Morning Focus

October 24, 2018

Korea Morning Focus

Company News & Analysis Major Indices Close Chg Chg (%) KT (030200/Buy/TP: W38,000) Raise TP KOSPI 2,106.10 -55.61 -2.57 Watch for enhanced asset efficiency KOSPI 200 272.54 -6.86 -2.46 KOSDAQ 719.00 -25.15 -3.38 POSCO Daewoo (047050/Buy/TP: W24,000) Lower TP Gas field recovery: A matter of when Turnover ('000 shares, Wbn) Volume Value GS E&C (006360/Buy/TP: W58,000) KOSPI 363,224 5,856 KOSPI 200 83,332 4,462 Holding steady KOSDAQ 479,472 3,095

Market Cap (Wbn) Sector News & Analysis Value Entertainment (Overweight) KOSPI 1,410,672 An ideal market environment KOSDAQ 240,262

KOSPI Turnover (Wbn) Buy Sell Net Foreign 1,329 1,748 -419 Institutional 1,246 1,489 -243 Retail 3,269 2,628 641

KOSDAQ Turnover (Wbn) Buy Sell Net Foreign 285 401 -116 Institutional 239 228 11 Retail 2,577 2,475 102

Program Buy / Sell (Wbn) Buy Sell Net KOSPI 1,181 1,566 -385 KOSDAQ 185 236 -51

Advances & Declines Advances Declines Unchanged KOSPI 67 809 22 KOSDAQ 93 1,120 41

KOSPI Top 5 Most Active Stocks by Value (Wbn) Price (W) Chg (W) Value Celltrion 246,500 -22,000 788 Samsung Electronics 43,050 -500 406 KODEX KOSDAQ150 13,800 -1,005 395 LEVERAGE KODEX LEVERAGE 12,185 -610 287 Digital Power 6,200 1,000 262 Communication

KOSDAQ Top 5 Most Active Stocks by Value (Wbn) Price (W) Chg (W) Value SillaJen 81,500 -6,500 240 ECOPRO 44,650 -1,050 113 Celltrion Healthcare 74,400 -5,800 97 Posco Chemtech 67,900 -6,300 86 HLB 99,000 -5,400 78 Mirae Asset Daewoo Research Note: As of October 23, 2018 This document is a summary of a report prepared by Mirae Asset Daewoo Co., Ltd. (“Mirae Asset Daewoo”) and published on our website. Please review the compliance notices contained in the original report. Information and opinions contained herein have been compiled in good faith from sources deemed to be reliable. However, the information has not been independently verified. Mirae Asset Daewoo makes no guarantee, representation or warranty, express or implied, as to the fairness, accuracy or completeness of the information and opinions contained in this document. Mirae Asset Daewoo accepts no responsibility or liability whatsoever for any loss arising from the use of this document or its contents or otherwise arising in connection therewith. Information and opinions contained herein are subject to change without notice. This document is for informational purposes only. It is not and should not be construed as an offer or solicitation of an offer to purchase or sell any securities or other financial instruments. This document may not be reproduced, further distributed or published in whole or in part for any purpose.

KT (030200 KS) Watch for enhanced asset efficiency

Telecom Service 3Q18 preview: OP of W349.8bn, slightly below the consensus Earnings Preview For 3Q18, we forecast KT to post consolidated revenue of W5.87tr and operating profit October 23, 2018 of W349.8bn. Our operating profit estimate is modestly below the consensus (W388bn), mainly due to our expectation of higher marketing expenses. We estimate gross subscriber additions (new, device upgrades, and mobile number porting combined) increased more than 100,000 QoQ to around 1.7mn in 3Q18. We believe there were also some marketing expenses in the fixed-line space, aimed at retaining initial GiGA (Maintain) Buy internet subscribers whose contracts were ending. We believe a W27bn one-time contribution to the broadcast development fund was another major factor behind the ▲ Target Price (12M, W) 38,000 QoQ operating profit decline.

Share Price (10/23/18, W) 29,800 Fixed-line business continuing steady growth Despite its already high market share, we believe KT saw net subscriber additions in Expected Return 28% the internet space in 3Q18, thanks to its early advance and leadership in the GiGA internet market. Such net subscriber growth is particularly impressive, considering the

contract expiry of initial GiGA internet subscribers. We believe the IPTV segment is also OP (18F, Wbn) 1,399 continuing net subscriber additions, which have exceeded 100,000 for four consecutive Consensus OP (18F, Wbn) 1,384 quarters. We estimate more than 100,000 were net added again in 3Q18. The growth in IPTV subscribers is even more encouraging, as it drives VOD sales and supports the EPS Growth (18F, %) 56.0 growth of home shopping and T-commerce. Market EPS Growth (18F, %) 13.3 P/E (18F, x) 10.5 Poised to benefit from 5G rollout Market P/E (18F, x) 8.5 We believe KT is well-positioned to lead the 5G market by building upon its experience KOSPI 2,106.10 in operating 5G services during the PyeongChang Winter Olympics. We think fixed-line Market Cap (Wbn) 7,781 networks will become an important source of competitiveness in the 5G era, as the Shares Outstanding (mn) 261 amount of data is expected to significantly increase. While efforts are underway to Free Float (%) 82.4 allow operators to share essential equipment in exchange for a usage charge, we still Foreign Ownership (%) 49.0 think directly owning related equipment and technologies gives KT a competitive edge. Beta (12M) 0.43 The usage charges can also serve as a source of additional revenue growth. 52-Week Low 26,700 Maintain Buy and raise TP to W38,000 52-Week High 31,300 While 3Q18 operating profit looks likely to be weaker than previously anticipated due (%) 1M 6M 12M to higher-than-expected marketing spend and one-off expenses, our 4Q18 and 2019 Absolute 2.1 9.8 0.3 estimates remain unchanged. We maintain our Buy call on KT and raise our target Relative 13.3 28.9 18.6 price to W38,000, as we changed our valuation base year to 2019. KT’s current market value corresponds to a P/E of 10x and an EV/EBITDA of less than 3x. The company also 110 KT KOSPI looks severely undervalued when considering its real estate assets, which have a total 100 market value of W8tr. We believe some of this should be reflected into the stock’s

90 valuation, given the ease with which real estate assets can be securitized nowadays, following recent moves to revitalize publicly traded REITs. 80

70 10.17 2.18 6.18 10.18

Mirae Asset Daewoo Co., Ltd.

[Telecom Service/IoT] FY (Dec.) 12/15 12/16 12/17 12/18F 12/19F 12/20F Revenue (Wbn) 22,281 22,744 23,387 23,378 23,668 23,997 Hakmoo Lee +822-3774-1785 OP (Wbn) 1,293 1,440 1,375 1,399 1,424 1,523 [email protected] OP margin (%) 5.8 6.3 5.9 6.0 6.0 6.3 NP (Wbn) 553 711 477 744 774 868 EPS (W) 2,118 2,723 1,826 2,847 2,965 3,325 ROE (%) 5.2 6.4 4.1 6.0 5.9 6.3 P/E (x) 13.3 10.8 16.6 10.5 10.0 9.0 P/B (x) 0.6 0.6 0.6 0.6 0.5 0.5 Dividend yield (%) 1.8 2.7 3.3 3.4 3.4 3.4 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.

October 23, 2018 KT

Earnings and forecasts

Table 1. 3Q18 preview (Wbn, %, %p) 3Q18F Growth 3Q17 2Q18 Mirae Asset Daewoo Consensus YoY QoQ Revenue 5,827 5,807 5,870 5,846 0.7 1.1 Operating profit 377 399 350 388 -7.3 -12.4 OP margin (%) 6.5 6.9 6.0 6.6 -0.5 -0.9 Pretax profit 317 391 289 287 -8.7 -26.1 Net profit 180 251 189 196 5.0 -24.8 Notes: All figures are based on consolidated K-IFRS; net profit is attributable to controlling interests Source: Company data, WISEfn, Mirae Asset Daewoo Research estimates Table 2. Quarterly earnings and forecasts (Wbn, %) 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18F 4Q18F Operating revenue 5,515 5,678 5,530 6,021 5,612 5,842 5,827 6,107 5,710 5,807 5,870 5,991 Wireless 1,851 1,880 1,884 1,803 1,794 1,781 1,816 1,813 1,741 1,764 1,765 1,779 Fixed-line 1,279 1,286 1,255 1,245 1,254 1,226 1,218 1,203 1,199 1,181 1,168 1,152 Media/content 442 471 495 514 520 561 573 585 554 595 609 623 Finance 823 858 866 881 847 915 874 893 833 867 891 911 Other 505 546 540 584 534 586 567 565 537 597 573 570 Merchandise sales 616 636 490 995 663 773 779 1,048 847 803 863 956 Operating expenses 5,119 5,251 5,128 5,795 5,195 5,395 5,449 5,972 5,313 5,408 5,520 5,738 * Marketing expenses 625 738 687 702 640 627 678 703 616 552 593 583 Operating profit 396 427 402 226 417 447 377 134 397 399 350 253 OP margin 7.2 7.5 7.3 3.8 7.4 7.7 6.5 2.2 7.0 6.9 6.0 4.2 Net profit 223 255 235 93 224 258 203 -122 224 195 211 119 Net margin 4.0 4.5 4.2 1.5 4.0 4.4 3.5 -2.0 3.9 3.4 3.6 2.0 YoY Operating revenue 1.4 4.7 0.8 1.0 1.8 2.9 5.4 1.4 1.8 -0.6 0.7 -1.9 Wireless 1.6 2.8 2.5 -3.8 -3.1 -5.3 -3.6 0.6 -2.9 -1.0 -2.8 -1.9 Fixed-line -2.0 -0.8 -2.3 -1.8 -1.9 -4.7 -3.0 -3.4 -4.4 -3.6 -4.1 -4.2 Media/content 15.2 15.1 15.3 16.6 17.5 19.2 15.8 13.8 6.6 6.0 6.4 6.5 Finance -0.8 7.1 3.7 -10.4 3.0 6.7 0.9 1.3 -1.7 -5.3 2.0 2.0 Other 22.9 12.8 7.3 14.2 5.8 7.2 5.0 -3.2 0.6 1.9 1.0 1.0 Merchandise sales -10.2 5.2 -17.8 12.9 7.7 21.5 59.1 5.4 27.7 3.9 10.8 -8.8 Operating expenses 0.1 3.7 -0.4 1.8 1.5 2.8 6.3 3.1 2.3 0.2 1.3 -3.9 * Marketing expenses -12.4 4.7 -7.8 -5.0 2.4 -15.0 -1.3 0.2 -3.7 -12.0 -12.5 -17.2 Operating profit 23.3 18.0 19.1 -15.3 5.4 4.8 -6.0 -40.7 -4.8 -10.8 -7.3 88.7 Net profit -23.3 -19.3 92.1 TTB 3.6 1.8 -10.8 -41.5 -6.4 -10.2 -8.0 92.4 Notes: All figures are based on consolidated K-IFRS; net profit is attributable to controlling and non-controlling interests Source: Company data, Mirae Asset Daewoo Research estimates Table 3. Earnings forecast revisions (Wbn, W, %)

Previous Revised % chg. Notes 2018F 2019F 2018F 2019F 2018F 2019F Revenue 23,371 23,644 23,378 23,668 0.0 0.1 Operating profit 1,430 1,414 1,399 1,424 -2.2 0.7 - Reflected increase in marketing expenses Pretax profit 1,227 1,212 1,197 1,222 -2.4 0.8 Net profit 766 754 744 774 -2.9 2.7 EPS (W) 2,934 2,888 2,847 2,965 -3.0 2.7 OP margin (%) 6.1 6.0 6.0 6.0 Net margin (%) 3.2 3.2 3.2 3.3 Note: All figures are based on consolidated K-IFRS; net profit is attributable to controlling interests Source: Mirae Asset Daewoo Research estimates

Mirae Asset Daewoo Research

POSCO Daewoo (047050 KS) Gas field recovery: A matter of when

Energy 3Q18 review: In-line OP of W69.3bn Results Comment For 3Q18, POSCO Daewoo announced revenue of W6.53tr (+19.0% YoY). Despite muted October 24, 2018 sales volume at the Myanmar gas field, top line expanded thanks to strong revenue in the steel (+18.3% YoY) and commodity/chemicals (+35.4% YoY) segments.

Operating profit came in at W69.3bn, slightly above our expectation (W63.9bn) and the consensus (W66.4bn). This was mainly attributable to the Myanmar gas field, which (Maintain) Buy generated an operating profit (W17.7bn before cost allocation vs. our expectation of a W1bn loss), driven by higher pricing amid rising oil prices. Overseas subsidiaries’ Target Price (12M, W) ▼ 24,000 operating profit slightly fell to W10.5bn, but the impact was offset by the trading business (W46.2bn), which was boosted by strong domestic sales/exports of non- Share Price (10/23/18, W) 18,400 ferrous metals and robust chemical profits. On the non-operating side, the company saw net financial loss widen to W27.4bn (vs. Expected Return 30% loss of W15.4bn in 3Q17), due to an increase in trade finance stemming from revenue growth. The company also suffered an equity-method loss of W9bn (vs. profit of W2bn in 3Q17) from the Myanmar onshore gas pipeline project as a result of weaker sales OP (18F, Wbn) 450 volume. All in all, net profit contracted 29.3% YoY to W13.6bn. Consensus OP (18F, Wbn) 467 Temporary pipelines look unlikely, but long-term fundamentals remain EPS Growth (18F, %) 21.7 intact Market EPS Growth (18F, %) 13.3 P/E (18F, x) 10.5 1) Gas pipeline repair: While the pipeline repair is due to be officially completed on th Market P/E (18F, x) 8.5 November 15 , there were expectations that temporary pipelines would be installed KOSPI 2,106.10 before then, driving sales volume growth from October. However, recent output (140- 150MMCFD) suggests this remains a distant prospect. As such, we are revising down Market Cap (Wbn) 2,270 our 4Q18 operating profit forecast from W129bn to W94.4bn. Shares Outstanding (mn) 123 Free Float (%) 36.6 2) China’s gas demand: China has been easing up on its environmental policies, Foreign Ownership (%) 10.4 sparking worries over gas demand. However, we believe China is likely to maintain its Beta (12M) 1.22 environmental stance over the long term, as air quality remains a significant challenge. Even if China’s demand cools down, POSCO Daewoo’s take-or-pay agreement with 52-Week Low 17,600 China means the company’s gas production will likely remain at 500MMCFD. 52-Week High 25,650

(%) 1M 6M 12M Cut TP to W24,000, but maintain Buy Absolute -8.0 -21.9 -5.6 In light of the slower-than-expected gas pipeline restoration in China, we lower our Relative 2.2 -8.2 11.6 2018 operating profit forecast by 6.1%, as well as our 2018 DPS forecast to W550 (from W600). Given the timing of the pipeline repair, we continue to see robust earnings for 150 POSCO Daewoo KOSPI 2019 and maintain our 2019 DPS forecast of W700. 130 Reflecting our downward earnings revisions, we cut our target price on POSCO 110 Daewoo to W24,000 (from W27,000), but maintain our Buy rating. The stock’s current

90 price implies a 12-month forward P/E of 7.8x and a 2018F dividend yield of 3.0%. Absent any headwinds to gas field fundamentals (such as a sharp decline in oil prices), 70 10.17 2.18 6.18 10.18 we believe current share prices offer a good long-term entry point.

Mirae Asset Daewoo Co., Ltd.

[ Transport/Energy] FY (Dec.) 12/15 12/16 12/17 12/18F 12/19F 12/20F Revenue (Wbn) 17,527 16,492 22,572 24,858 24,952 26,626 Jay JH Ryu +822-3774-1738 OP (Wbn) 369 318 401 450 539 624 [email protected] OP margin (%) 2.1 1.9 1.8 1.8 2.2 2.3

NP (Wbn) 129 111 176 217 320 394 EPS (W) 1,132 977 1,444 1,757 2,592 3,194 ROE (%) 5.3 4.5 6.6 7.5 10.4 11.7

P/E (x) 14.4 27.6 12.6 10.5 7.1 5.8 P/B (x) 0.8 1.2 0.8 0.8 0.7 0.6 Dividend yield (%) 3.1 1.9 2.8 3.0 3.8 4.3 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

October 24, 2018 POSCO Daewoo

Table 1. 3Q18 review (Wbn, %, %p) 3Q18P Growth

3Q17 2Q18 Mirae Asset Preliminary Consensus YoY QoQ Daewoo Revenue 5,490 6,176 6,532 5,122 5,729 19.0 5.8 Operating profit 98 136 69 64 66 -29.3 -49.0 OP margin (%) 1.8 2.2 1.1 1.2 1.2 -0.7 -1.1 Pretax profit 36 54 22 34 44 -39.8 -59.3 Net profit 19 47 14 30 32 -29.3 -70.8 Notes: Based on consolidated K-IFRS; net profit is attributable to controlling interests Source: Company data, WISEfn, Mirae Asset Daewoo Research estimates

Table 2. Earnings forecast revisions (Wbn, W, %) Previous Revised % chg. Notes 18F 19F 18F 19F 18F 19F Revenue 23,369 24,806 24,858 24,952 6.4 0.6 Reflected 3Q18 results; Cut gas field revenue estimate Operating 479 543 450 539 -6.1 -0.7 Delays in gas field restoration profit Pretax profit 340 453 272 448 -19.9 -1.1

Net profit 276 324 217 320 -21.5 -1.1

EPS (W) 2,239 2,622 1,757 2,592 -21.5 -1.1 Notes: Based on consolidated K-IFRS; net profit is attributable to controlling interests Source: Company data, Mirae Asset Daewoo Research estimates

Table 3. Quarterly and annual earnings (Wbn, %) 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18P 4Q18F 2017 2018F 2019F Revenue 5,224 6,121 5,490 5,737 6,171 6,176 6,532 5,979 22,572 24,858 24,952 Operating profit 110 97 98 96 150 136 69 94 401 450 539 - Myanmar 76 59 42 96 94 78 18 39 272 229 337 - Trading & other 35 38 56 0 56 58 52 55 129 221 202 Pretax profit 130 29 36 53 127 54 22 74 248 272 448 Net profit (controlling) 92 21 19 44 91 47 14 64 176 217 320 Total OP margin (%) 2.1 1.6 1.8 1.7 2.4 2.2 1.1 1.6 1.8 1.8 2.2 Myanmar OP margin (%) 51.5 39.7 28.5 53.0 57.2 57.5 41.6 50.0 43.7 54.4 52.3 Pretax margin (%) 2.5 0.5 0.7 0.9 2.1 0.9 0.3 1.2 1.1 1.5 1.8 Net margin (%) 1.8 0.3 0.4 0.6 1.4 0.6 0.2 0.8 0.8 1.3 1.3 Notes: Based on consolidated K-IFRS; net profit is attributable to controlling interests Source: Company data, Mirae Asset Daewoo Research estimates

Mirae Asset Daewoo Research October 24, 2018 POSCO Daewoo

Table 4. Quarterly one-off items Quarter One-off costs (Wbn) Details 3Q15 117.5 - Steel division booked W26.1bn in provisions against potential losses - Aluminum price declines led to inventory valuation losses of W15.6bn - W28.1bn in F/X losses from gas field-related foreign currency-denominated debts - Trading division posted W47.7bn in provisions for prepaid expenses - W71.8bn in impairment losses on intangible assets (e.g., offshore Block 8 in 4Q15 179.9 Peru, tight oil/gas in Canada) - W108.1bn in impairment losses related to the Ambatovy nickel mine 2Q16 5.2 - W5.2bn in financial guarantee costs for the Ambatovy mine 3Q16 62.6 - W33.8bn in impairment losses on its holdings in Daewoo Paper - Trading unit booked W19.6bn in provisions against inventory valuation losses - W22.5bn in provisions against potential losses on the City Bus project, grain 4Q16 105.1 trading, and Iran-based accounts receivable, as well as inventory valuation losses - W13.4bn in losses on the sale of Daewoo Paper and Tianjin Daewoo Paper - W31.3bn in contingency losses on exercising put option of Canada oil project - W27.7bn in losses on meat trading, steel trading in Iran, and trading in Kazakhstan - W10.2bn in one-off losses on its Vietnamese mines, Canadian uranium mine, and Australian mine 2Q17 34.1 - W10.9bn losses on Canada tight oil - W4.2bn in provisions related to Block 8 in Peru - W2.6bn in impairment losses on the Wetar copper mine - W16.4bn in account receivables write-off 3Q17 17.7 - W5bn in impairment losses on its automotive parts-related AR - W7.4bn in losses related to the Ambatovy nickel mine, W2.5bn in impairment losses on other intangible assets - W2.8bn in losses on stake sale for its Beijing subsidiary - W41.8bn in receivables in Iran, W3.9bn in losses related to steel, W10.1bn in 4Q17 145.4 losses related to machinery/infrastructure - W56.5bn in losses in East Sea, W11.8bn in losses related to other blocks, W18.8bn in losses in Canada - W40.8bn in other profit, including a tax refund 2Q18 46.9 - Impairment loss on the Canada Baptiste project -Total 774.4 Source: Company materials, Mirae Asset Daewoo Research

Mirae Asset Daewoo Research

GS E&C (006360 KS) Holding steady

Construction 3Q18 review: Solid results Results Comment For 3Q18, GS E&C reported revenue of W3.2tr (+13.4% YoY), operating profit of October 24, 2018 W233.9bn (+229.6% YoY), and pretax profit of W156.3bn. Both revenue and operating profit beat market expectations. One of the biggest highlights of the 3Q18 report was the building (housing) division’s cost ratio improvement. In 3Q18, the division’s gross profit margin expanded to 14.8% (from 12% in 2Q18), driven by profit growth amid an increase in completed apartments. In 3Q18, the company completed 11,000 (Maintain) Buy apartments (vs. 6,300 units in 1H18).

Target Price (12M, W) 58,000 Favorable conditions to continue in 2019 Despite the delivery of stable earnings in 1H18, investor worries have remained over Share Price (10/23/18, W) 48,150 housing margins and the risk of additional overseas losses. However, we believe the latest 3Q18 results will dispel such uncertainties. Notably, the plant division maintained Expected Return 20% operating profitability, yielding a gross profit margin of 5.9% due to margin improvements in Middle East projects.

OP (18F, Wbn) 1,066 With housing revenue and margins steadying and uncertainties surrounding the plant Consensus OP (18F, Wbn) 1,019 business subsiding, we are bullish on the company’s 2019 earnings outlook. We expect 2019 apartment move-ins to be around 22,500 units, in line with the 2018 level, which EPS Growth (18F, %) - should support stable margins in housing. And despite the 1Q19 completion of the Market EPS Growth (18F, %) 13.3 UAE Ruwais Refinery West (RRW) project (contract value of W1.4tr), we believe projects P/E (18F, x) 5.8 for LG Chem (investments of W2.8tr) and GS Caltex (investments of W2tr) will help Market P/E (18F, x) 8.5 maintain revenue and reduce uncertainties in the plant division. KOSPI 2,106.10 Preparing for growth Market Cap (Wbn) 3,798 GS E&C has moved past its struggles and is now preparing for a new period of growth. Shares Outstanding (mn) 79 As the domestic housing market contracts, the company is beefing up its efforts to win Free Float (%) 70.9 profitable overseas contracts (W1tr in 4Q18), and the Vietnam development project is Foreign Ownership (%) 23.7 also gathering traction (first presales for Nha Be new city have begun; US$150mn). We Beta (12M) 0.83 believe the company’s main challenge is now growth rather than recovery. As we look 52-Week Low 25,850 for stable profits in 2019, we maintain our Buy rating and target price of W58,000. 52-Week High 54,700

(%) 1M 6M 12M Absolute -6.7 29.3 77.7 Relative 3.6 51.8 110.1

220 GS E&C KOSPI

170

120

70 10.17 2.18 6.18 10.18

Mirae Asset Daewoo Co., Ltd.

[ Construction/Construction Materials] FY (Dec.) 12/15 12/16 12/17 12/18F 12/19F 12/20F Revenue (Wbn) 10,573 11,036 11,679 13,155 12,401 12,193 Kwangsoo Lee +822-3774-1457 OP (Wbn) 122 143 319 1,066 952 865 [email protected] OP margin (%) 1.2 1.3 2.7 8.1 7.7 7.1

NP (Wbn) 26 -26 -168 625 735 711 EPS (W) 367 -363 -2,359 8,286 9,315 9,016 ROE (%) 0.8 -0.8 -5.2 18.6 18.9 15.5

P/E (x) 53.8 - - 5.8 5.2 5.3 P/B (x) 0.4 0.6 0.6 1.1 0.9 0.8 Dividend yield (%) 0.0 0.0 1.1 0.6 0.6 0.6 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

October 24, 2018 GS E&C

Figure 1. GS E&C’s annual apartment move-in volumes

(units) 25,000

20,000

15,000

10,000

5,000

0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Source: Real Estate 114, Mirae Asset Daewoo Research

Table 1. 3Q18 review (Wbn, %, %p) 3Q17 4Q17 1Q18 2Q18 3Q18P YoY QoQ Previous Diff. Cons. Diff.

Revenue 2,820 3,164 3,127 3,582 3,197 13.4 (10.7) 3,083 3.7 3,062 4.4 Operating profit 71 103 390 219 234 229.6 6.8 230 1.7 212 10.3 Pretax profit (4) (97) 311 190 156 TTB (17.9) 222 (29.7) 160 (2.6) Net profit (controlling interests) (10) (99) 207 144 115 TTB (20.1) 159 (27.7) 120 (4.0) OP margin 2.5 3.3 12.5 6.1 7.3 4.8 1.2 7.5 (0.1) 6.9 0.4 Pretax margin (0.1) (3.1) 9.9 5.3 4.9 5.0 (0.4) 7.2 (2.3) 5.2 (0.3) Net margin (0.4) (3.1) 6.6 4.0 3.6 4.0 (0.4) 5.2 (1.6) 3.9 (0.3) Source: Company data, Mirae Asset Daewoo Research estimates

Table 2. Earnings forecast revisions (Wbn, %, %p) Revised Previous Change Consensus Diff.

2018F 2019F 2018F 2019F 2018F 2019F 2018F 2019F 2018F 2019F Revenue 13,155 12,401 12,174 11,337 8.1 9.4 12,861 12,256 2.3 1 Operating profit 1,066 952 1,062 895 0.4 6.4 1,019 880 4.6 8.2 Pretax profit 882 1,024 900 967 (2.0) 5.9 813 725 8.5 41.3 Net profit (controlling interests) 616 749 630 750 (2.2) (0.1) 591 539 4 38.9 OP margin 8.1 7.7 8.7 7.9 (0.6) (0.2) 7.9 7.2 0.2 0.5 Pretax margin 6.7 8.3 7.4 8.5 (0.7) (0.3) 6.3 5.9 0.4 2.3 Net margin 4.7 6.0 5.2 6.6 (0.5) (0.6) 4.6 4.4 0.1 1.6 Source: WiseFn, Mirae Asset Daewoo Research estimates

Mirae Asset Daewoo Research

Entertainment An ideal market environment

Overweight (Maintain) Raising sector fair multiple to 40x, in light of favorable variables We are raising our fair multiple for the entertainment sector to 40x (from 30x Industry Report previously). We believe the two biggest variables of entertainment firms’ valuations are: 1) earnings fundamentals in existing markets, and 2) prospects of growth in new October 24, 2018 markets (in terms of business area and region). In our view, entertainment firms currently face an ideal environment. Earnings from Korea and Japan are either stable or growing, while the rise of global music/video platforms points to the potential for significant market expansion. Mirae Asset Daewoo Co., Ltd. Over the past two decades, entertainment firms have experienced astonishing growth (more than 20 times based on SM Entertainment’s market cap and 33 times based on [Media] SM Entertainment’s revenue). However, such growth was a function of the success of a few individual companies, rather than favorable market conditions. As the 1990s music Jeong-yeob Park industry boom came to an end, traditional income sources declined for an extended +822-3774-1652 period, prompting companies to diversify their business out of necessity. Such efforts [email protected] paid off, leading to a rise in enterprise value.

Today, market conditions are looking favorable for both variables for the first time since the 1990s. The potential for profit growth and market expansion is also coming into focus for the first time in a decade. We thus believe the sector warrants a higher

valuation multiple.

Growth prospects: Building a global fan base Online video and music platforms are probably the most popular media formats in today’s global market. YouTube has 1.9bn monthly active users, and Korean teenagers spend three times as much time on YouTube as on Kakao Talk. Global music platforms like Apple Music and Spotify are also expanding their geographical footprint. Secular changes in media consumption (from traditional TV and albums to digital media) are becoming increasingly evident in the rapid growth of these global platforms. We believe idol groups, given their combination of singing and dancing, are one of the most ideal content formats for the three aforementioned global media platforms. Because an increase in content distribution driven by the geographical expansion of platforms does not carry any marginal costs, we think entertainment firms with idol group content have the potential to benefit exponentially over the long term. The amount YouTube allocated to domestic entertainment firms (net revenue) in 1H18 was equivalent to 72% of the 2017 figure, highlighting the rapid pace of their growth on the platform. We continue to see opportunities for Korean music content in terms of both price (ad rates) and quantity (views and subscribership). In particular, we expect visible progress in developed markets, driven by a growing fan base not only for BTS, but also for groups like BLACKPINK and NCT, and an increase in global collaborations.

Earnings fundamentals: Korean artists gaining increasing ground in Japan Earnings fundamentals also remain solid in the core markets of Korea and Japan. The concert market in Japan is continuing positive growth, with Korean artists grabbing an increasing share of the market. It is also taking less time for Korean artists to land dome tours, which is helping to improve profit margins. In Korea, album sales are booming, similar to the heydays of the 1990s. And recent revisions to music royalty payment rules suggest a rise in pricing and more favorable revenue sharing ratio are likely.

Positive on all three major stocks; Our top pick is YG Entertainment We present YG Entertainment (122870 KQ) as our top pick and raise our target price to W60,000 (from W43,000). We believe the company stands to benefit the most from the expansion of global platforms. The earnings void expected in 2019 is holding back share prices, but we view this as an issue that will soon be resolved. We believe YG Entertainment has the strongest upside potential, as the company’s market value lags far behind its competitors’, despite our expectation of robust profits in 2020. We also see the company expanding its reach into developed markets. We lift our target price on SM Entertainment (041510 KQ) to W65,000 (from W54,000). Earnings remain solid, and efforts to advance into new markets are getting underway. In particular, we think the acts NCT China and NCT 127 (US) deserve close attention. We initiate our coverage on JYP Entertainment (035900 KQ) with a Buy rating and target price of W46,500. The company has an ample artist pipeline beyond TWICE and is also free from contract renewal risks through 2022. Looking ahead, we expect frequent comebacks and margin improvements to continue.

October 24, 2018 Entertainment

YG Entertainment (122870 KQ) Earnings void offers buying opportunity

Entertainment Raise TP; Earnings void through 2019 offers buying opportunity We reaffirm our Buy rating on YG Entertainment and raise our target price to W60,000. We based our target price on our average net profit estimate for 2019 (iKON and (Maintain) Buy BLACKPINK) and 2020 (Big Bang’s comeback) to capture the faster-than-expected growth of newer artists and the timing of Big Bang’s military discharge, which is now only one year away. We used a target P/E of 30x, applying a 25% discount to the sector fair Target Price (12M, W) ▲ 60,000 multiple of 40x, in order to reflect the risk of no new artist debuts in 2019 and uncertainties and time value until Big Bang’s return. Share Price (10/23/18, W) 42,700 In our view, the inevitable earnings weakness through 2019 temporarily distorts the company’s valuation, thus offering a buying opportunity. Our 2020 net profit attributable Expected Return 41% to controlling interest estimates for the three listed entertainment companies vary by less than 10% (W46.7bn for YG Entertainment, W47.1bn for SM Entertainment, and

OP (18F, Wbn) 14 W42.3bn for JYP), but their market values as of yesterday’s close diverge by more than 50% (W0.76tr for YG Entertainment, W1.2tr for SM Entertainment, and W1.35tr for JYP). Consensus OP (18F, Wbn) 11 We recommend aggressively overweighting YG Entertainment, with the year 2020 in EPS Growth (18F, %) -37.4 mind. The company’s artist lineup will become fully active in a year, and we believe the Market EPS Growth (18F, %) 13.3 company has strong potential on global platforms. Newer artists like BLACKPINK, iKON, P/E (18F, x) 73.3 and WINNER, which are rising fast in Korea and Japan, should meaningfully contribute to profits over the long term. We also think the company is favorably positioned to Market P/E (18F, x) 8.5 capitalize on the growing presence of global platforms. In our view, there is plenty of KOSDAQ 719.00 upside momentum over the next two years, compared with what current share prices imply. Market Cap (Wbn) 777 Shares Outstanding (mn) 20 A favorite among global music/video platforms Free Float (%) 62.7 YG Entertainment has the strongest traffic growth on YouTube among the three major Foreign Ownership (%) 13.4 listed entertainment names. In 2016-17, the company’s YouTube views jumped 104% YoY (vs. +25% for SM Entertainment and 114% for JYP), and the total number from January Beta (12M) 0.56 through September 2018 was 1.6 times that of last year (vs. 1.1x for SM Entertainment 52-Week Low 27,000 and 1.0x for JYP), mainly thanks to the success of BLACKPINK’s new album (released in 52-Week High 46,700 June). Also worth noting is the group iKON, whose global fan base has been rapidly growing, with YouTube views reaching 70% of BTS’s in 3Q18. (%) 1M 6M 12M Absolute -3.0 40.2 50.4 BLACKPINK-iKON-WINNER: More frequent comebacks and more various artist compositions Relative 11.7 71.4 41.3 YG Entertainment’s resources and fan base are shifting toward the company’s next-

180 YG Entertainment KOSDAQ generation artists. After repeated delays from 2016 to early 2018, artist comebacks 160 look likely to become more frequent. BLACKPINK, whose fan base has ballooned following the success of its latest album, recently unveiled a new track with Dua Lipa on 140 October 19th and signed a deal with Universal Music Group on October 23rd. We expect 120 more collaborations with global artists to follow. Starting with Jennie, who will unveil a new solo song during the group’s concert in November, all of the group’s members will 100 embark on solo projects. This should allow the company to create more diverse acts (as 80 solos or in units, like it did with Big Bang) and thus more hit songs and longer concert 10.17 2.18 6.18 10.18 setlists within a short period of time, which should help boost concert demand. We also look for more activities from iKON and WINNER, which are currently on global tours.

[Media] FY (Dec.) 12/15 12/16 12/17 12/18F 12/19F 12/20F Revenue (Wbn) 193 322 350 283 305 395 Jeong-yeob Park +822-3774-1652 OP (Wbn) 22 32 24 14 30 56 [email protected] OP margin (%) 11.4 9.9 6.9 4.9 9.8 14.2

메일@ miraeasset.com NP (Wbn) 28 19 18 11 25 47 EPS (W) 1,700 1,094 931 583 1,280 2,391 ROE (%) 14.7 7.7 5.7 3.3 6.9 11.9 P/E (x) 26.2 25.9 31.0 73.3 33.4 17.9 P/B (x) 3.6 1.8 1.6 2.4 2.2 2.0 Dividend yield (%) 0.8 0.7 0.5 0.4 0.4 0.4 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 2 October 24, 2018 Entertainment

3Q18 preview: Key point to watch is global platform revenue For 3Q18, we forecast consolidated revenue and operating profit to come in at W65.8bn (-12.6% YoY) and W4bn (+170.9% YoY), respectively. While YoY revenue contraction likely continued, we believe profits improved on generally lower COGS. We expect quarterly revenue from YouTube of around W2bn. While 3Q18 had neither Big Bang nor overseas concerts, the company had a string of positive news, such as Seungri’s solo album release, iKON’s comeback, and BLACKPINK’s success. We believe the company saw robust domestic album sales (300,000 copies in 2Q18 and 190,000 copies in 3Q18) and maintained a high share in digital music sales. We think domestic digital music sales, a relatively stable source of income, and global platform sales (YouTube ads, Apple Music/Spotify licensing, etc.), a fast-growing source of income, both contributed a higher share of profits. Meanwhile, we expect the content production business to post a small profit (vs. losses of W10.1bn during the previous three quarters) due to the airing of one of its shows on Netflix. YG Plus likely continued profitability, following a turnaround in the previous quarter.

Mirae Asset Daewoo Research 3 October 24, 2018 Entertainment

SM Entertainment (041510 KQ) Time to upgrade expectations

Entertainment

Raise TP to W65,000 (Maintain) Buy We maintain our Buy rating on SM Entertainment and raise our target price to W65,000. Our target price corresponds to a P/E of 36x our 2019F EPS, a 10% discount to the sector Target Price (12M, W) ▲ 65,000 fair multiple of 40x, reflecting the risk of no new artist debuts in 2019 and the low multiples of the advertising business (which contributes 12% to consolidated operating Share Price (10/23/18, W) 51,700 profit and 5% to net profit attributable to controlling interests). Now is the time to upgrade expectations on the firm’s earnings and growth potential. We Expected Return 26% look for a strong 4Q18, in light of: 1) comebacks by major artists; 2) the debut of a new group in China; 3) brisk revenue contribution from the existing lineup of artists across OP (18F, Wbn) 48 advertising and music services on various platforms (YouTube, Apple Music, Spotify); and Consensus OP (18F, Wbn) 48 4) the global fan base starting to develop around idol group NCT 127. We believe SM EPS Growth (18F, %) 580.2 Entertainment has many drivers to support earnings and long-term growth potential. Market EPS Growth (18F, %) 13.3 Solid earnings and new market penetration P/E (18F, x) 38.2 We forecast SM Entertainment to continue solid earnings in 4Q18, with operating profit Market P/E (18F, x) 8.5 of W17bn. Major artists (EXO, NCT 127, Taeyeon, Red Velvet, and Super Junior) are set to KOSDAQ 719.00 make a comeback, and album sales are expected to top 1m copies in 4Q18 for the first Market Cap (Wbn) 1,187 time in four quarters. At SM C&C, earnings should improve thanks to a focus on profit- Shares Outstanding (mn) 23 oriented entertainment programs (rather than dramas) and the arrival of peak-demand Free Float (%) 76.2 season for the ad business. The ad business has had a relatively high exposure to fixed costs over the past year and thus is likely to maximize operating leverage effects during Foreign Ownership (%) 20.0 the peak season. Beta (12M) 0.63 52-Week Low 30,400 The debut of NCT China, an all-Chinese idol group, is drawing near. NCT China has a 52-Week High 52,600 management contract with SM Beijing, 100% owned by Dream Maker, which is SM Entertainment’s consolidated subsidiary (68.5% stake). The group is expected to debut in (%) 1M 6M 12M November and be active in 2019, raising expectations on the resumption of the Chinese Absolute 8.0 40.1 65.4 business after a long hiatus. Relative 24.4 71.3 55.5 NCT 127 is expanding its fan base in the US. Although the fan base is still small, NCT 127 180 SM Entertainment KOSDAQ enjoys better recognition in the US in terms of YouTube views compared with other idol 160 groups. The group’s regional fan map—which looks similar to that of BTS—is considered 140 ideal for revenue sources like YouTube, music streaming services, and concerts. NCT 127 is advancing into the US by appearing on major TV programs (FOX and ABC channels) 120 from October, attending the 2018 American Music Awards, and releasing a digital album 100 in English. 80 10.17 2.18 6.18 10.18 Securing fan bases in developed markets drives up CPM and streaming demand. If NCT 127 successfully establishes a global fan base, sales to global content platforms may expand at a faster-than-expected rate. Fan base growth in China in addition to the US and Europe deserves attention.

[Media] FY (Dec.) 12/15 12/16 12/17 12/18F 12/19F 12/20F Revenue (Wbn) 322 350 365 550 630 701 Jeong-yeob Park OP (Wbn) 38 21 11 48 63 75 +822-3774-1652 OP margin (%) 11.8 6.0 3.0 8.7 10.0 10.7 [email protected] NP (Wbn) 22 4 4 30 39 47

메일@ miraeasset.com EPS (W) 1,048 169 199 1,353 1,709 2,049 ROE (%) 8.3 1.2 1.3 7.9 8.9 9.7 P/E (x) 41.0 153.0 174.4 38.2 30.2 25.2 P/B (x) 3.1 1.7 2.2 2.8 2.6 2.3 Dividend yield (%) 0.0 0.0 0.0 0.0 0.0 0.0 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 4 October 24, 2018 Entertainment

3Q18 preview: Sales to global content platforms deserve attention For 3Q18, we expect SM Entertainment to report consolidated revenue of W141.5bn (+63.3% YoY) and operating profit of W10.4bn (+125.1% YoY). We lowered our estimate for core business earnings, but only over a timing issue given the change in the release date of EXO’s regular album (to November 2nd from September/October). In addition, EXO’s repackage album is expected to be released at end-December, as scheduled. Meanwhile, revenue from YouTube is likely to reach W1.4bn.

Subsidiaries related to core businesses likely performed well. Around 460,000 albums were sold in the quarter—a sound performance, given that most of the releases were mini albums. The firm’s share of the music service market likely remained intact, supported by Red Velvet, Girl’s Generation, and NCT Dream. In the concert segment (SM Town, TVXQ), we estimate the firm recognized 110,000 attendees in Korea and 360,000 attendees in Japan.

We expect SM C&C to turn a profit of W900mn in 3Q18 and begin to expand earnings in earnest from 4Q18. Despite two successful dramas, the drama production business was unprofitable in 1H18. We believe SM C&C should focus on entertainment programs in 2H18 and take a long-term approach to the drama production business, due to an unfavorable pricing structure compared with other studios. The ad business is likely to generate operating leverage effects in 4Q18, the peak-demand season, following a slight margin recovery in 3Q18.

Mirae Asset Daewoo Research 5 October 24, 2018 Entertainment

JYP Entertainment (035900 KQ) Profit-savvy talent management agency

Entertainment Initiate coverage with Buy and TP of W46,500

We initiate our coverage on JYP Entertainment with a Buy rating and target price of (Initiate) Buy W46,500. Our target price is based on 2020F net profit (attributable to controlling interests) to reflect the firm’s growth potential. The existing lineup of artists is well on Target Price (12M, W) 46,500 track, and new artist debuts also have high visibility. We derived our target P/E of 38x by applying a time discount of 5% to the sector fair multiple (40x), in light of a stronger Share Price (10/23/18, W) 38,900 lineup of new artists for 2019-20 and rapid earnings growth.

Expected Return 20% Although the stock has been rallying since early 2017, the justification for our Buy rating is the ongoing re-rating across the entertainment sector driven by the growing influence

OP (18F, Wbn) 29 of global content service platforms. Core earnings and growth variables look positive, Consensus OP (18F, Wbn) 30 and the firm’s deep pool of young artists—its competitive strength—is likely to remain intact through 2022. EPS Growth (18F, %) 38.1 Market EPS Growth (18F, %) 13.3 Expectations on high-margin artist activities P/E (18F, x) 59.8 Market P/E (18F, x) 8.5 1) TWICE will go on a Japan dome tour in 2019, only four years after the group’s debut in KOSDAQ 719.00 Korea and less than two years after its debut in Japan. The experiences of other K-pop artists suggest that TWICE will further solidify its fan base after the dome tour. The Market Cap (Wbn) 1,342 group started to contribute to profits this year, and its contribution will likely gather pace Shares Outstanding (mn) 35 in 2019. TWICE’s Japanese arena tour, which wrapped up earlier this month, attracted Free Float (%) 76.2 more than 150,000 attendees, and the group is set to release a mini album in November. Foreign Ownership (%) 13.0 TWICE has sold 2.7m albums in Korea on a cumulative basis. Beta (12M) 0.46 52-Week Low 10,450 2) GOT7 is likely to expand its fan base and start contributing to profits in 2019. The 52-Week High 39,150 group completed a 17-city world tour during May and August 2018 and is scheduled to perform four arena concerts in Japan from end-2018. Backed by steady album sales (%) 1M 6M 12M (around 700,000 albums sold both in 2017 and 2018), scheduled concerts in Japan, and Absolute 6.3 76.8 225.5 rapidly increasing global YouTube views, GOT7—just like TWICE—is likely to become Relative 22.4 116.2 206.0 profitable only a few short years after its debut. 480 JYP Entertainment KOSDAQ 3) JYP Entertainment has an extensive lineup of new and soon-to-debut artists. The new 380 boy groups Stray Kids and Boy Story are cultivating fan bases across regions through 280 showcases and fan conventions, although it remains to be seen whether they will be a

180 success. For 2019, the new artist lineup includes a five-member girl group including Shin Rhujin, a popular participant in a talent competition (January), an all-Japanese girl group 80 10.17 2.18 6.18 10.18 targeting the Japanese market (2H19), and a Chinese boy group (Project C). We believe all three have a reasonable shot at success.

The firm’s active artists (who are not up for contract renewal until 2022) are likely to release frequent comeback albums under the current label structure and be fully active.

[Media] FY (Dec.) 12/15 12/16 12/17 12/18F 12/19F 12/20F Revenue (Wbn) 51 74 102 122 138 177 Jeong-yeob Park OP (Wbn) 4 14 19 29 39 56 +822-3774-1652 OP margin (%) 7.8 18.9 18.6 23.8 28.3 31.6 [email protected] NP (Wbn) 3 8 16 23 30 42 EPS (W) 94 246 471 650 861 1,227 ROE (%) 5.6 13.4 21.4 22.3 22.6 25.3 P/E (x) 48.9 20.0 29.2 59.8 45.2 31.7 P/B (x) 2.2 2.1 4.8 10.3 8.4 6.6 Dividend yield (%) 0.0 0.0 0.0 0.0 0.0 0.0 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 6 October 24, 2018 Entertainment

In addition, growing sales to global content service platforms, which incur almost no additional expenses, should drive continuous margin improvement.

3Q18 preview: Sales to global content platforms deserve attention

For 3Q18, we expect JYP Entertainment to post consolidated revenue of W32.6bn (+86.8% YoY) and operating profit of W8.6bn (+681% YoY).

In the music album business, we estimate 770,000 albums were sold in Korea, driven by TWICE and GOT7. Notably, TWICE’s album sales in Japan are estimated at 400,000 copies. In the concert segment, 15 concerts were likely recognized, including GOT7’s tour in North America and Europe and TWICE’s showcase in Japan (January) and concerts in Malaysia, Thailand, and Seoul (August-September). The recognition of the Japanese arena tours was partly pushed back to 4Q18.

We estimate revenue from YouTube—the most closely watched revenue source—at W1bn.

Mirae Asset Daewoo Research 7

Mirae Asset Daewoo Research Key Universe Valuations October 24, 2018

※All data as of close October 22, 2018, unless otherwise noted.

18F Earnings growth Mkt Cap Price P/E (x) P/B (x) ROE (%) Ticker Company Div Yield OP EPS (Wbn) (W) (%) 18F 19F 18F 19F 18F 19F 18F 19F 18F 19F 005930 Samsung Electronics 276,352 43,050 3.3 20.3 0.1 27.2 7.5 6.2 5.8 1.2 1.1 22.2 20.0 000660 SK Hynix 50,305 69,100 1.4 62.2 2.4 59.2 4.1 3.0 2.9 1.0 0.7 40.5 30.2 068270 Celltrion 30,910 246,500 - - - - 0.0 0.0 207940 Samsung Biologics 27,624 417,500 4.5 277.0 - 375.1 533.5 112.3 6.9 6.5 1.3 5.9 051910 LG Chem 23,225 329,000 1.8 -20.4 4.5 -13.4 6.9 15.3 14.3 1.5 1.4 10.1 10.1 017670 SK Telecom 22,851 283,000 3.5 -13.5 18.7 29.5 8.9 6.8 6.2 0.9 0.8 17.0 15.7 005490 POSCO 22,756 261,000 3.1 19.3 3.5 21.5 10.4 6.7 6.1 0.5 0.5 7.6 7.9 028260 Samsung C&T Corporation 21,340 112,500 1.8 26.8 7.7 96.0 2.2 17.2 16.8 0.8 0.8 5.4 5.2 105560 KB Financial Group 21,324 51,000 21.6 5.5 7.7 4.1 5.9 5.7 0.6 0.5 10.3 10.0 055550 Shinhan Financial Group 20,770 43,800 23.0 3.0 16.1 3.4 6.1 5.9 0.6 0.5 9.9 9.4 096770 SK Innovation 19,140 207,000 3.9 -8.0 -6.3 -3.8 -2.0 9.6 9.8 1.0 0.9 11.1 10.4 034730 SK Holdings 18,258 259,500 1.5 4.6 7.0 26.5 6.1 8.7 8.2 1.1 1.0 14.5 13.6 032830 Samsung Life 18,220 91,100 - - - - 0.0 0.0 015760 KEPCO 16,884 26,300 - - - - - 20.2 0.2 0.2 - 1.2 006400 Samsung SDI 16,469 239,500 0.4 498.4 44.8 20.4 40.4 21.3 15.2 1.4 1.3 6.8 8.9 018260 Samsung SDS 16,056 207,500 1.2 24.5 13.4 31.7 12.1 23.0 20.5 2.6 2.4 12.0 12.3 010950 S-Oil 14,073 125,000 3.7 10.1 29.0 -23.3 55.1 15.3 9.8 2.2 1.9 14.2 21.0 033780 KT&G 13,729 100,000 4.2 -15.7 21.0 -16.8 13.7 14.2 12.5 1.7 1.6 12.5 13.8 000810 Samsung F&M 13,170 278,000 - - - - 0.0 0.0 086790 Hana Financial Group 12,895 42,950 24.3 10.1 18.0 10.2 5.3 4.8 0.5 0.4 9.6 9.7 003550 LG Corp. 10,940 63,400 2.1 0.5 8.3 -23.0 10.4 6.0 5.5 0.6 0.6 10.9 10.8 091990 Celltrion Healthcare 10,455 74,400 45.8 63.6 39.9 27.0 42.4 33.4 5.4 4.8 13.5 15.1 066570 LG Electronics 10,408 63,600 1.1 29.4 15.2 -9.5 36.7 7.4 5.4 0.8 0.7 11.2 13.6 009150 Samsung Electro-Mechanics 9,598 128,500 0.6 258.4 27.8 332.2 26.8 14.3 11.3 2.0 1.7 15.4 16.8 011170 Lotte Chemical 8,775 256,000 4.1 -19.6 -0.8 -14.0 4.5 4.5 4.4 0.7 0.6 15.7 14.6 024110 Industrial Bank of Korea 8,036 14,350 22.7 8.5 19.0 8.3 5.3 4.9 0.4 0.4 8.8 8.9 032640 LG Uplus 7,815 17,900 3.1 0.5 13.8 -3.5 14.9 14.8 12.9 1.2 1.1 8.8 8.8 030200 KT 7,781 29,800 3.4 1.8 1.8 56.0 4.1 10.5 10.0 0.6 0.5 6.0 5.9 010130 Korea Zinc 7,359 390,000 2.6 -8.6 2.9 -1.2 9.5 11.8 10.8 1.1 1.1 10.1 10.3 004020 Hyundai Steel 6,232 46,700 1.6 1.1 2.5 8.3 7.0 8.0 7.5 0.4 0.3 4.6 4.7 034220 LG Display 6,172 17,250 2.9 ------0.5 0.5 - - 023530 Lotte Shopping 5,856 207,000 2.5 18.2 36.1 - - - 11.4 0.5 0.5 - 4.1 139480 Emart 5,812 208,500 0.8 -5.8 18.1 -28.5 7.9 13.2 12.2 0.7 0.7 5.3 5.6 000720 Hyundai E&C 5,713 51,300 1.0 1.0 13.9 159.8 9.8 10.9 9.9 0.9 0.8 8.0 8.4 005830 DB Insurance 5,076 71,700 - - - - 0.0 0.0 097950 CJ CheilJedang 5,051 335,500 0.9 7.9 9.9 134.6 -65.1 5.6 16.1 1.1 1.0 23.1 6.7 036460 KOGAS 4,948 53,600 1.9 25.0 10.6 - 8.1 7.1 6.5 0.6 0.5 8.6 8.6 128940 Hanmi Pharmaceutical 4,719 414,500 0.1 3.0 97.1 -7.8 114.0 84.7 39.6 6.1 5.3 7.6 14.6 078930 GS Holdings 4,632 49,850 3.6 -8.0 4.8 -2.6 5.3 4.9 4.7 0.6 0.5 11.8 11.3 271560 Orion 4,191 106,000 0.6 145.6 6.6 43.9 6.9 22.6 21.1 2.8 2.5 13.3 12.7 003670 POSCO Chemtech 4,011 67,900 0.5 -10.4 17.2 26.9 11.2 30.5 27.4 5.4 4.6 19.0 18.3 088350 Hanwha Life 4,000 4,605 - - - - 0.0 0.0 086280 Hyundai Glovis 3,994 106,500 2.8 -5.0 8.0 -39.9 40.2 9.8 7.0 1.0 0.9 10.0 13.1 006360 GS E&C 3,798 48,150 0.6 234.5 -10.7 - 12.4 5.8 5.2 1.1 0.9 18.6 18.9 029780 Samsung Card 3,783 32,650 -28.5 -22.3 -8.2 3.9 10.7 10.3 0.5 0.5 1.5 1.5 001450 Hyundai M&F 3,706 41,450 - - - - 0.0 0.0 000120 CJ Logistics 3,696 162,000 -2.8 27.1 185.8 46.0 41.1 28.1 1.2 1.2 3.6 5.0 028050 Samsung Engineering 3,479 17,750 211.4 69.6 - 50.4 35.1 23.3 3.2 2.8 9.3 12.7 012750 S1 3,420 90,000 3.0 1.3 5.5 0.2 5.7 23.8 22.5 2.4 2.3 11.6 11.6 005940 NH Investment & Securities 3,405 12,100 - - - - 0.0 0.0 Source: Mirae Asset Daewoo Research

Mirae Asset Daewoo Research Market Data October 24, 2018

※All data as of close October 23, 2018, unless otherwise noted.

Other Major Indices Economic Indicators Close Net Chg 1D (%) YTD (%) Close 1D ago 1M ago 1Y ago MSCI Korea* 456.29 2.63 0.58 -17.66 USD/KRW 1,130.90 1,134.30 1,119.90 1,131.90 KOSPI 2,106.10 -55.61 -2.57 -15.06 JPY100/KRW 1,002.35 1,008.67 995.73 994.33 KOSDAQ 719.00 -25.15 -3.38 -11.50 EUR/KRW 1,296.63 1,305.86 1,319.24 1,331.51 Dow Jones* 25,317.41 -126.93 -0.50 1.99 3Y Treasury 1.99 2.01 2.02 2.03 S&P 500* 2,755.88 -11.90 -0.43 2.23 3Y Corporate 2.43 2.45 2.46 2.58 NASDAQ* 7,468.63 19.60 0.26 6.59 DDR2 1Gb* 1.20 1.22 1.30 1.25 Philadelphia Semicon* 1,234.20 8.26 0.67 -4.15 NAND 16Gb* 2.81 2.81 2.82 2.93 FTSE 100* 7,042.80 -7.00 -0.10 -7.91 Oil (Dubai)* 78.78 77.88 77.35 55.13 Nikkei 225 22,010.78 -604.04 -2.67 -6.36 Gold* 1,221.20 1,225.30 1,196.60 1,277.40 Hang Seng* 26,153.15 591.75 2.32 -14.29 Customer deposits (Wbn)* 23,442 23,832 25,316 24,018 Taiwan (Weighted) 9,775.20 -199.08 -2.00 -8.73 Equity type BC (Wbn)(Oct. 19) 81,940 81,755 82,076 71,659 Note: * as of October 22, 2018 Source: KSDA, Wisefn, 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 Hynix 38.08 Celltrion 238.56 Celltrion 102.14 KODEX KOSDAQ150 LEVERAGE 73.03 Samsung Electronics (P) 13.36 Samsung Electronics 55.65 KODEX 200 Futures Inverse 2X 20.61 KODEX LEVERAGE 71.24 Honam Petrochemical 11.32 SAMSUNG BIOLOGICS 38.47 KODEX INVERSE 16.02 SEMCO 36.35 Hyundai Eng. & Cosnt. 10.20 SEMCO 36.17 KODEX KOSDAQ150 INVERSE 14.07 Samsung SDI 23.17 Hyundai Elevator 7.20 LG Display 24.25 POSCO 7.60 SAMSUNG BIOLOGICS 22.35 Hyundai Steel 6.11 POSCO 21.75 KODEX 200 5.90 Hyundai Heavy Industries 16.19 Amore Pacific 6.00 KODEX 200 13.05 TIGER 200 Futures Inverse 2X 5.65 Hotel Shilla 11.79 Hyundai Motor 5.22 KODEX KOSDAQ150 LEVERAGE 9.93 Korea Express 5.36 SAMSUNG C&T 11.49 Hyundai Heavy Industries 4.94 KEPCO 8.36 KEPCO 4.88 Samsung Electronics (P) 11.04 HDC-OP 4.19 SAMSUNG C&T 8.09 LG Household & Health Care 3.95 Hyundai Steel 10.95 Source: KSDA, Wisefn

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 ECOPRO 7.58 SillaJen 42.11 Paradise 6.73 Posco Chemtech 12.93 Studio Dragon 4.59 Posco Chemtech 9.10 CJ O Shopping 6.49 SKPI 7.20 SK Materials 3.37 CJ O Shopping 6.78 YG Entertainment 2.99 ECOPRO 5.21 NATURECELL 2.21 Medy-tox 6.41 Medy-tox 2.69 Jtuen Entertainment 3.32 PearlAbyss 2.18 HLB 5.12 ViroMed 2.38 Celltrion Healthcare 2.67 GS Home Shopping 1.86 Paradise 4.79 PearlAbyss 1.99 Fortis 2.64 Daea TI 1.61 Jtuen Entertainment 3.01 SillaJen 1.81 SK Materials 2.57 Gamevil 1.43 Fortis 2.75 Modetour Network 1.81 Studio Dragon 2.46 Celltrion Healthcare 1.24 SKPI 2.09 NCB Networks 1.60 Jenexine 1.99 GCMS 1.09 IDIS 2.04 Huons 1.52 Techno Semichem 1.37 Source: KSDA, Wisefn

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 43,050 -500 276,352 Celltrion Healthcare 74,400 -5,800 10,455 Hynix 69,100 -900 50,305 SillaJen 81,500 -6,500 5,690 Samsung Electronics (P) 34,900 -400 31,537 CJ O Shopping 244,500 -7,800 5,361 Celltrion 246,500 -22,000 30,910 Posco Chemtech 67,900 -6,300 4,011 SAMSUNG BIOLOGICS 417,500 -29,500 27,624 HLB 99,000 -5,400 3,866 Hyundai Motor 116,500 -1,500 24,892 NANOS 7,120 -180 3,495 LG Chem 329,000 -8,500 23,225 ViroMed 215,900 -8,600 3,445 SK Telecom 283,000 -3,000 22,851 Studio Dragon 108,400 -1,300 3,039 POSCO 261,000 -5,500 22,756 PearlAbyss 217,600 2,600 2,802 SAMSUNG C&T 112,500 -4,000 21,340 Kolon TissueGene(Reg.S) 44,050 -1,650 2,686 Source: Korea Exchange