2H19 Outlook
Transportation The inexorable march of innovation
Jay JH Ryu +822-3774-1738 [email protected]
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. Contents
[Summary] Shares to rebound on earnings improvements in 2H 3
I. Logistics 4
II. Mobility 10
III. Airlines 21
[Conclusion] Market share expansion holds the key 27
Top picks 28 CJ Logistics, Jeju Air
Global peer group valuations 30 [Summary] Shares to rebound on earnings improvements in 2H
OP of the transportation sector vs. P/B: Valuations have declined amid economic slowdown
(Wbn) (x) OP (L) P/B (R) 1,500 2.5 Oil price decline; Air cargo Minimum Global Global High oil prices; greater Oil wage hike; Slowdown in rebound; housing financial Inventory shipping market logistics price oil price Chinese stimulus LCC growth; bubble crisis restocking restructuring momentum rebound M&As growth
1,000 2.0
500 1.5
0 1.0
-500 0.5
-1,000 0.0 1Q04 1Q05 1Q06 1Q07 1Q08 1Q09 1Q10 1Q11 1Q12 1Q13 1Q14 1Q15 1Q16 1Q17 1Q18
Source: FnGuide, Mirae Asset Daewoo Research
3| 2H19 Outlook [Transportation] Mirae Asset Daewoo Research I. Logistics: Easing of oversupply
Over the past 15 years, • In the five years following the Asian financial crisis (1998), the domestic logistics market saw annual average regulations have supply growth of more than 10%, as many laid-off workers became independent delivery truck drivers. • Supply has been restricted over the past 15 years, thanks to delivery truck registration regulations. restricted supply growth • Logistics demand has also been on the rise, steadily resolving oversupply.
No. of commercial trucks registered for logistics No. of domestic logistics players and growth
('000) (%) ('000) (%, YoY) 500 No. of commercial trucks (L) 20 400 No. of companies (L) YoY (R) 16 Growth (R)
13 400 15 300
10 300
10 200 7
200 4
5 100 100 1
0 0 0 -2 96 98 00 02 04 06 08 10 12 14 16 96 98 00 02 04 06 08 11 13 15 17
Source: Statistics Korea, Mirae Asset Daewoo Research Source: Statistics Korea, Mirae Asset Daewoo Research
4| 2H19 Outlook [Transportation] Mirae Asset Daewoo Research I. Logistics: Easing of oversupply
Price increases to come • The three major domestic logistics players generate OP margins below 3%: Lotte Global Logistics has suffered operating losses for two years in a row. • With rising labor and safety management costs, there is little room for margin improvement. • A rate hike is essential to improving margins.
Parcel delivery firms’ OP margins: Differentiation even Parcel delivery rate trends: Market consolidation to lead to rate hike among top-tier firms (W) (%)
3,800 Overall average Top 5 average 6 CJ Logistics Hanjin Lotte Global Logistics
3,600 5
3,400 4 3,200 3 3,000 2 2,800 1 2,600
0 2,400
2,200 -1
2,000 -2 00 02 04 06 08 10 12 14 16 18 10 11 12 13 14 15 16 17 18
Source: Korea Logistics Business Directory, Mirae Asset Daewoo Research Source: Company data, Mirae Asset Daewoo Research
5| 2H19 Outlook [Transportation] Mirae Asset Daewoo Research I. Logistics: E-commerce players and 3PL
Amazon has emerged as • Amazon (AMZN US/CP: US$1,921) has emerged as the leading player in the third-party logistics (3PL) market, the leading player in 3PL backed by revenue growth of 34% in 2018. • Of note, other top-tier logistics firms have also delivered robust growth. • There is controversy over the possibility of e-commerce companies’ entries into the 3PL market.
Global 3PL rankings
2017 revenue 2018 revenue Ranking Company Country Growth Notes (US$) (US$) 1 Amazon US 31,881 42,745 34.1% Including commissions, fulfillment fees, and other 3PL service revenue 2 DHL Germany 30,775 33,424 8.6% 3 Kuehne + Nagel Switzerland 22,674 25,368 11.9% 4 DB Schenker Germany 17,783 19,527 9.8% 5 Nippon Express Japan 16,382 18,205 11.1% 6 C.H. Robinson US 13,503 15,515 14.9% Acquired Milgram & Company in Sep. 2017 and The Space Group in Mar. 2019. 7 DSV Denmark 11,355 12,511 10.2% 8 XPO Logistics US 10,352 11,823 14.2% 9 UPS US 8,691 9,814 12.9% 10 J.B. Hunt US 6,828 8,214 20.3% Acquired Special Logistics in Jul. 2017 and Cory Home Delivery in Jan. 2019. 13 CEVA Logistics Switzerland 6,994 7,356 5.2% 24 Samsung SDS Logistics Korea 3,688 3,977 7.8% 28 FedEx US 3,294 3,654 10.9% 30 CJ Logistics Korea 2,308 3,322 43.9% Acquired DSC Logistics in Jun. 2018. 35 Kerry Logistics Hong Kong 2,204 2,673 21.3% Acquired S.A.S. in May 2018.
Note: Rankings based on 2018 data Source: Armstrong & Associates, Mirae Asset Daewoo Research
6| 2H19 Outlook [Transportation] Mirae Asset Daewoo Research I. Logistics: E-commerce players and 3PL
How much will parcel • Annual parcel delivery rate hike of 5% vs. Coupang’s logistics rate decline delivery rates increase? • We expect the parcel delivery rate to rise to W2,800 per box in 2023 (vs. around W2,200 in 2018; CAGR of -14% for Coupang’s rate). • If Coupang’s rate decline continues, the company could enter the 3PL market. • During its earnings call (May 3rd), a logistics firm projected price hikes through end-2023.
Coupang’s logistics rate vs. parcel delivery rate
(W/parcel) 12,000 Parcel delivery rate Coupang rate
10,000
8,000 1. Economies of scale 2. Establishment of CLS (3PL) 6,000 3. Increased efficiency
CAGR: -14% 4,000
2,000 1. Cost-push CAGR: 5% 2. Government policies 3. Market consolidation 0 2014 2015 2016 2017 2018 2019F 2020F 2021F 2022F 2023F
Source: Korea Logistics Business Directory , company data, Mirae Asset Daewoo Research
7| 2H19 Outlook [Transportation] Mirae Asset Daewoo Research I. Logistics: E-commerce players and 3PL
Keep an eye on • Coupang: Logistics costs relative to revenue are estimated to have declined significantly. Coupang’s earnings • OP margin deteriorated despite increasing revenue and falling logistics cost burdens. • The problem is gross margin contraction, which appears attributable to low-price offerings.
Platform commerce companies’ cost structures
(US$mn/Wmn) Coupang Kurly Amazon 2016 2017 2018 2016 2017 2018 2016 2017 2018 Revenue 1,915,938 2,684,630 4,422,788 17,361 46,573 157,111 135,987 177,866 232,887 Gross profit 389,610 518,126 750,110 4,005 12,627 42,738 47,722 65,932 93,731 Gross margin 20.3 19.3 17.0 23.1 27.1 27.2 35.1 37.1 40.2 Logistics costs 459,775 674,640 823,226 7,418 15,151 47,397 17,619 25,249 34,027 % of revenue 24.0 25.1 18.6 42.7 32.5 30.2 13.0 14.2 14.6 Labor costs 108,810 169,921 196,646 3,138 4,976 8,397 16,085 22,620 28,837 % of revenue 5.7 6.3 4.4 18.1 10.7 5.3 11.8 12.7 12.4 Depreciation costs 41,185 52,470 57,232 550 604 1,383 8,116 11,478 15,341 % of revenue 2.1 2.0 1.3 3.2 1.3 0.9 6.0 6.5 6.6 Marketing/ads 32,347 53,803 154,843 631 2,387 14,804 7,233 10,069 13,814 % of revenue 1.7 2.0 3.5 3.6 5.1 9.4 5.3 5.7 5.9 Operating profit -565,270 -638,897 -1,097,037 -8,828 -12,396 -33,676 4,186 4,106 12,421 OP margin -29.5 -23.8 -24.8 -50.9 -26.6 -21.4 3.1 2.3 5.3 (ex-AWS) 1078 -225 OP margin 0.9 -0.1 (ex-AWS and overseas) 2361 2837 OP margin 32.7
Notes: Logistics costs include some labor costs for Coupang, transportation/rental costs for Kurly, and fulfilment costs for Amazon; Coupang’s labor costs exclude labor costs related to logistics. Source: Company data, Mirae Asset Daewoo Research
8| 2H19 Outlook [Transportation] Mirae Asset Daewoo Research I. Logistics: E-commerce players and 3PL
Delivery labor shortage • Coupang has been expanding delivery outsourcing (Coupang Flex) due to labor shortages. is another issue that • There has been increasing controversy over Coupang Flex. Coupang needs to • In addition to cost burdens and earnings deterioration, delivery labor shortages are another issue that Coupang needs to address. address
Coupang’s labor shortage Controversy over Coupang Flex
Controversy over Coupang delivery personnel compensation Is an hourly wage of W25,000 a thing of the past?
Surge in part-time delivery personnel results in lower fees (less than W700) Securing volume by lowering unit prices by W100-200
The dark side of Coupang Flex: Apartment passwords shared too freely
Deliveries handled without confirming ID Shared entrance passwords given out freely Despite increasing delivery volume, the number of Are Coupang Flex’s issues okay for now? “Coupang Men” remains at 3,500
Source: Press materials, Mirae Asset Daewoo Research Source: Press reports, Mirae Asset Daewoo Research
9| 2H19 Outlook [Transportation] Mirae Asset Daewoo Research II. Mobility: An irreversible trend
Mobility IPOs • IPO of Lyft (LYFT US/CP: US$59.34) in March 2019: Raised US$18bn; Shares are stabilizing after a 20% decline. vs. valuation • IPO of Uber (UBER US/CP: US$41.57) on May 10th: Raised US$8.1bn with an IPO price of US$45, near the bottom of the marketed range; the IPO price gives Uber a market value of US$75.5bn. • Uber’s listing is the biggest in the US since Alibaba’s (BABA US/CP: US$181.43) offering in 2014. • High growth vs. costs (R&D, marketing, insurance premium, management costs) • Mobility companies’ valuations: P/S of 4-5x
Lyft shares: Stabilizing after a 20% decline following the IPO Uber’s earnings
(US$) (US$mn) 80 High: 2016 2017 2018 78.29 Gross bookings 19,236 34,409 49,799
75 Revenue 3,845 7,932 11,270 Gross margin 1,617 3,772 5,647
70 Operating and 881 1,354 1,516 maintenance costs 5/3 close: 62.51 R&D 864 1,201 1,505 65 Marketing 1,594 2,524 3,151
SG&A 981 2,263 2,082 60 Depreciation costs 320 510 426
Operating profit -3,023 -4,080 -3,033 55 OP margin -78.6 -51.4 -26.9
Pretax profit -3,218 -4,575 1,312 50 3/28 4/4 4/11 4/18 4/25 5/2 Net profit -370 -4,033 997 Source: Bloomberg, Mirae Asset Daewoo Research Source: Company data, Mirae Asset Daewoo Research Sold Southeast Asia business
10| 2H19 Outlook [Transportation] Mirae Asset Daewoo Research II. Mobility: An irreversible trend
Korea will also likely see • The number of driver's license holders has been steadily declining. the mobility market • The proportion of driver's license holders aged 30 or younger has fallen below 40%. expand • A new mobility solution is needed.
Driver's license holders in Korea (by age): Proportion of younger No. of driver's license holders in Korea: Stagnant growth drivers is on the decrease (mn persons) (%) 100% 35 No. of license holders (L) 25 80+ Growth (R) 90% 30 20 70s 80%
15 25 70% 60s
10 60% 50s 20 50% 5 40s 15 40% 0 30s 30% 10 -5 20% 20s
5 -10 10% Teens
0 -15 0% 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 11 12 13 14 15 16 17
Source: Statistics Korea, Mirae Asset Daewoo Research Source: KNPA, Mirae Asset Daewoo Research
11| 2H19 Outlook [Transportation] Mirae Asset Daewoo Research II. Mobility: An irreversible trend
Growing safety concerns • The percentage of traffic accidents involving elderly drivers is on a steady rise. regarding older drivers • Taxi drivers are also getting older; the average age of taxi drivers in Korea is 53.4. • In Korea, 40-50% of all taxi drivers are aged 60 or over, with the percentage of those aged 65 or over being in the 20-30% range.
Growing % of car accidents involving elderly drivers Taxi drivers by age; % of those aged 60 or over
(%) (%) 30 35,000 No. of car accidents involving elderly drivers (L) 16 Privately-owned taxis % of 60+ drivers: % of total accidents (R) Corporate-owned taxis 40-50% 14 30,000 25
12 25,000 20 10 20,000 8 15 15,000 6 10 10,000 4 5 5,000 2
0 0 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 20-25 25-30 30-35 35-40 40-45 45-50 50-55 55-60 60-65 65-70 70-75 75-80 80-85 85-90
Source: Korea Transportation Safety Authority, Mirae Asset Daewoo Research Notes: As of August 2018, nationwide data Source: KNPA, Mirae Asset Daewoo Research
12| 2H19 Outlook [Transportation] Mirae Asset Daewoo Research II. Mobility: An irreversible trend
Autonomous driving • Uber: Per-trip gross bookings of US$9.5 vs. net revenue of US$2 (balance goes to the driver) technology to facilitate • The adoption of autonomous vehicles would allow Uber: 1) to drive up its net revenue by US$4-5; and spread of new mobility 2) boost revenue (US$11bn US$50bn), leading to P/S contraction to below 2x.
Uber’s revenue breakdown Uber’s autonomous vehicle: Volvo’s XC90
(US$mn) Revenue (L) Gross bookings (L) (US$) 60,000 Gross bookings/trip (R) Revenue/trip (R) 12
49,799 50,000 10.6 10
9.5 9.2 40,000 8 34,409
30,000 6
19,236 20,000 4
2.1 2.1 2.2 10,000 2 11,270 7,932 3,845 0 0 2016 2017 2018
Source: Company data, Mirae Asset Daewoo Research Source: Company materials, Mirae Asset Daewoo Research
13| 2H19 Outlook [Transportation] Mirae Asset Daewoo Research II. Mobility: An irreversible trend
Korea: • In Korea, the car-sharing market is split between SoCar and Green Car. SoCar vs. Green Car • In 2018, SoCar acquired messenger app startup VCNC and launched van-sharing service TADA. • Based on its stable growth strategy, Green Car is posting steady profits.
Annual earnings of SoCar and Green Car New mobility service users (trend)
(Wbn) ('000 members) 200 SoCar revenue Green Car revenue SoCar 4,000 SoCar OP Green Car OP
150 3,400
3,000 100 2,400
2,400 2,100 Green Car 50 1,500
1,200 0 510 120 510 -50 70 2013 2014 2015 2016 2017 2018 2013 2014 2015 2016 2017 2018
Source: Company data, Mirae Asset Daewoo Research Source: Company data, press materials, Mirae Asset Daewoo Research
14| 2H19 Outlook [Transportation] Mirae Asset Daewoo Research II. Mobility: The rise of TADA
Fierce competition ahead • Cutthroat competition is expected between TADA and Kakao Mobility. for ride-hailing services • New entrants to the new mobility market: Waygo, Macaron Taxi, ChaCha • Kakao Mobility’s choice?
Ride-hailing services; Consumers now have a lot more options to choose from
Service Operator Services
Waygo Blue Rejection-free hailing service; operated via Kakao T app TAGO Solutions Kakao Mobility Waygo Lady A taxi service for female passengers with around 4,500 taxis secured
SUV-based car-hailing service; evaded regulations through partnership with TADA designated drivers VCNC TADA Premium Premium: Luxury taxi service; plans to operate 1,000 vehicles by year-end TADA Assist Assist: Taxi service for the physically disabled and those aged 65 or over
Switched to tip-based carpool service starting in March; fare assessment and Poolus Poolus platform profits excluded
Completed first round of negotiations with taxi operators; launch of services is still Kakao Carpool Kakao Mobility being delayed
Operates pet taxis and taxis for pregnant women; provides services for the elderly
Macaron Taxi KST Mobility Expanded its fleet to 1,000 vehicles by purchasing the cancelled license plates of corporate-owned taxis.
Specializes in long-distance commute carpool services; offers female-specific Udigo WITSmobility options
Source: Press reports, Mirae Asset Daewoo Research
15| 2H19 Outlook [Transportation] Mirae Asset Daewoo Research II. Mobility: The rise of TADA
Kakao Mobility • In 2018, Kakao Mobility’s revenue climbed 221% YoY to W53.6bn, driven by its taxi-hailing and chauffeur/designated driver services. • While operating losses widened to W21bn, OP margin improved (-64% -39%) • The delayed launch of carpool services needs to be addressed.
Mass taxi driver protest against Kakao Carpool vs. agreement struck Kakao Mobility’s annual earnings with taxi operators (Wmn) 2017 2018
Operating revenue 16,709 53,634
Operating costs 27,349 74,720
Employee wages 7,121 16,577
Advertising expenses 6,490 11,167
Insurance expenses 3,322 9,724
Commission fees 6,367 24,982
Benefits 1,013 3,047
Other 3,036 9,223
Operating profit -10,640 -21,085
OP margin -63.7 -39.3
Pretax profit -10,146 -18,531
Net profit -10,146 -18,531
Source: Company data, Mirae Asset Daewoo Research Source: Press materials, Mirae Asset Daewoo Research
16| 2H19 Outlook [Transportation] Mirae Asset Daewoo Research II. Mobility: The rise of TADA
SK (SoCar) vs. Kakao • SoCar and Kakao Mobility are pursuing different strategies. • Kakao Mobility is maintaining its platform business strategy, although persistent regulatory issues have forced the firm to revise some of its business tactics. • SK (SoCar) has thus far evaded regulations, resulting in continued expansion of its TADA services.
SK (SoCar) vs. Kakao Mobility
SK (SoCar) Kakao Mobility
Competitive- Availability Competitive- Availability Operator Tasks Operator Tasks ness of service ness
Synergies with Investment Car-sharing O ★★★★ SoCar X? - AJ Rent-a-Car burden
Potential Cooperation Ride-hailing O ★★★★ TADA △ ?Waygo regulatory risks with taxis
Regulatory Kakao Regulatory Ride-sharing O ★★★ Poolus O ★★ barriers Carpool barriers
TMap/ Integration Potential Platform O ★★★ O ★★★★★ Kakao T NAVER Map required competition
NAVER Labs, Level 4 technology Autonomous High-precisions maps for autonomous driving driving (partnerships with MOLIT and Hyundai Motor) Collaboration with SK Telecom
Source: Press reports, Mirae Asset Daewoo Research
17| 2H19 Outlook [Transportation] Mirae Asset Daewoo Research II. Mobility: The rise of TADA
Mobility service traffic trends
Car-sharing service traffic trends Map/navigation service traffic trends
('000 persons) ('000 persons) 700 SoCar 8,000 T map Green Car 600 Kakao Map Delivery Car NAVER Map 500 6,000 400 4,000 300
200 2,000 100 0 0 9/15 3/16 9/16 3/17 9/17 3/18 9/18 3/19 9/15 3/16 9/16 3/17 9/17 3/18 9/18 3/19
Source: Nielsen KoreanClick, Mirae Asset Daewoo Research Source: Nielsen KoreanClick, Mirae Asset Daewoo Research
Taxi app traffic trends Ride-sharing/hailing service traffic trends ('000 persons) ('000 persons) Launch of Kakao 70 Poolus 3,000 Kakao T Carpool 60 Tada 2,500 T map Taxi postponed 50 2,000 40 1,500 30
1,000 Kakao Carpool beta testing 20 ends 500 10 0 0 9/15 3/16 9/16 3/17 9/17 3/18 9/18 3/19 9/15 3/16 9/16 3/17 9/17 3/18 9/18 3/19 Source: Nielsen KoreanClick, Mirae Asset Daewoo Research Source: Nielsen KoreanClick, Mirae Asset Daewoo Research
18| 2H19 Outlook [Transportation] Mirae Asset Daewoo Research II. Mobility: The road to MaaS
Mobility as a Service • MaaS brings various forms of transport services into a single mobile app/platform by combining passenger (MaaS) vehicles (e.g., EVs, shared vehicles) with other public/personal transportation modes. • MaaS aims to provide optimized transportation solutions based on the integration of payment services and proprietary algorithms.
Moving beyond simple car-sharing
Source: Frost & Sullivan, The Transport Knowledge Hub, Mirae Asset Daewoo Research
19| 2H19 Outlook [Transportation] Mirae Asset Daewoo Research II. Mobility: The road to MaaS
Kakao launched new • Personal mobility services are integral to MaaS. electric bike-sharing • Kakao Mobility’s launch of an electric bike-sharing services also needs to be viewed from this perspective. services • The electric personal mobility market has been expanding since the launch of a public bike rental system by the Seoul Metropolitan Government.
Kakao Mobility’s electric bike-sharing service Kickgoing electric scooter-sharing service
Source: Company materials, Mirae Asset Daewoo Research Source: Company materials, Mirae Asset Daewoo Research
20| 2H19 Outlook [Transportation] Mirae Asset Daewoo Research III. Airlines: Changes have already begun
Two major FSCs are • Korean Air and Asiana Airlines, two major full-service carriers (FSCs) have recently begun to scale back on capex, scaling back investments weighed down by high debt ratios. • They are suffering from intensifying competition in passenger and weak demand in cargo.
Capex trends of Korean Air and Asiana Airlines
(Wbn) 2,500 Korean Air Asiana Airlines
2,000
1,500
1,000
500
0 08 09 10 11 12 13 14 15 16 17 18 Note: On a non-consolidated basis (K-IFRS) Source: Company data, Mirae Asset Daewoo Research
21| 2H19 Outlook [Transportation] Mirae Asset Daewoo Research III. Airlines: Changes have already begun
FSCs continuing to lose • In 2016, the market shares of Korean Air and Asiana Airlines broke below 30% and 20%, respectively. steam • Their IIA traffic shares also dropped about 40% each • Despite relatively stable cargo market shares, their passenger market shares are rapidly being eroded by LCCs.
International passenger M/S of Korean Air and Asiana Airlines LCCs’ international route M/S trends
(%) (%) 50 50 Korean Air Asiana Airlines Total LCC M/S (A + B) Korea LCC M/S (A) 45 45 Foreign LCC M/S (B)
40 40
35 March 2016 35
30 30
25 25
20 20
15 15 December 2016 10 10
5 5
0 0 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 11 12 13 14 15 16 17 18 19
Source: IIA, Mirae Asset Daewoo Research Source: IIA, Mirae Asset Daewoo Research
22| 2H19 Outlook [Transportation] Mirae Asset Daewoo Research III. Airlines: China route allocation to accelerate changes
China route allocation • The increase in the number of China routes should expand the China passenger market by roughly W400bn. • The share of LCCs in total China route capacity rose from 10.5% to 28.1%. • Jeju Air and T’way Air (091810 KS/CP: W8,300) have the largest shares in newly allocated routes (25.2% each), and Air Busan has the highest share in Category 1 routes.
Passenger route allocation results Route allocation share breakdown by airline (%)
Total share of Before route After route Classification Airline Category 1 Category 2 Category 3 Category 4 allocated allocation allocation routes
No. of routes 57 66 Korean Air 19 - 17.9 - 10.1
SCA 33 37 Asiana 14.3 7.7 3.6 - 5.0 Ex-SCA 24 29 Airlines
No. of flights (weekly) 449 588 Jeju Air 19 26.9 21.4 33.3 25.2 SCA departures 341 418
Ex-SCA departures 108 170 Air Busan - - 21.4 16.7 12.9
LCCs 47 165 Eastar Jet 33.3 26.9 7.1 25 19.4 Market size (regular routes, Wbn) T’way Air 14.3 38.5 23.2 25 25.2
Full-service carriers 1,505 1,584 Air Seoul - - 5.4 - 2.2 LCCs 196 541
Note: SCA = Seoul capital area Source: MOLIT, Mirae Asset Daewoo Research Source: MOLIT, Mirae Asset Daewoo Research
23| 2H19 Outlook [Transportation] Mirae Asset Daewoo Research III. Airlines: China route allocation to accelerate changes
Structural changes are • Previously, China routes were dominated by Chinese carriers and Korean FSCs. underway on China • LCCs are expected to serve as a major growth driver for China routes. routes
Domestic carriers’ China route revenue and % of total IIA-China routes: ASK share trends by carrier type passenger revenue (%) (Wbn) (%) Passenger flight revenue 70 Korean FSCs Chinese carriers Korean LCCs 9,000 20 China route revenue 8,000 17 China route % 18 60 16 7,000 14 50 14 6,000 12 12 12 40 5,000 10 4,000 30 7 8 3,000 6 20 4 2,000 4 929 10 1,000 646 2 65 141 67 29 0 0 0 Asiana Air Busan Korean Air Jeju Air Jin Air T'way Air 12 13 14 15 16 17 18 19 Airlines
Source: MOLIT, Mirae Asset Daewoo Research Note: Cumulative data as of 3Q18 for Air Busan Source: Company data, Mirae Asset Daewoo Research
24| 2H19 Outlook [Transportation] Mirae Asset Daewoo Research III. Airlines: Stable competitive dynamics but structural demand slowdown for cargo
Cargo: Stable • Market share trends in the cargo segment remain relatively stable. competitive dynamics • Both Korean Air and Asiana Airlines are holding back investments in cargo aircraft, with their cargo fleets stagnating at 23 and 12 aircraft, respectively. • A potential restructuring of Asiana Airlines could benefit Korean Air.
International cargo M/S trends for Korean Air and Asiana Airlines
(%)
60 Korean Air Asiana Airlines 55
50
45
40
35
30
25
20
15
10
5
0 1/03 1/04 1/05 1/06 1/07 1/08 1/09 1/10 1/11 1/12 1/13 1/14 1/15 1/16 1/17 1/18 1/19
Source: IIA, Mirae Asset Daewoo Research
25| 2H19 Outlook [Transportation] Mirae Asset Daewoo Research III. Airlines: Stable competitive dynamics but structural demand slowdown for cargo
Cargo: Structural • Cargo demand growth has been slowing down recently, due in large part to IT export declines (mainly demand slowdown semiconductors). • The cargo segment is weighed down by structural problems.
ISM Manufacturing vs. demand growth at IIA IT product export growth: Down cycle
(Index) (%, YoY) (%, YoY) 80 ISM (L) IIA cargo growth (R) 60 160 Semiconductors Display
70 40 120
60 20 80
50 0 40
40 -20 0
30 -40 -40 06 07 08 09 10 11 12 13 14 15 16 17 18 19 10 11 12 13 14 15 16 17 18 19
Source: IIA, Bloomberg, Mirae Asset Daewoo Research Source: MOTIE, K-stat, Mirae Asset Daewoo Research
26| 2H19 Outlook [Transportation] Mirae Asset Daewoo Research [Conclusion] Market share expansion holds the key
Focus on cost • Companies’ capabilities to effectively respond to market changes should determine their long-term competitiveness and competitiveness. • We advise investors to focus on companies with cost competitiveness and/or expanding market shares. market share
CASKs of Jeju Air and Asiana Airlines Parcel delivery M/S trend
(W/ASK) (%) 160 Jeju Air CASK 60 CJ Logistics Hanjin Lotte Global Logistics (ex-Hyundai) Logen Asiana Airlines CASK 140 Korea Post Other 50
120
40 100 Higher labor costs are 80 30 weighing down laggards 60 20 40
10 20
0 0 1Q08 1Q09 1Q10 1Q11 1Q12 1Q13 1Q14 1Q15 1Q16 1Q17 1Q18 2015 2016 2017 2018 2019F
Source: Company data, Mirae Asset Daewoo Research Source: Korea Logistics Business Directory, Mirae Asset Daewoo Research
27| 2H19 Outlook [Transportation] Mirae Asset Daewoo Research CJ Logistics (000120 KS)
Market share remains robust despite rate hikes
Investment points (Maintain) Buy • CJ Logistics is maintaining market share at 47% even after its parcel delivery rate hikes in March 2019. • The company’s pricing still remains competitive, and other parcel delivery firms have also begun increasing Target Price (12M, W) 220,000 rates. • Parcel delivery rate increases will likely accelerate on the back of rising costs, improving supply and demand Share Price (5/7/19, W) 161,500 conditions, and favorable policies.
Expected Return 36% Risk factors • Economic slowdown and minimum wage hikes could depress earnings.
OP (19F, Wbn) 255 • E-commerce firms, namely Coupang, could make forays into the logistics space.
Consensus OP (19F, Wbn) 295 • Valuation is still demanding. EPS Growth (19F, %) 66.9
Market EPS Growth (19F, %) -18.2 P/E (19F, x) 58.3
Market P/E (19F, x) 12.2 KOSPI 2,176.99
130 Market Cap (Wbn) 3,684 CJ Logistics FY (Dec.) 12/16 12/17 12/18 12/19F 12/20F 12/21F
Shares Outstanding (mn) 23 KOSPI Revenue (Wbn) 6,082 7,110 9,220 10,976 12,279 13,437 120 Free Float (%) 39.4 OP (Wbn) 228 236 243 255 303 355 Foreign Ownership (%) 19.6 110 OP margin (%) 3.7 3.3 2.6 2.3 2.5 2.6
Beta (12M) 0.71 NP (Wbn) 56 31 38 63 114 199 100 52-Week Low 140,000 EPS (W) 2,446 1,380 1,660 2,770 4,993 8,707
52-Week High 190,500 90 ROE (%) 2.4 1.3 1.5 2.3 4.1 6.8
(%) 1M 6M 12M80 P/E (x) 73.2 101.4 100.6 58.3 32.3 18.5 Absolute -3.9 4.5 4.9 P/B (x) 1.4 1.1 1.2 1.2 1.1 1.1 70 Relative -2.4 -0.2 18.618.4 18.8 18.12 19.4 Div.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: CJ Logistics, Mirae Asset Daewoo Research estimates
28| 2H19 Outlook [Transportation] Mirae Asset Daewoo Research Jeju Air (089590 KS)
China to offer a newfound growth opportunity
Investment points (Maintain) Buy • Jeju Air is the LCC leader in Korea and is now seeing an additional increase in market share. • In the recent allocation of new China routes, Jeju Air secured the largest share (25%). New growth driver Target Price (12M, W) 50,000 • The company’s efforts to reduce costs (CASK) could boost competitiveness and help it achieve economies of scale faster. Share Price (5/7/19, W) 40,300 Risk factors Expected Return 24% • Economic slowdown could bring down passenger flight demand growth. • Won depreciation could depress passenger demand and push up costs. OP (19F, Wbn) 156 • An upturn in oil prices could add to cost pressures. Consensus OP (19F, Wbn) 142 EPS Growth (19F, %) 37.1
Market EPS Growth (19F, %) -18.2 P/E (19F, x) 10.9
Market P/E (19F, x) 12.2 KOSPI 2,176.99
110 Market Cap (Wbn) 1,062 Jeju Air KOSPI FY (Dec.) 12/16 12/17 12/18 12/19F 12/20F 12/21F Shares Outstanding (mn) 26 Revenue (Wbn) 748 996 1,259 1,543 1,740 1,946 100 Free Float (%) 33.0 OP (Wbn) 58 101 101 156 172 188 Foreign Ownership (%) 9.2 90 OP margin (%) 7.8 10.1 8.0 10.1 9.9 9.7
Beta (12M) 1.35 NP (Wbn) 53 78 71 97 124 135 80 52-Week Low 28,800 EPS (W) 2,038 2,954 2,689 3,687 4,720 5,134
52-Week High 51,000 70 ROE (%) 19.5 25.8 19.9 23.0 24.1 21.6
(%) 1M 6M 12M60 P/E (x) 12.3 12.0 12.5 10.9 8.5 7.9 Absolute 4.4 12.6 -18.9 P/B (x) 2.4 2.8 2.3 2.3 1.9 1.5 50 Relative 6.0 7.5 -8.318.4 18.8 18.12 19.4 Div.Yield (%) 2.0 1.7 1.9 1.7 1.9 2.0 Note: All figures are based on consolidated K-IFRS; NP refers to net profit attributable to controlling interests Source: Jeju Air, Mirae Asset Daewoo Research estimates
29| 2H19 Outlook [Transportation] Mirae Asset Daewoo Research Global peer group valuations
Global logistics players (Wbn, %, x)
Market Revenue Operating profit Net profit ROE P/E P/B EV/EBITDA Company cap 19F 20F 19F 20F 19F 20F 19F 20F 19F 20F 19F 20F 19F 20F
Korea CJ Logistics 3,684 11,408 12,415 374 426 128 154 4.6 5.3 26.1 21.6 1.2 1.1 11.0 9.9
Hyundai Glovis 5,888 18,753 19,438 835 881 599 630 12.2 11.6 9.8 9.3 1.1 1.0 6.2 5.9
Hanjin Transportation 542 2,253 2,641 78 94 23 36 2.2 3.3 23.8 15.0 0.5 0.4 10.3 8.7
Japan Yamato Holdings 10,373 18,859 20,152 981 1,023 571 575 8.7 8.3 17.1 17.0 1.5 1.4 6.1 5.9
Nippon Express 5,866 23,462 23,730 803 863 510 563 8.3 7.2 10.9 9.5 0.9 0.7 6.0 5.8
Mitsubishi Logistics 2,824 2,501 - 144 - 128 - 3.9 - 21.5 - 0.8 - 11.3 -
Kintetsu World Express 1,198 6,385 6,695 219 236 117 128 8.6 9.0 9.9 9.0 0.8 0.8 6.4 6.0
Sankyu 3,543 5,980 6,290 409 448 274 299 12.8 12.7 11.6 10.6 1.4 1.3 6.3 5.9
Kamigumi 3,708 2,834 2,917 245 252 190 196 5.6 5.5 16.7 16.2 0.9 0.9 7.9 7.7
Seino Holdings 3,149 6,464 6,606 342 364 252 251 5.9 5.6 11.7 11.7 0.7 0.6 4.0 3.9
Hitachi Transport System 3,720 7,743 7,933 360 374 267 274 9.9 9.8 13.6 13.2 1.3 1.2 8.0 8.0
Fukuyama Transporting 2,381 2,980 3,089 202 216 144 153 5.5 5.6 14.2 13.3 0.8 0.7 8.2 7.8
China Xiamen Xiangyu 1,710 53,550 61,543 453 534 260 310 10.4 11.3 6.6 5.5 0.7 0.6 - - Hong Sinotrans 5,394 15,009 16,129 595 671 521 522 11.0 10.6 6.4 6.0 0.7 0.6 8.5 7.1 Kong
Kerry Logistics 3,595 6,888 7,791 398 395 241 264 7.5 8.0 13.7 13.2 1.0 1.0 8.8 8.1
Singapore Singapore Post 1,923 1,269 1,284 156 157 113 118 9.1 8.9 16.9 17.5 1.5 1.3 10.5 10.2
Vietnam Gemadept 386 166 170 38 33 32 33 10.4 8.7 12.3 15.1 1.2 - 8.9 8.9
Malaysia POS Malaysia 393 728 753 9 16 1 4 0.2 0.8 98.9 48.1 0.7 0.7 6.7 5.6
Tasco 78 218 265 15 - 7 7 5.7 6.5 11.3 - 4.6 - 7.5 -
India Container Corp. of India 5,015 1,526 - 316 - 256 - 13.3 - 19.9 - 2.6 - 13.2 -
Asia average 3,268 9,449 11,102 349 411 232 251 7.8 7.7 18.6 14.8 1.2 0.9 8.2 7.2
US UPS 102,739 91,864 95,119 10,425 11,155 8,192 8,760 87.3 55.1 12.6 11.7 8.9 6.1 9.5 9.0
FedEx 55,038 84,304 88,368 6,524 7,094 5,017 5,522 18.7 18.5 10.7 9.6 2.0 1.8 6.9 6.3
Germany Deutsche Post 47,766 87,323 90,263 6,186 6,561 3,990 4,234 19.6 19.0 11.9 11.3 2.2 2.1 6.1 5.8
Australia Qube Holdings 3,686 1,494 1,598 168 184 114 130 5.0 5.7 31.4 27.4 1.6 1.6 16.5 14.8
Global average 11,442 18,915 21,599 1,262 1,523 914 1,053 11.9 10.8 18.3 14.9 1.6 1.3 8.5 7.6
Source: Bloomberg, Mirae Asset Daewoo Research 30| 2H19 Outlook [Transportation] Mirae Asset Daewoo Research Global peer group valuations
FSC players (Wbn, %, x)
Revenue Operating profit Net profit ROE P/E P/B EV/EBITDA Market Company cap 19F 20F 19F 20F 19F 20F 19F 20F 19F 20F 19F 20F 19F 20F
Korea Korean Air 3,144 13,589 13,751 1,055 1,135 419 547 11.4 13.2 7.1 5.8 0.8 0.7 6.2 6.1
Asiana Airlines 1,332 7,317 5,241 289 (332) 70 (508) 4.7 1.8 17.9 26.4 1.0 1.1 5.7 4.4
Japan Japan Airlines 13,652 16,752 - 1,951 - 1,300 - 10.4 - 10.0 - 1.0 - 2.8 -
ANA Holdings 13,831 24,019 - 2,125 - 1,397 - 11.2 - 9.3 - 1.0 - 4.7 -
Thailand Bangkok Airways 894 1,044 1,089 20 (12) 32 32 2.8 2.7 35.2 28.1 0.8 0.8 10.6 11.4
Thai Airways 988 8,007 8,400 324 307 87 198 7.1 23.4 10.6 5.1 1.0 1.0 6.3 5.1
Singapore Singapore Airlines 9,742 14,625 15,468 1,058 1,090 735 716 6.2 5.9 13.3 14.2 0.8 0.8 5.4 5.0
Indonesia Garuda Indonesia 846 6,099 6,676 260 323 133 150 11.6 11.5 4.7 5.6 1.0 0.6 5.0 4.3
India Jet Airways 250 4,472 4,671 - - (76) 46 4.8 (2.7) - 6.3 - - 20.2 7.8
Philippines Cebu Air 1,094 2,050 2,074 253 279 196 221 17.5 18.6 5.5 4.9 0.9 0.8 3.9 4.0
China China Southern 14,862 30,492 33,367 2,360 2,645 1,411 1,558 11.6 12.7 7.1 6.1 0.8 0.7 8.2 7.1
China Eastern 14,278 24,505 26,372 2,762 3,210 1,441 2,011 12.4 13.0 7.2 6.6 0.9 0.8 6.6 6.0
Taiwan China Airlines 1,957 6,666 6,971 256 - 111 147 4.7 6.3 17.5 13.3 0.9 0.8 - -
EVA Airways 2,655 7,232 7,563 - - 193 192 7.4 6.9 12.6 12.6 0.9 0.8 5.2 5.3
Hong KongCathay Pacific 7,453 17,877 18,133 900 995 738 749 7.3 7.4 9.7 8.9 0.7 0.7 5.8 5.6
Asia average 5,799 12,316 11,521 1,047 964 546 466 8.7 9.3 12.0 11.1 0.9 0.8 6.9 6.0
US Delta Air 43,757 56,529 58,728 7,255 7,679 5,390 5,636 28.0 22.8 7.9 7.5 2.0 1.6 5.9 5.7
United Continental 26,473 53,627 55,790 4,991 5,483 3,588 3,911 25.4 25.6 7.0 6.3 1.5 1.3 5.6 5.3
France Air France-KLM 5,182 37,163 37,906 1,888 2,084 976 1,164 24.8 22.9 5.2 4.5 1.2 1.0 2.5 2.3
Russia Aeroflot 1,877 13,331 14,462 1,019 1,115 442 491 2.9 (43.9) 4.1 3.7 4.4 2.3 1.7 1.5
Germany Deutsche Lufthansa 12,655 50,188 51,283 3,782 4,130 2,747 2,986 17.2 16.9 4.6 4.2 0.7 0.7 2.9 2.7
Australia Qantas 7,198 15,146 15,377 1,353 1,400 835 876 27.0 27.1 8.2 7.4 2.2 1.9 3.7 3.6
Ireland Ryan air 19,646 11,119 12,063 1,598 1,936 1,327 1,638 19.0 19.9 14.6 11.7 2.6 2.2 8.6 7.4
World average 9,262 19,175 19,769 1,775 1,969 1,068 1,138 12.5 10.6 10.4 9.5 1.3 1.1 6.1 5.3
Source: Bloomberg, Mirae Asset Daewoo Research 31| 2H19 Outlook [Transportation] Mirae Asset Daewoo Research Global peer group valuations
LCC players (Wbn, %, x)
Revenue Operating profit Net profit ROE P/E {/B EV/EBITDA Market Company cap 19F 20F 19F 20F 19F 20F 19F 20F 19F 20F 19F 20F 19F 20F
Korea Jeju Air 1,024 1,685 1,910 155 165 122 126 22.6 19.9 8.6 8.1 1.8 1.6 2.8 2.2
Jin Air 749 1,334 1,525 129 157 98 120 26.6 26.0 7.6 6.3 1.8 1.5 - -
T’way Air 389 1,054 1,048 87 97 73 75 22.8 20.6 5.4 5.2 1.1 1.0 0.9 0.7
Thailand Asia Aviation 753 1,800 1,963 110 118 127 245 6.6 7.7 12.9 8.3 1.0 0.9 8.5 8.1
Malaysia AirAsia X 269 1,686 1,756 32 46 21 27 7.4 11.8 15.3 10.5 0.9 1.2 5.9 8.1
AirAsia Group 2,441 3,422 3,766 246 282 285 316 11.4 11.5 8.5 7.3 1.0 0.9 3.3 3.0
UAE Air Arabia 1,545 1,470 1,514 172 179 180 184 10.9 10.6 8.5 8.3 0.9 0.9 6.0 5.8
China Spring Airlines 6,327 3,180 3,793 504 595 398 485 14.4 14.3 15.8 - 2.2 1.8 9.8 8.4
Juneyao Airlines 3,928 3,433 4,020 456 563 358 439 15.8 16.7 11.0 9.1 1.7 1.5 7.1 8.2
Asia average 1,936 2,118 2,366 210 245 184 224 15.4 15.5 10.4 7.9 1.4 1.3 5.5 5.6
US Southwest Airlines 33,149 28,899 30,289 4,065 4,380 3,125 3,332 24.1 23.2 10.0 9.0 2.0 1.6 6.0 5.8
JetBlue Airways 6,516 10,318 10,978 1,160 1,275 793 907 13.0 12.4 8.1 7.1 0.9 0.8 4.6 4.1
SkyWest 3,626 3,469 3,487 618 607 380 382 13.6 11.3 9.4 9.3 1.2 1.1 6.6 7.0
Alaska Air 8,829 10,756 11,308 1,330 1,432 959 1,048 18.9 18.1 9.1 8.2 1.5 1.4 5.6 5.5
Allegiant Travel 2,755 2,380 2,623 432 490 269 295 26.7 22.8 10.0 9.6 2.3 1.9 5.8 5.5
Spirit Airlines 4,062 5,232 5,877 720 827 503 587 16.4 14.9 8.0 7.2 1.2 1.0 6.4 5.5
Canada WestJet Airlines 1,884 4,849 5,246 317 397 185 262 9.1 8.9 10.0 7.4 0.8 0.7 3.7 3.1
England EasyJet 6,574 10,593 11,332 792 938 616 714 11.6 12.6 10.6 9.0 1.2 1.1 4.7 4.1
Ireland Ryan Air 19,646 11,119 12,063 1,598 1,936 1,327 1,638 19.0 19.9 14.6 11.7 2.6 2.2 8.6 7.4
Global average 5,804 5,927 6,361 718 805 545 621 16.1 15.7 10.2 8.3 1.4 1.3 5.7 5.4
Source: Bloomberg, Mirae Asset Daewoo Research
32| 2H19 Outlook [Transportation] Mirae Asset Daewoo Research Global peer group valuations
Bulk shippers (Wbn, %, x)
Revenue Operating profit Net profit ROE P/E P/B EV/EBITDA Market Company cap 19F 20F 19F 20F 19F 20F 19F 20F 19F 20F 19F 20F 19F 20F
Korea Korea Line 568 1,620 1,723 185 199 84 105 9.5 9.5 6.8 5.4 0.6 0.5 7.6 7.5
Pan Ocean 2,483 2,954 3,128 249 264 194 210 6.5 6.6 13.2 11.8 0.8 0.8 8.2 7.8
China COSCO Shipping Holdings 10,288 26,183 30,076 1,396 1,811 347 502 6.3 6.6 16.0 11.4 1.1 1.1 15.5 12.1
COSCO Shipping Energy 3,924 2,724 3,024 657 917 345 477 6.6 8.8 8.1 5.8 0.5 0.5 8.3 7.0
Hong Sinotrans Shipping - 1,300 1,421 143 169 139 164 6.5 7.3 ------Kong
Pacific Basin Shipping 1,013 2,169 2,062 181 190 148 146 10.6 7.9 6.9 6.9 0.6 0.6 5.3 5.1
Taiwan U-Ming Marine Transport 1,010 ------
Thailand Precious Shipping 442 198 214 60 82 26 36 5.3 7.0 13.5 12.6 0.9 0.8 9.3 8.5
Thoresen Thai 349 637 - 32 - 24 - - - 15.8 - - - - -
Global average 2,510 4,723 5,950 363 519 163 234 7.3 7.7 11.5 9.0 0.8 0.7 9.0 8.0 Source: Bloomberg, Mirae Asset Daewoo Research
33| 2H19 Outlook [Transportation] Mirae Asset Daewoo Research Coverage overview
Target Price Current Price Company Ticker Rating (12M, W) (5/7/19, W)
CJ Logistics 000120 KS Buy W220,000 W161,500
Korean Air 003490 KS Buy W45,000 W33,550
Asiana Airlines 020560 KS Hold - W6,300
Jeju Air 089590 KS Buy W50,000 W40,300
Hyundai Glovis 086280 KS Buy W190,000 W158,000
Source: Mirae Asset Daewoo Research
34| 2H19 Outlook [Transportation] Mirae Asset Daewoo Research APPENDIX 1
Important Disclosures & Disclaimers 2-Year Rating and Target Price History
Company (Code) Date Rating Target Price Company (Code) Date Rating Target Price CJ Logistics(000120) 11/06/2018 Buy 50,000 02/10/2019 Buy 220,000 08/07/2018 Buy 60,000 04/20/2018 Buy 200,000 06/21/2018 Buy 62,000 12/19/2017 Buy 180,000 05/08/2018 Buy 65,000 11/08/2017 Buy 200,000 04/06/2018 Buy 60,000 04/13/2017 Buy 230,000 02/06/2018 Buy 52,000 Jeju Air(089590) 06/20/2017 Buy 50,000 05/07/2019 Buy 50,000 04/26/2017 Buy 42,000 04/05/2019 Buy 47,000 01/14/2019 Buy 45,000
(W) CJ Logistics (W) Jeju Air
250,000 80,000
200,000 60,000 150,000 40,000 100,000
20,000 50,000
0 0 May 17 May 18May May 17 19 May 18 May 19
Stock Ratings Industry Ratings Buy : Relative performance of 20% or greater Overweight : Fundamentals are favorable or improving Trading Buy : Relative performance of 10% or greater, but with volatility Neutral : Fundamentals are steady without any material changes Hold : Relative performance of -10% and 10% Underweight : Fundamentals are unfavorable or worsening Sell : Relative performance of -10%
Ratings and Target Price History (Share price (─), Target price (▬), Not covered (■), Buy (▲), Trading Buy (■), Hold (●), Sell (◆)) * Our investment rating is a guide to the relative return of the stock versus the market over the next 12 months. * Although it is not part of the official ratings at Mirae Asset Daewoo Co., Ltd., we may call a trading opportunity in case there is a technical or short-term material development. * The target price was determined by the research analyst through valuation methods discussed in this report, in part based on the analyst’s estimate of future earnings. * The achievement of the target price may be impeded by risks related to the subject securities and companies, as well as general market and economic conditions.
35| 2H19 Outlook [Transportation] Mirae Asset Daewoo Research APPENDIX 1
Equity Ratings Distribution & Investment Banking Services Buy Trading Buy Hold Sell Equity Ratings Distribution 83.52% 8.24% 8.24% 0.00% Investment Banking Services 82.61% 4.35% 13.04% 0.00% * Based on recommendations in the last 12-months (as of March 31, 2019)
Disclosures As of the publication date, Mirae Asset Daewoo Co., Ltd. and/or its affiliates do not have any special interest with the subject company and do not own 1% or more of the subject company's shares outstanding.
Analyst Certification The research analysts who prepared this report (the “Analysts”) are registered with the Korea Financial Investment Association and are subject to Korean securities regulations. They are neither registered as research analysts in any other jurisdiction nor subject to the laws 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 division. At the time of publication of this report, the Analysts do not know or have reason to know of any actual, material conflict of interest of the Analyst or Mirae Asset Daewoo except as otherwise stated herein.
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36| 2H19 Outlook [Transportation] Mirae Asset Daewoo Research APPENDIX 1
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37| 2H19 Outlook [Transportation] Mirae Asset Daewoo Research Mirae Asset Daewoo International Network
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38| 2H19 Outlook [Transportation] Mirae Asset Daewoo Research