[Korea] Cosmetics December 17, 2020

AmorePacific Trading Buy (090430 KS ) (Maintain)

Moving more nimbly TP: W230,000 ▲ Upside: 10.0%

Mirae Asset Daewoo Co., Ltd. Junghan Yoon [email protected]

Direction is set Focusing on and online channel s ó We expect AmorePacific’s China revenue exposure to exceed 50% for the first time in 2020. ó For online sales in China, management has set a 2021 growth target of 30% (vs. +20% YoY in 2020). ó The company will close 170 Innisfree stores in China next year (up from 141 closures in 2020). ó Both Sulwhasoo and enjoy strong brand recognition in China, making them suitable targets for online expansion strategies.

Responding more flexibly Going wherever demand exists ó During China’s Singles’ Day event, AmorePacific held eight live commerce sessions with internet celebrity Li Jiaqi (comparable to the marketing campaigns of leading brands). ó The company plans to conduct more than 100 live commerce sessions every month domestically and overseas. ó The company will also launch its Aestura brand online to target China’s growing “dermacosmetics” market (the brand is already available in Chinese clinics). ó The company is generating revenue from corporate-type daigou , having signed deals in October.

Valuation and recommendation Raise TP by 24% to W 230,000 and maintain Trading Buy ó AmorePacific is currently trading at 27x our 12-month forward operating profit estimate. ó The stock has traded at an 18.5% discount to global peers on average since 2019 (due to its relative weakness in the luxury category). ó Sulwhasoo’s growth in China has recovered to 20% YoY. China’s cosmetics market conditions in 2021 are likely to prove favorable to AmorePacific. ó We raise our target price on the stock to W230,000, applying an 8% discount to the multiple of global peers. ó With expectations fully priced in, we believe the company needs to show more than just a recovery; it needs to deliver growth. We maintain our Trading Buy rating.

Key data

Current price (12/17/20, W) 209,000 Market cap (Wbn) 12,218 140 AmorePacific KOSPI OP (20F, Wbn) 150 Shares outstanding (mn) 69 120 Consensus OP (20F, Wbn) 189 Free float (%) 49.8 100 EPS growth (20F, %) -77.1 Foreign ownership (%) 32.2

80 P/E (20F, x) 263.5 Beta (12M) 0.74

60 Market P/E (20F, x) 18.9 52-week low (W) 147,500 12.19 4.20 8.20 12.20 KOSPI 2,770.43 52-week high (W) 236,500

Share performance Earnings and valuation metrics (%) 1M 6M 12M (Dec.) 2017 2018 2019 2020F 2021F 2022F Absolute 13.0 29.4 7.7 Revenue (Wbn) 5,124 5,278 5,580 4,367 4,855 6,192 Relative 3.5 0.0 -14.6 OP (Wbn) 596 482 428 150 461 594

OP margin (%) 11.6 9.1 7.7 3.4 9.5 9.6 NP (Wbn) 394 332 239 55 315 403 EPS (W) 5,709 4,813 3,460 793 4,565 5,837 ROE (%) 9.8 7.7 5.4 1.2 6.8 8.2 P/E (x) 53.3 43.5 57.8 263.5 45.8 35.8 P/B (x) 5.1 3.3 3.0 3.2 3.0 2.8 Div. yield (%) 0.4 0.6 0.5 0.1 0.5 0.7 Notes: Under consolidated K-IFRS; NP is attributable to owners of the parent Source: Company data, Mirae Asset Daewoo Research estimat es Analysts who prepared this report are registered as research analysts in Korea but not in any other jurisdiction, including t he US. PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES AND DISCLAIMERS IN APPENDIX 1 AT THE END OF REPORT. December 17, 2020 AmorePacific

An enhanced selection and concentration strategy

We expect AmorePacific’s China revenue exposure to exceed 50% for the first time in 2020. The company’s board recently announced an organizational shakeup. As part of this, a regional headquarters was established in China, with Vice President Hwang Young-min (who had been in charge of managing overseas subsidiaries) serving as its head. The changes should lead to more coherent and consistent pricing policies and brand positioning strategies between China and Korea, as well as help the company concentrate on growth in China. We believe e-commerce will become a major channel for the company’s onshore China sales. In 3Q20, we estimate online accounted for 45% of China revenue, up from 25% at end-2018, suggesting the company is rapidly shifting to the online channel.

Figure 1. AmorePacific’s expected China exposure Figure 2. AmorePacific’s share of online sales in China

Offshore (L) Cross-border (L) Onshore (L) China revenue exposure (R) 60% 100% 60% 90% 54.7% 56.1% 50% 50% 45% 80% 52.6% 49.8% 70% 40% 44.4% 40% 60% 39.3% 40.3% 50% 30% 30% 40% 20% 20% 30% 20% 10% 10% 10% 0% 0% 0% 2016 2017 2018 2019 2020F 2021F 2022F 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20

Note: Assuming 95% of 2020 duty-free revenue is from China Source: Company data, Mirae Asset Daewoo Research Source : Company data, Mirae Asset Daewoo Research

During a strategy sharing event on Dec. 9, AmorePacific presented a 2021 online sales growth target of 30% for China—an ambitious figure considering the level in 2020 (+20% YoY). The online revenue contributions for market leaders L'Oréal and Estee Lauder in China are currently 56% and 52%, respectively. In 2021, we expect AmorePacific to become a leading cosmetics company in the online space. The company also revealed that it will close 170 directly operated Innisfree stores in China next year, after shuttering 141 stores in 2020. The number of Innisfree stores still remaining at the end of 2021 will likely be around 300. While the store closures mean that top-line growth is unlikely for the brand in China, profit margins per store should improve. Online sales (which have higher margins) should also increase. As such, we expect worries about margin contraction due to fixed costs to ease.

Figure 3. Contribution of online sales in China by brand (2020) Figure 4. No. of directly operated Innisfree stores in China

70% 700

60% 600

50% 500

40% 400

30% 300

20% 200

10% 100

0% 0 Proya L'Oreal Estee Lauder AmorePacific LG H&H 1Q18 4Q18 3Q19 2Q20 1Q21F 4Q21F 3Q22F

Source: Company data, Mirae Asset Daewoo Research Source: Company data, Mirae Asset Daewoo Research

Mirae Asset Daewoo Research 2 December 17, 2020 AmorePacific

In its recent organizational shakeup, AmorePacific expanded its online operations in China and tapped Calvin Wang, who has experience working for global cosmetics brands, as head of the China e-commerce division. Relative to its revenue size, AmorePacific enjoys strong brand recognition in China. In several surveys, six to seven out of every 10 respondents said they were aware of the brands Sulwhasoo and Laneige, indicating a level of brand recognition not too far behind that of top global names. Brand awareness is probably the most crucial factor in online channels, which allow access to a much wider range of consumers than offline channels.

Although it may be too early to tell, we think cross-border movements will remain restricted in 2021. As such, we expect demand to gradually shift away from the duty-free channel (which has acted as an unofficial distributor of global cosmetics in China) to online channels like Tmall and JD.com. AmorePacific plans to conduct more than 100 live commerce sessions every month domestically and overseas. The company is devoting its resources to major Chinese retail events, such as Singles’ Day, 618, and Women’s Day, and is currently spending 50-60% of its total marketing budget on the online channel. During its strategy sharing event, management revealed that it may increase that share further.

Figure 5. Brand recognition survey (% of respondents aware of the brand)

85%

80%

75%

70% 67% 66% 65%

60%

55%

50% Shiseido Lancome Estee Lauder Dior Chanel Sulwhasoo Laneige

Source: Press reports, Mirae Asset Daewoo Research

During this year’s Singles’ Day event, the company’s luxury brand Sulwhasoo recorded a 174% YoY increase in GMV. A key driver behind the strong growth was the move to change the brand’s core product from the Yoon Jo serum to the Jaumseng set, which is US$50 more expensive. Around 1.1mn Jaumseng sets were sold during the event, representing an increase of 200%. In November, Sulwhasoo’s GMV on the online site Tmall reached CNY840mn, up 107% YoY, representing the second-highest growth rate among top-tier brands (behind Shiseido).

Mirae Asset Daewoo Research 3 December 17, 2020 AmorePacific

Figure 6. November Tmall GMV data

(CNYmn) GMV (L) YoY (R) 3,000 140% 120% 2,500 107% 100% 80% 2,000 60% 1,500 40% 20% 1,000 0% -20% 500 -40% 0 -60% L'Oreal Estee Lancome Whoo Olay SK-II Winona Shiseido Sulwhasoo Chando Lauder

Source: Tmall, Mirae Asset Daewoo Research

We believe the company’s marketing tactics have proven effective. For this year’s Singles’ Day event, AmorePacific held marketing campaigns comparable to those of rivals, including eight live commerce sessions with Chinese internet celebrity Li Jiaqi. These live commerce sessions led to 455,000 sales with GMV totaling CNY410mn. In addition, we think the enlistment of mid/low-tier internet celebrities across different products and brands resulted in more cost- efficient marketing.

Table 1. Live streaming sessions with Li Jiaqi and transaction value (‘000 sales, CNY’000) Brand No. of live streaming sessions No. of sales Transaction value L'Oréal 17 2,407 925,000 Estee Lauder 13 712 491,550 SK-II 11 146 324,050 Sulwhasoo 8 455 411,970 Lancôme 6 3,561 472,260 Whoo 3 435 683,000 Source : Taobao, Mirae Asset Daewoo Research

We believe AmorePacific will strengthen its competitiveness in the dermacosmetics space, where it is perceived to have a relatively weak presence. China’s dermacosmetics market is estimated at around CNY13.6bn (as of 2019). Dermacosmetics make up just 5.5% of total cosmetics sales in the country, far below the levels in the US (14.7%) and Europe (43%), suggesting there is plenty of room for growth. Indeed, Chinese functional dermacosmetics brands (e.g., Bloomage’s Biohyalux, Jahwa United’s Dr. Yu, and Yunnan Botanee Bio- Technology’s Winona) saw sales more than double YoY during this year’s Singles’ Day festival. In particular, Winona brought in CNY700mn (+105% YoY) in revenue and ranked no. 9 in the skin care category, making it the only Chinese brand to break into the top 10.

Mirae Asset Daewoo Research 4 December 17, 2020 AmorePacific

We believe AmorePacific will take aim at China’s dermacosmetics market with its Aestura brand. The brand, which entered the Chinese market in 2017, has yet to generate any meaningful revenue, but the Aestura 365 line (domestic sales and cross-border e-commerce combined) has been growing more than 100% on average per month. In addition, the company has already built a track record by supplying the brand to over 100 clinics in China. The company plans to officially launch the brand online in China next year.

Figure 7. Chinese dermacosmetics market size and growth rate

(CNYbn) Chinese dermacosmetics market size (L) Growth (R) 16 35%

14 30%

12 25% 10 20% 8 15% 6 10% 4

2 5%

0 0% 2014 2015 2016 2017 2018 2019

Source: Euromonitor, Mirae Asset Daewoo Research

The most worrisome aspect of AmorePacific’s 3Q20 earnings report was the 49.2% drop in duty-free channel sales (vs. overall market decline of 35.0%). In the duty-free channel (AmorePacific’s key profit contributor in the domestic business), large-scale daigou (classified by the Korea Customs Service as “major guests” requiring business registrations) have been the key players since the COVID-19 outbreak. Previously, AmorePacific did not do business with these corporate-type daigou due to concerns over brand value erosion and price distortion caused by illegal reselling in the domestic market. But in the face of prolonged travel restrictions, management is departing from its conservative stance on daigou .

We believe AmorePacific entered into contracts with large-scale daigou in October, with related sales now underway. The company is set to expand such transactions while assessing their impact on global pricing and branding (with the next one to two quarters serving as a trial period). Even after the duty-free market returns to normal, we expect outstanding contracts with daigou to continue to generate sales.

Mirae Asset Daewoo Research 5 December 17, 2020 AmorePacific

Along with sales to large-scale daigou , AmorePacific has seen a growing mix of small-scale daigou (main customer) sales in 4Q20. Meanwhile, sales from Hainan duty-free stores (approximately 5% of overall duty-free sales) continue to expand at a triple-digit rate. Against this backdrop, we forecast the pace of decline in AmorePacific’s duty-free sales in 4Q20 to be in line with that of the overall duty-free market (overall market fell 34.1% YoY in October).

Figure 8. AmorePacific’s duty-free sales vs. domestic travel retail market growth

(%) Domestic travel retail maket AmorePacific duty-free revenue 60

40

20

0

-20

-40

-60 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20F

Source: Korea Duty Free Association, Mirae Asset Daewoo Research

Mirae Asset Daewoo Research 6 December 17, 2020 AmorePacific

Raise TP by 24% to W230,000 and maintain Trading Buy

Based on the Dec. 16 closing price, AmorePacific’s market cap stood at W12.45tr. The stock is currently trading at 27x our 12-month forward operating profit estimate and 31.5x the consensus estimate. This represents a 10% premium to the upper end of the stock’s range since 2015 (when China-bound sales began in earnest; 25x), supported by: 1) increased consumer spending in China despite COVID-19; and 2) expectations for improvements in the firm’s fundamentals.

Sulwhasoo’s growth trajectory in China shows that AmorePacific’s position in the luxury segment is weaker than that of global peers such as L’Oréal and Estee Lauder. From 2019 until just before the pandemic, consumer spending in China’s luxury segment (where demand elasticity is low) expanded slightly amid the widening gap between the real economy and financial markets. But during this time, AmorePacific’s stock traded at an 18.5% discount to global peers on average.

Figure 9. AmorePacific’s market cap/OP trends (12MF) Figure 10. Global peer comparison (market cap/12MF OP)

(x) (x) L'Oreal/Estee Lauder AmorePacific 35 40

30 35

30 25 25 20 20 15 15 27x (based on Mirae 10 Asset Daewoo est.) 10

5 5

0 0 12/14 8/15 4/16 12/16 8/17 4/18 12/18 8/19 4/20 1/10 7/11 1/13 7/14 1/16 7/17 1/19 7/20

Source: WISEfn, Mirae Asset Daewoo Research Source: WISEfn, Mirae Asset Daewoo Research

Currently, L’Oréal and Estee Lauder are trading at 20% premiums to the upper ends of their respective valuation ranges, supported by: 1) solid demand in the luxury category despite COVID-19 (steady earnings); and 2) the low interest rate environment (lower discount rate). For AmorePacific’s luxury brand Sulwhasoo, onshore growth in China reached 20% YoY in 3Q20 (vs. China cosmetic retail market growth of 18%), and GMV during the Singles’ Day event in 4Q20 expanded 174% YoY. Looking to 2021, we expect the sales mix of Sulwhasoo to exceed that of Innisfree at the Chinese subsidiary.

Figure 11. Chinese subsidiary’s sales mix: Innisfree and Sulwhasoo

(%) Innisfree Sulwhasoo Other 100 90 80 70 60 50 23 33 40 30 20 10 0 1Q18 3Q18 1Q19 3Q19 1Q20 3Q20 1Q21F 3Q21F

Source: Company data, Mirae Asset Daewoo Research

Mirae Asset Daewoo Research 7 December 17, 2020 AmorePacific

China’s consumption environment could change in 2021. The country’s unemployment rate has returned to the pre-pandemic level, and manufacturing PMI and industrial production indicators (which affect real consumption) are picking up. Meanwhile, the US Fed’s current stance should provide China with room for policy maneuvering. We believe the current circumstances are reminiscent of 2017, when Chinese consumer spending on cosmetics expanded. Back then, AmorePacific missed out on the boom due to the THAAD backlash. Looking to 2021, we expect the Chinese cosmetics market to improve in quantitative rather than qualitative terms (as household income will increase due to the recovery of real economy).

Given China’s overall consumption growth, AmorePacific’s online-centric strategy should drive market share gains, in our view. The firm’s strategic focus on the luxury segment and online channels should also help reduce its valuation discount to global peers. We therefore lift our target price on AmorePacific to W230,000 (fair market cap of W13.37tr), which was derived by applying a target multiple of 29x (8% discount to the average of global peers L’Oréal and Estee Lauder [31.5x]) to our 2021 operating profit estimate of W461.2bn.

We forecast AmorePacific to fully recognize labor restructuring costs (e.g., early retirement expenses) in 4Q20. Accordingly, 4Q20 results may disappoint. In addition, although Sulwhasoo is faring well in China, its sales are concentrated on a single line’s bundled products, raising concerns over the sustainability of growth compared to global peers. As the market has already reflected expectations for an earnings recovery, we expect share price volatility to increase depending on earnings results. We believe the company needs to show more than just a recovery; it needs to deliver growth. We maintain our Trading Buy rating.

Figure 12. AmorePacific’s OP margin and share performance

(%) (W) OP margin (L) Share price (adj., R) 18 500,000

15 400,000

12 300,000 Target price

9 200,000

6 100,000

3 0 1Q11 4Q11 3Q12 2Q13 1Q14 4Q14 3Q15 2Q16 1Q17 4Q17 3Q18 2Q19 1Q20 4Q20F 3Q21F 2Q22F

Source: WISEfn, Mirae Asset Daewoo Research

Mirae Asset Daewoo Research 8 December 17, 2020 AmorePacific

AmorePacific (090430 KS)

Income statement (summarized) Balance sheet (summarized) (Wbn) 2019 2020F 2021F 2022F (Wbn) 2019 2020F 2021F 2022F Revenue 5,580 4,367 4,855 6,192 Current assets 1,803 1,656 1,710 2,061 Cost of revenue 1,501 1,249 1,348 1,687 Cash & equivalents 674 705 729 839 GP 4,079 3,118 3,507 4,505 AR & other receivables 387 413 417 530 SG&A expenses 3,652 2,968 3,046 3,911 Inventory 453 424 444 552 OP (adj.) 428 150 461 594 Other current assets 289 114 120 140 OP 428 150 461 594 Non-current assets 4,186 4,060 4,275 4,674 Non-operating profit -57 -103 -41 -34 Investments in associates 2 0 0 0 Net financial income -7 5 6 7 PP&E 2,662 2,426 2,286 2,180 Net income from associates 0 0 0 0 Intangible assets 227 227 377 627 Pretax profit 371 47 420 560 Total assets 5,989 5,716 5,985 6,736 Income tax 147 12 111 151 Current liabilities 1,067 897 840 1,032 Profit from continuing operations 224 35 309 409 AP & other payables 172 266 199 192 Profit from discontinued operations 0 0 0 0 Short-term financial liabilities 297 122 103 154 NP 224 35 309 409 Other current liabilities 598 509 538 686 Attributable to owners 239 55 315 403 Non-current liabilities 424 354 382 609 Attributable to minority interests -15 -20 -6 6 Long-term financial liabilities 268 0 0 150 Total comprehensive income 231 35 309 409 Other non-current liabilities 156 354 382 459 Attributable to owners 246 55 315 403 Total liabilities 1,490 1,251 1,222 1,641 Attributable to minority interests -15 -20 -6 6 Equity attributable to owners 4,490 4,456 4,753 5,084 EBITDA 913 636 901 999 Capital stock 35 35 35 35 FCF 472 160 406 489 Capital surplus 724 724 724 724 EBITDA margin (%) 16.4 14.6 18.6 16.1 Retained earnings 3,874 3,840 4,138 4,470 OP margin (%) 7.7 3.4 9.5 9.6 Minority interests 9 9 10 11 Net margin (%) 4.3 1.3 6.5 6.5 Shareholders' equity 4,499 4,465 4,763 5,095

Cash flow statement (summarized) Key valuation metrics/ratios (Wbn) 2019 2020F 2021F 2022F 2019 2020F 2021F 2022F Operating cash flow 718 410 706 789 P/E (x) 57.8 263.5 45.8 35.8 NP 224 35 309 409 P/CF (x) 13.5 26.9 16.7 14.9 Non-cash income/expenses 795 501 555 562 P/B (x) 3.0 3.2 3.0 2.8 Depreciation 485 486 440 405 EV/EBITDA (x) 13.6 20.4 14.4 12.9 Amortization 0 0 0 0 EPS (W) 3,460 793 4,565 5,837 Other 310 15 115 157 CFPS (W) 14,764 7,769 12,524 14,062 Chg. in working capital -161 -112 -44 -26 BPS (W) 66,519 64,563 68,875 73,669 Chg. in AR & other receivables -83 -20 18 -87 DPS (W) 1,000 156 1,134 1,502 Chg. in inventory -94 28 -20 -108 Dividend payout ratio (%) 25.9 30.6 25.0 25.0 Chg. in AP & other payables 62 94 -67 -7 Dividend yield (%) 0.5 0.1 0.5 0.7 Income tax -131 -12 -111 -151 Revenue growth (%) 5.7 -21.7 11.2 27.5 Cash flow from investing activities -403 -341 -651 -801 EBITDA growth (%) 22.1 -30.3 41.7 10.9 Chg. in PP&E -219 -250 -300 -300 OP growth (%) -11.2 -65.0 207.3 28.9 Chg. in intangible assets -32 0 0 0 EPS growth (%) -28.1 -77.1 475.7 27.9 Chg. in financial assets -55 0 0 0 AR turnover (x) 17.1 11.6 12.9 15.0 Other -97 -91 -351 -501 Inventory turnover (x) 13.0 10.0 11.2 12.4 Cash flow from financing activities -387 -246 -31 123 AP turnover (x) 10.6 5.7 5.8 8.6 Chg. in financial liabilities 449 -177 -20 200 ROA (%) 3.9 0.6 5.3 6.4 Chg. in equity 3 0 0 0 ROE (%) 5.4 1.2 6.8 8.2 Dividends -81 -69 -11 -77 ROIC (%) 7.4 2.3 8.1 9.8 Other -758 0 0 0 Debt-to-equity ratio (%) 33.1 28.0 25.6 32.2 Chg. in cash -62 -177 24 110 Current ratio (%) 169.1 184.6 203.6 199.8 Beginning balance 736 882 705 729 Net debt-to-equity ratio (%) -4.0 2.0 1.7 1.2 Ending balance 674 705 729 839 Interest coverage ratio (x) 21.4 35.9 419.2 247.3 Source: Company data, Mirae Asset Daewoo Research estimates

Mirae Asset Daewoo Research 9 December 17, 2020 AmorePacific

Appendix 1

Important disclosures and disclaimers Two-year rating and TP history

Company Date Rating TP (W) (W) AmorePacific AmorePacific (090430) 12/17/20 Trading Buy 230,000 250,000 10/20/20 Trading Buy 185,000 200,000 10/16/20 No Coverage 04/29/20 One year 150,000 04/29/19 Hold 100,000 03/19/19 Trading Buy 210,000 08/07/18 No Coverage 50,000

0 Dec 18 Dec 19 Dec 20

Stock ratings Sector ratings Buy Expected 12-month performance: +20% or greater Overweight Expected to outperform the market over 12 months Trading Buy Expected 12-month performance: +10% to +20% Neutral Expected to perform in line with the market over 12 months Hold Expected 12-month performance: -10% to +10% Underweight Expected to underperform the market over 12 months Sell Expected 12-month performance: -10% or worse

Rating and TP history: Share price (─), TP (▬), Not Rated ( ■), Buy (▲), Trading Buy (■), Hold (●), Sell (◆) * Our investment rating is a guide to the expected return of the stock over the next 12 months. * Outside of the official ratings of Mirae Asset Daewoo Co., Ltd., analysts may call trading opportunities should technical or short-term material developments arise. * The TP was determined by the research analyst through valuation methods discussed in this report, in part based on estimates of future earnings. * TP achievement may be impeded by risks related to the subject securities and companies, as well as general market and economic conditions.

Ratings distribution and investment banking services Buy Trading Buy Hold Sell Ratings distribution 73.62% 14.11% 11.04% 1.23% Investment banking services 72.22% 11.11% 16.67% 0.00% * Based on recommendations in the last 12 months (as of September 30, 2020)

Disclosures As of the publication date, Mirae Asset Daewoo Co., Ltd. has acted as a liquidity provider for equity-linked warrants backed by shares of AmorePacific as an underlying asset; other than this, Mirae Asset Daewoo has no other special interests in the covered companies.

Analyst certification The research analysts who prepared this report (the “Analysts”) are registered with the Korea Financial Investment Association and are subject to Korean securities regulations. They are neither registered as research analysts in any other jurisdiction nor subject to the laws or regulations thereof. Each Analyst responsible for the preparation of this report certifies that (i) all views expressed in this report accurately reflect the personal views of the Analyst about any and all of the issuers and securities named in this report and (ii) no part of the compensation of the Analyst was, is, or will be directly or indirectly related to the specific recommendations or views contained in this report. Mirae Asset Daewoo Co., Ltd. (“Mirae Asset Daewoo”) policy prohibits its Analysts and members of their households from owning securities of any company in the Analyst’s area of coverage, and the Analysts do not serve as an officer, director, or advisory board member of the subject companies. Except as otherwise specified herein, the Analysts have not received any compensation or any other benefits from the subject companies in the past 12 months and have not been promised the same in connection with this report. Like all employees of Mirae Asset Daewoo, the Analysts receive compensation that is determined by overall firm profitability, which includes revenues from, among other business units, the institutional equities, investment banking, proprietary trading, and private client divisions. At the time of publication of this report, the Analysts do not know or have reason to know of any actual, material conflict of interest of the Analyst or Mirae Asset Daewoo except as otherwise stated herein.

Disclaimers This report was prepared by Mirae Asset Daewoo, a broker-dealer registered in the Republic of Korea and a member of the Korea Exchange. Information and opinions contained herein have been compiled in good faith and from sources believed to be reliable, but such information has not been independently verified and Mirae Asset Daewoo makes no guarantee, representation or warranty, express or implied, as to the fairness, accuracy, completeness, or correctness of the information and opinions contained herein or of any translation into English from the Korean language. In case of an English translation of a report prepared in the Korean language, the original Korean language report may have been made available to investors in advance of this report. The intended recipients of this report are sophisticated institutional investors who have substantial knowledge of the local business environment, its common practices, laws, and accounting principles, and no person whose receipt or use of this report would violate any laws or regulations or subject Mirae Asset Daewoo or any of its affiliates to registration or licensing requirements in any jurisdiction shall receive or make any use hereof. This report is for general information purposes only and 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

Mirae Asset Daewoo Research 10 December 17, 2020 AmorePacific

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. For further information regarding company-specific information as it pertains to the representations and disclosures in this Appendix 1, please contact [email protected] or +1 (212) 407-1000.

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Mirae Asset Daewoo Research 11 December 17, 2020 AmorePacific

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Mirae Asset Daewoo Co., Ltd. (Seoul) Mirae Asset Securities (HK) Ltd. Mirae Asset Securities (UK) Ltd. One-Asia Equity Sales Team Units 8501, 8507-8508, 85/F 41st Floor, Tower 42 Mirae Asset Center 1 Building International Commerce Centre 25 Old Broad Street, 26 Eulji-ro 5-gil, Jung-gu, Seoul 04539 1 Austin Road West London EC2N 1HQ Korea Kowloon United Kingdom Hong Kong 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 Brazil Tel: 1-212-407-1000 Tel: 1-213-262-3807 Tel: 55-11-2789-2100

PT. Mirae Asset Sekuritas Indonesia Mirae Asset Securities () Pte. Ltd. Mirae Asset Securities () 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 Republic of Singapore District 1, Ben Nghe Ward, Ho Chi Minh City Jakarta Selatan 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

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