039 3,148 3,086 Net (198) (32) 172

FUND FLOW (KOSDAQ) (KRWb) Net buying Feb 1 Jan 31 Jan 30 Foreign (2) 7 (17) Domestic 11 10 6 Retail 3 (4) 16

We welcome feedback on our services. To make comments, suggestions, or complaints, ADRs/GDRs please contact us at [email protected]. Last 1-day chg Prem/ (USD) (%) disc (%)

KB Financial Group 38.2 0.7 1.9 MARKET DATA

Samsung Electronics 486.1 (1.3) 1.4 (Index, %) Feb 1 1-week chg 1-mo chg 3-mo chg 12-mo chg SK Telecom 14.0 0.1 1.1 KOSPI 1,959 0.4 7.3 2.6 (5.4) Posco 92.2 0.50.8 KOSPI 200 257 (0.0) 8.0 2.9 (6.0) KOSDAQ 519 1.5 3.8 5.5 (1.0) MAJOR PRODUCT PRICES (USD) Feb 1 1-mo ago 3-mo ago TRADING DATA ECONOMIC FORECASTS DRAM spot (KRWt) KOSPI KOSDAQ 20102011E 2012E DDR3 1Gb 1333MHz 0.64 0.67 0.80 Trading value 7.2 2.5 GDP growth (% y-y) 6.3 3.8 4.2 DDR3 2Gb 1333MHz 0.86 1.11 1.18 Market cap 1,116.5 110.9 Unemployment rate (%) 3.7 3.5 3.4 TFT-LCD (17" SXGA) 58 58* 58 Customer deposits* 20.1 n/a CPI growth (% y-y) 2.9 4.2 3.4

TFT-LCD (32" WXGA) 147 147* 147 Long arbitrage balance 2.3 n/a KRW/USD rate (year-end) 1,135 1,000 950 Dubai crude (USD/bbl) 105.32 108.61 114.89 Trading volume (mil shares) 501 637 3-year KTB yield (%) 3.4 3.4 3.9 Ethylene (USD/tonne) 1,121 1,201 1,381 Note: * As of Jan 31 HDPE (USD/tonne) 1,300 1,329 1,370 Details of Samsung Securities' and analysts' equity holdings in the companies covered here are shown at the end of each report. HRC—China spot (USD/tonne) 538 490 481 All our research is available on a variety of electronic platforms, including Bloomberg, Thomson Reuters. Ship price—VLCC (USDm) 97 98 102 Contact your Samsung sales representative for . Note: * LCD data updated twice a month February 2, 2012 Morning Meeting Daily

Daelim Industrial (000210 KS) Company Expecting improvement in 2012 Update WHAT’S THE STORY?

Event: 4Q11 operating results and upward revisions to 2012 guidance. Impact: Even after a recent share price rally, Daelim Industrial offers the largest valuation merits in the construction sector in light of upward revisions to its gross margin and sales forecast. Action: Daelim is our top pick and we maintain a BUY rating on the stock.

THE QUICK VIEW 2012 guidance revised up: Daelim Industrial yesterday raised its 2012 sales and operating profit targets 5.6% and 43.1%, respectively, to KRW9.4t and KRW807.9b—the sales target 31% higher than 2011 sales. The company expects total sales to surge, believing overseas sales will KS Kang balloon to KRW3.5t (from KRW1.8t in 2011) thanks to a project in the Philippines, which it Analyst started before signing a contract. Daelim hiked its operating profit estimate following an upward [email protected] revision to its 2012 gross margin estimate (from 10.4% to 13%), in turn based on rises in its gross 822 2020 7776 margin assumptions for its plant and architecture divisions—from 11.1% and 6.5%, respectively, to 15% and 10.2%. We find it encouraging that Daelim is raising its guidance when many Sungyup Oh constructors are suffering from falling gross margins overseas. Research Associate [email protected] Aggressive regional and divisional diversification: Daelim is targeting KRW7.8t in 822 2020 7827 overseas orders (or 57% of its 2012 new order target of KRW13.7t)—staggering given that its averaged less than KRW3t in annual overseas orders over 2008-2010. We believe the firm can hit its 2012 target, as it is successfully diversifying its business into new regions and new types of plant—having previously focused on the Middle East and petrochemical plants. Daelim won  AT A GLANCE power-plant orders from the Middle East last year, and looks set to win power plant orders from Vietnam, the Philippines, and Jamaica this year. The firm’s pursuit of a petrochemical-complex package deal also seems a valid strategy, as the constructor own a chemical production line, which combined with overseas orders, could greatly boost top- and bottom-line growth. Operating fundamentals intact despite poor 4Q results: Daelim’s consolidated sales Target price KRW164,000(44.5%) grew 41.8% y-y in 4Q, but operating profit plunged 52.6% y-y to KRW53.2b, due to KRW65.6b in one-off asset impairment losses from subsidiaries Korea Development Corporation and Samho Current price KRW113,500 International, resulting in a quarterly net loss. On a parent basis, however, Daelim posted an Bloomberg code 000210 KS adjusted operating profit of KRW107.6b and an operating margin of 5%. It company also posted a Market cap KRW4.0t/USD3.6b solid annualized overseas gross margin of 16.2%—topping guidance by 3.1%pts—despite its Shares (float) 34,800,000 (76.0%) overseas COGS ratio rising 89.7% q-q in 4Q. 52-week high/low KRW142,000/KRW70,500 Recommending Daelim as sector top pick: We reiterate our BUY rating on Daelim, with a Average daily trading value KRW25.99b/ target price of KRW164,000 (based on a 2012 P/E of 11.7x applied to a 12-month forward EPS (60-day) USD23.07m estimate of KRW13,853). Even following a recent share price rally, Daelim still offers the largest One-year performance 1M 6M 12M valuation merits in the construction sector in light of upward revisions to its gross margin and Daelim Industrial (%) +26.4 -14.0 -8.8 sales forecasts. We expect valuation discounts placed on the company to dissipate, as: 1) its Vs Kospi (%pts) +19.1 -4.2 -3.4 overseas orders rebounded to near industry averages in 2011 after remaining low (at around  KEY CHANGES KRW2t) in the past; 2) its overseas division, having previously focused on the Middle East and petrochemical plants, has started to take overseas orders in Asia and for power plants; 3) its total (KRW) New Old Diff unsold housings and PF loan guarantees have dropped below the sector averages to 2,024 units Recommendation BUY BUY and KRW1.1t, respectively; and 4) Daelim’s EPS should grow at a 25% CAGR through end-2014, Target price 164,000 164,000 +0% despite the firm adopting a conservative approach to how it recognizes COGS. 2011E EPS 8,465 12,791 -33.8%

2012E EPS 14,037 13,918 0.9%  SUMMARY FINANCIAL DATA 2013E EPS 15,988 15,314 4.4% 2010 2011E 2012E 2013E Revenue (KRWb) 7,690.9 7,989 10,002 11,374.0 Net profit (adj) (KRWb) 351.5 379 556 635.5  SAMSUNG vs THE STREET EPS (adj) (KRW) 8,600 8,465 14,037 15,988 No of I/B/E/S estimates 35 EPS (adj) growth (%) 5.4 (1.6) 65.8 13.9 EBITDA margin (%) 7.3 7.6 8.3 8.0 Target price vs I/B/E/S mean +18% ROE (%) 8.6 8.6 11.4 11.6 Estimates up/down (4 weeks) 0/0 P/E (adj) (x) 13.2 13.4 8.1 7.1 1-year fwd EPS vs I/B/E/S mean +13% P/B (x) 1.1 1.0 0.9 0.8 Estimates up/down (4 weeks) 0/1 EV/EBITDA (x) 8.5 7.8 5.0 3.8 Dividend yield (%) 0.1 0.1 0.1 0.1 I/B/E/S recommendation Buy Source: Company data, Samsung Securities estimates

 All our research is available on a variety of electronic platforms, Head of Research including Bloomberg, First Call Research Direct, I/B/E/S Trapeze, Multex, and Investext. Yun Seok, CFA Contact your Samsung sales representative for access. [email protected] 2 February 2, 2012 Morning Meeting Daily

Valuations for major KSE-listed companies

Code Stock Close Target Rec P/B (x) P/E (x) ROE (%) Mkt cap (KRW) (KRW) 2011E 2012E 2011E 2012E 2011E 2012E (USDm) A005930 1,079,000 1,250,000 BUY 1.9 1.7 13.8 11.4 14.3 15.2 154,563 A005380 Hyundai Motor 218,500 274,000 BUY★★★ 1.8 1.5 8.0 7.4 21.9 19.3 46,458 A005490 Posco 412,000 520,000 BUY★★★ 1.1 1.0 8.7 8.1 11.0 10.8 31,916 A012330 283,000 380,000 BUY★★★ 2.1 1.7 9.2 7.9 24.4 22.9 24,480 A000270 Motors 66,900 85,000 BUY★★★ 2.3 1.7 8.0 6.7 29.6 26.6 24,019 A051910 LG Chem 388,000 420,000 BUY 3.0 2.5 13.1 11.5 25.4 23.4 23,680 A009540 314,000 390,000 BUY 1.5 1.2 7.6 8.2 20.8 16.0 21,203 A015760 Kepco 27,900 38,000 BUY 0.3 0.3 (12.6) 27.7 (2.8) 1.2 15,914 A032830 84,000 140,000 BUY★★★ 1.1 1.1 19.9 14.6 5.6 7.6 14,927 A105560 KB Financial Group 42,150 49,000 HOLD 0.7 0.6 6.8 7.7 11.0 8.7 14,469 A000660 Hynix Semiconductor 27,200 24,000 HOLD 2.1 1.6 (1,140.4) 198.9 3.4 1.4 14,311 A096770 SK Innovation 172,000 220,000 BUY 1.2 1.1 7.5 8.1 25.2 12.7 14,184 A066570 LG Electronics 84,300 67,000 HOLD 1.2 1.1 455.0 19.8 (0.3) 6.0 12,660 A010950 S-Oil 120,500 142,000 BUY 2.6 2.3 11.4 9.3 24.7 25.6 12,265 A003550 LG Corporation 71,200 81,400 BUY 1.7 1.7 27.1 24.6 6.5 6.9 10,988 A011170 Honam Petrochemical 368,500 400,000 BUY 2.1 1.8 11.2 10.2 21.8 19.9 10,431 A017670 SK Telecom 140,500 169,000 HOLD 1.3 1.1 7.1 6.8 13.1 11.8 10,080 A000830 Samsung C&T 71,500 101,000 BUY 1.4 1.3 42.9 20.5 4.6 6.3 10,014 A034220 LG Display 30,150 33,000 BUY★★★ 1.1 1.1 (15.7) 35.3 (6.7) 2.7 9,585 A023530 Lotte Shopping 371,000 558,000 BUY 0.8 0.7 9.5 8.5 8.0 8.3 9,574 A033780 KT&G 77,700 91,000 BUY 2.3 2.1 12.8 11.7 17.3 17.5 9,478 A000810 Samsung Fire & Marine 218,500 280,000 BUY 1.6 1.4 13.7 11.9 12.4 12.4 9,408 A035420 NHN 210,000 300,000 BUY 7.0 5.8 22.8 18.3 30.1 32.1 8,980 A004020 110,000 180,000 BUY★★★ 1.0 0.9 12.1 8.5 9.0 10.8 8,338 A028050 225,000 272,000 BUY 6.4 4.6 12.4 10.4 42.9 38.7 7,996 A030200 KT 33,300 45,000 BUY 0.8 0.7 7.1 6.8 11.9 10.3 7,725 A000720 Hyundai E&C 75,000 85,000 BUY 2.1 1.8 14.5 12.2 16.6 15.8 7,424 A010140 35,650 37,000 BUY 1.7 1.5 10.3 11.7 19.9 14.3 7,316 A139480 E-Mart 273,000 350,000 BUY 1.3 1.1 8.8 7.6 9.5 10.5 6,762 A034020 Doosan Heavy Industries & 69,700 90,000 BUY 2.1 1.8 16.0 10.9 12.4 16.0 6,555 Construction A010130 Korea Zinc 383,500 420,000 BUY 2.3 1.9 11.7 12.3 21.2 17.0 6,430 A086280 187,500 241,000 BUY 5.4 4.2 21.6 17.3 26.8 27.2 6,247 A000240 45,500 50,000 BUY 2.5 2.1 18.9 11.7 17.3 21.9 6,153 A003600 SK Holdings 144,000 231,000 BUY 0.8 0.7 5.6 6.0 14.8 12.3 6,029 A006400 Samsung SDI 145,000 170,000 BUY 1.1 1.0 16.5 13.3 6.8 8.0 5,940 A088350 Korea Life 7,550 7,000 HOLD 1.0 0.9 12.8 12.2 8.0 7.9 5,826 A010060 OCI 272,000 338,000 BUY★★★ 1.9 1.7 7.1 13.7 33.3 13.1 5,764 A036570 NCsoft 296,000 390,000 BUY 7.4 6.2 52.6 34.4 13.7 18.7 5,747 A034730 SK C&C 128,000 186,000 BUY 4.0 3.0 14.9 11.7 3.0 28.8 5,686 A090430 Amorepacific 998,000 1,350,000 BUY 3.8 3.3 22.1 19.0 18.5 18.3 5,443 Note: As of Feb 1 Source: Samsung Securities estimates

 All our research is available on a variety of electronic platforms, Head of Research including Bloomberg, First Call Research Direct, I/B/E/S Trapeze, Multex, and Investext. Seok Yun, CFA Contact your Samsung sales representative for access. [email protected] 3 February 2, 2012 Morning Meeting Daily

Valuations for major KOSDAQ-listed companies

Code Stock Close Target Rec P/B (x) P/E (x) ROE (%) Mkt cap (KRW) (KRW) 2011E 2012E 2011E 2012E 2011E 2012E (USDm) A035720 Daum Communications 129,200 176,000 BUY 4.1 3.4 17.1 14.6 29.0 23.4 1,544 A035760 CJ O Shopping 273,000 360,000 BUY 3.9 3.1 17.8 14.6 24.9 24.4 1,505 A130960 CJ E&M 33,350 42,000 HOLD 3.0 2.9 22.4 21.0 6.4 4.8 1,124 A033630 SK Broadband 3,360 4,400 HOLD 1.1 1.0 1,910.5 38.0 0.1 2.4 884 A095660 Neowiz Games 41,050 50,000 HOLD 3.7 2.7 11.2 9.7 24.3 24.6 799 A041510 SM Entertainment 53,500 33,000 BUY 9.2 6.4 58.0 22.4 17.0 34.0 788 A034230 Paradise 9,320 10,500 BUY 1.6 1.4 20.3 12.5 6.4 11.7 753 A028150 GS Home Shopping 106,300 148,000 BUY 1.1 1.0 11.1 7.5 36.7 14.1 620 A077360 Duksan Hi-Metal 23,700 36,000 BUY★★★ 7.3 4.8 23.1 13.8 28.9 34.1 619 A112040 WeMade Entertainment 75,900 96,000 BUY 3.1 2.6 28.0 13.9 7.5 14.2 566 A036830 Soulbrain 39,700 49,000 BUY 2.1 1.5 11.5 8.7 20.6 20.0 518 A051370 Interflex 38,950 31,000 BUY 2.2 1.9 18.9 9.5 13.9 21.5 484 Note: As of Feb 1 Source: Samsung Securities estimates

 All our research is available on a variety of electronic platforms, Head of Research including Bloomberg, First Call Research Direct, I/B/E/S Trapeze, Multex, and Investext. Seok Yun, CFA Contact your Samsung sales representative for access. [email protected] 4 February 2, 2012 Morning Meeting Daily

DR pricing FX rate: 1,122 Code Name Local Type Market Dr/shr Close Performance Domestic Premium/ Code 1-day chg 1-mo chg 3-mo chg price Discount (USD) (%) (%) (%) (KRW) (%) GMKT GMARKET Z12023 ADR NASDAQ 1.00 13.26 (0.75) 2.74 (0.79) 161,000 (87.52) GRVY GRAVITY CO., LTD. Z38871 ADR NASDAQ 4.00 1.79 7.19 27.86 54.31 14,000 (42.46) KB KB Financial Group A105560 ADR NYSE 1.00 37.90 0.26 21.12 (2.94) 42,600 0.09 KEP Kepco (NYSE) A015760 ADR NYSE 2.00 12.33 1.90 11.89 11.79 27,900 (0.56) LPL LG Display A034220 ADR NYSE 2.00 12.89 (1.07) 21.49 28.13 29,450 (1.52) PKX Posco (NYSE) A005490 ADR NYSE 4.00 91.76 (0.57) 12.22 6.80 414,500 (0.38) SHG.N A055550 ADR NYSE 0.50 79.16 (0.80) 16.34 (0.55) 44,750 (0.50) (NYSE) SKM SK Telecom (NYSE) A017670 ADR NYSE 9.00 14.01 0.65 3.39 (5.27) 142,500 (0.46) WF Woori Financial Holdings A053000 ADR NYSE 0.33 29.75 0.51 22.58 2.94 11,100 (0.50) 4266q.L DSME A042660 GDR Luxembourg 0.50 49.62 6.07 17.92 (1.27) 27,850 0.22 0538xq.L Hyundai Motor A005380 GDR Luxembourg 2.00 98.45 2.98 6.76 (3.53) 221,000 0.23 0538q.L Hyundai Motor (1P) A005385 GDR London 2.00 28.80 1.30 10.73 (6.86) 65,200 (0.61) 0066yq.L Hynix Semiconductor A000660 GDR London 1.00 23.92 2.93 25.89 (9.12) 26,850 0.22 IBK A024110 GDR Luxembourg 1.00 11.27 1.44 4.16 (15.58) 12,650 0.23 INID Hyundai Steel A004020 GDR Luxembourg 1.00 96.66 1.58 16.65 4.89 108,500 0.22 KIA Kia Motors A000270 GDR Luxembourg 1.00 60.14 2.16 4.14 (7.48) 67,500 0.23 KKCC KCC A002380 GDR Luxembourg 5.00 53.99 1.83 9.20 10.18 303,000 0.23 3378q.L KT&G A033780 GDR Luxembourg 2.00 35.01 3.15 (0.65) 12.07 78,600 0.22 LOTS Lotte Shopping A023530 GDR London 20.00 16.76 1.27 17.37 (3.68) 383,500 (1.67) 0640q.L Samsung SDI A006400 GDR Luxembourg 4.00 31.07 (0.06) 7.51 1.64 139,500 0.23 0593q.L Samsung Electronics (1P) A005935 GDR London 2.00 294.42 0.42 1.56 4.96 660,000 0.37 0593xq.L Samsung Electronics A005930 GDR London 2.00 493.93 0.17 7.93 14.50 1,107,000 0.39 STXP STX Pan Ocean A028670 GDR Singapore 2.00 7.82 1.96 16.02 (5.10) 7,170 95.06 Note: As of Jan 31 Source: Samsung Securities estimates

 All our research is available on a variety of electronic platforms, Head of Research including Bloomberg, First Call Research Direct, I/B/E/S Trapeze, Multex, and Investext. Seok Yun, CFA Contact your Samsung sales representative for access. [email protected] 5 February 2, 2012 Morning Meeting Daily

 SAMSUNG SECURITIES’ AND ANALYSTS’ EQUITY HOLDINGS AND MARKET ACTIVITIES Company Name Equity No of Acquisition Primary market Remark holdings shares date activities Samsung C&T Group Affiliation Samsung Electro-Mechanics Group Affiliation Samsung Electronics Group Affiliation Samsung Engineering Group Affiliation Samsung Fire & Marine Group Affiliation Samsung Life Insurance Group Affiliation Samsung Heavy Industries Group Affiliation,

financial advisor in a M&A Samsung SDI Group Affiliation Doosan Heavy Industries & Construction Issuer and LP of ELW Hynix Semiconductor Issuer and LP of ELW Hyundai E&C Issuer and LP of ELW Hyundai Heavy Industries Issuer and LP of ELW Hyundai Mobis Issuer and LP of ELW Hyundai Motor Issuer and LP of ELW Hyundai Steel Issuer and LP of ELW KB Financial Group Issuer and LP of ELW Kepco Issuer and LP of ELW Kia Motors Issuer and LP of ELW KT Issuer and LP of ELW LG Chem Issuer and LP of ELW LG Corporation Issuer and LP of ELW LG Display Issuer and LP of ELW LG Electronics Issuer and LP of ELW Posco Issuer and LP of ELW SK Holdings Issuer and LP of ELW SK Innovation Issuer and LP of ELW SK Telecom Issuer and LP of ELW

 All our research is available on a variety of electronic platforms, Head of Research including Bloomberg, First Call Research Direct, I/B/E/S Trapeze, Multex, and Investext. Seok Yun, CFA Contact your Samsung sales representative for access. [email protected] 6 February 2, 2012 Morning Meeting Daily

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 All our research is available on a variety of electronic platforms, Head of Research including Bloomberg, First Call Research Direct, I/B/E/S Trapeze, Multex, and Investext. Seok Yun, CFA Contact your Samsung sales representative for access. [email protected] 7