March 20, 2014

KOREA

Company News & Analysis Major Indices Close Chg Chg (%) (004170/Buy/TP: W295,000) KOSPI 1,919.52 -18.16 -0.94 Jan.-Feb. review KOSPI 200 248.68 -2.64 -1.05 KOSDAQ 541.79 -0.46 -0.08

Turnover ('000 shares, Wbn) Volume Value KOSPI 216,319 3,276 KOSPI 200 61,315 2,646 KOSDAQ 362,817 1,838

Market Cap (Wbn) Value KOSPI 1,136,823 KOSDAQ 131,728

KOSPI Turnover (Wbn) Buy Sell Net Foreign 789 1,001 -211 Institutional 797 839 -41 Retail 1,663 1,422 241

KOSDAQ Turnover (Wbn) Buy Sell Net Foreign 103 91 12 Institutional 87 98 -11 Retail 1,646 1,644 2

Program Buy / Sell (Wbn) Buy Sell Net KOSPI 505 683 -178 KOSDAQ 20 17 4

Advances & Declines Advances Declines Unchanged KOSPI 259 529 88 KOSDAQ 402 519 75

KOSPI Top 5 Most Active Stocks by Value (Wbn) Price (W) Chg (W) Value KODEX LEVERAGE 10,875 -280 353 Electronics 1,262,000 -7,000 148 KODEX INVERSE 7,980 100 118 SK Energy 117,500 -7,500 117 OCI 182,000 -11,000 114

KOSDAQ Top 5 Most Active Stocks by Value (Wbn) Price (W) Chg (W) Value SM 47,800 -1,950 71 Nowcom 22,100 1,900 68 Keayeast 2,415 135 42 IntroMedic 15,500 950 33 Dae Han New Pharm 7,050 10 32 Note: As of March 20, 2014

This document is a summary of a report prepared by Daewoo Securities Co., Ltd. (“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. 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. 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.

Shinsegae (004170 KS) Jan.-Feb. review

Retail What’s new: Operating profit down 1% YoY in January-February In February, Shinsegae’s gross merchandise sales (GMS) fell 4.8% YoY to W317.5bn, but Company Update operating profit rose 30.5% YoY to W12.3bn. Department store same-store sales (SSS) March 20, 2014 remained flat YoY in the month. Though sales declined YoY due to the difference in the timing of the Lunar New Year holiday (February 10, 2013 vs. January 31, 2014),

operating profit improved sharply, as holiday-related expenses (promotions, gift card (Maintain) Buy issuance, etc.) were booked in January this year. From January to February, GMS declined 3.9% YoY to W657.4bn, wh ile operating profit Target Price (12M, W) 295,000 fell 1.2% YoY to W26bn. The weak performance was in large part due to the delayed normalization of SSG.com, an integrated online shopping mall for Shinsegae Group Share Price (03/19/14, W) 225,000 retailers (including Shinsegae Mall).

Expected Return 31% SSG.com resumed normal operations after mid-February, later than originally anticipated, causing customer defections and additional costs. As a result, Shinsegae

Mall’s revenue slumped 39.5% YoY from January to February and losses expanded from OP (14F, Wbn) 337 W3.8bn in 2013 to W5.6bn in 2014. We expect the online business to weigh on the Consensus OP (14F, Wbn) 331 company’s earnings for some time. Earnings are unlikely to sharply recover in March EPS Growth (13F, %) -2.5 with consumer spending still weak and Shinsegae Mall likely to remain under pressure. Market EPS Growth (13F, %) 5.1 Catalysts P/E (13F, x) 15.8 Market P/E (13F, x) 12.3 In 2014, we expect profitability to c ontinue to improve thanks to higher cost efficiency KOSPI 1,937.68 and lower depreciation expenses.

Market Cap (Wbn) 2,215 We project depreciation expenses to start decreasing from 2Q. Depreciation expenses Shares Outstanding (mn) 10 for the Centum City and Yeoungdeungpo branches will likely decrease by W17bn, while Free Float (%) 72.8 th e expected lease renewals of the Gangnam and Centum City stores should drive up Foreign Ownership (%) 51.8 depreciation by W7bn. Indeed , annual depreciation expenses should decline by around Beta (12M) 0.93 W10bn in 2014. The company made aggressive cost-cutting efforts, including SG&A 52-Week Low 198,500 reductions, amid sluggish consumption in 2013. In the event of a recovery in 52-Week High 269,000 consumption, these cost-cutting efforts, along with falling depreciation expenses, will (%)(%)(%) 1M1M1M 6M6M6M 12M12M12M likely lead to a marked improvement in profitability. Absolute 0.7 -1.3 -1.1 Maintain Buy and TP of W295,000 Relative 0.9 2.1 1.0 We retain Buy on Shinsegae with a target price of W295,000. Although there will be no

130 Shinsegae KOSPI momentum from the opening of new stores until 2015, the company will likely exhibit 120 higher profitability improvement than its competitors once private consumption picks 110 up, backed by its steady cost-saving efforts . We see muted downside risks given the 100 expected fall in depreciation expenses from 2Q. However, upside momentum should 90 also remain limited due to sluggish consumption and the delayed recovery of Shinsegae 80 Mall. 3.13 7.13 11.13 3.14

Daewoo Securities CCo.,o., Ltd. FY (Dec.) 12/10 12/11 12/12 12/13 12/14F 12/15F Revenue (Wbn) 1,868 2,185 2,296 2,442 2,518 2,758 [Retail] OP (Wbn) 237 254 250 306 337 370

Young Ryu OP margin (%) 12.7 11.6 10.9 12.5 13.4 13.4 +822-768-4138 NP (Wbn) 1,087 3,502 162 158 169 202 [email protected] EPS (W) 28,829 182,729 16,415 16,010 17,155 20,533 ROE (%) 18.6 75.7 7.7 6.8 6.8 7.6

P/E (x) 10.5 1.3 13.3 15.8 13.1 11.0 P/B (x) 1.6 1.2 1.0 1.0 0.9 0.8 Notes: All figures are based on consolidated K-IFRS; NP refers to net profit attributable to controlling interests Source: Company data, KDB Daewoo Securities Research estimates

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

Key Universe Valuations March 20, 2014

※All data as of close March 19, 2014, unless otherwise noted.

14F Earnings growth Mkt Cap Price P/E (x) P/B (x) ROE (%) Ticker Company Div Yield OP EPS (Wbn) (W) (%) 14F 15F 14F 15F 14F 15F 14F 15F 14F 15F 005930 185,892 1,262,000 1.4 -2.1 6.2 -1.7 6.1 7.3 6.9 1.2 1.0 18.5 16.8 005380 Hyundai Motor 50,553 229,500 0.9 3.7 2.9 0.5 4.1 7.6 7.3 1.1 0.9 15.4 13.9 012330 29,106 299,000 0.7 7.7 10.2 10.4 7.3 7.7 7.2 1.2 1.1 17.2 15.8 035420 NAVER 26,865 815,000 0.1 79.0 24.6 108.5 23.7 39.3 31.7 11.2 8.7 41.8 40.9 000660 SK Hynix 26,242 36,950 32.1 0.5 38.2 -3.4 6.6 6.8 1.5 1.3 26.3 20.2 005490 POSCO 25,066 287,500 2.8 34.2 25.9 60.9 35.8 11.3 8.3 0.6 0.5 5.2 6.8 015760 KEPCO 24,202 37,700 280.7 21.5 3070.8 55.3 10.8 6.9 0.5 0.4 4.4 6.5 000270 Motors 23,065 56,900 1.4 -4.9 8.9 -6.2 11.4 6.4 5.8 1.0 0.8 16.4 15.7 055550 Shinhan Financial Group 20,770 43,800 - - - - 0.0 0.0 032830 Samsung Life 19,720 98,600 - - - - 0.0 0.0 017670 SK Telecom 17,280 214,000 4.4 14.6 6.5 17.3 6.5 9.5 9.0 1.4 1.3 13.0 12.8 051910 LG Chem 15,806 238,500 1.7 9.8 38.8 15.9 39.8 12.0 8.6 1.4 1.2 12.0 15.0 009540 Hyundai Heavy 15,276 201,000 1.2 19.3 64.1 53.6 90.8 20.1 10.5 0.8 0.7 4.3 7.8 105560 KB Financial Group 13,909 36,000 - - - - 0.0 0.0 086790 11,132 38,400 - - - - 0.0 0.0 096770 SK Innovation 10,865 117,500 2.7 32.1 32.9 66.4 34.9 8.6 6.4 0.6 0.6 7.8 9.8 033780 KT&G 10,846 79,000 4.1 8.0 2.6 38.9 4.6 13.7 13.1 1.8 1.7 14.5 14.1 000810 Samsung F&M 10,612 224,000 - - - - 0.0 0.0 066570 LG Electronics 10,261 62,700 0.6 31.2 43.3 329.1 56.8 15.0 9.5 1.0 1.0 6.3 9.4 023530 Lotte Shopping 9,904 314,500 0.5 9.4 14.1 25.7 16.1 9.5 8.2 0.6 0.6 6.5 7.0 003550 LG Corp. 9,577 55,500 1.8 19.9 8.3 11.5 7.2 9.5 8.8 0.8 0.7 8.5 8.5 034220 LG Display 9,178 25,650 1.9 -31.7 23.3 38.3 24.5 15.6 12.5 0.9 0.8 5.5 6.6 000830 Samsung C&T 9,139 58,500 0.9 35.4 12.6 36.9 14.9 19.8 17.2 0.9 0.9 4.2 4.7 003600 SK Holdings 8,852 188,500 1.3 47.5 16.4 117.9 9.9 7.9 7.2 0.7 0.6 9.2 9.3 086280 8,194 218,500 0.7 10.6 13.2 17.1 12.7 14.5 12.9 2.9 2.4 21.8 20.3 034730 SK C&C 7,675 153,500 0.8 11.8 10.2 182.8 8.8 14.4 13.2 2.3 2.0 20.5 18.7 030200 KT 7,651 29,300 2.7 -2.4 51.6 229.2 191.4 29.1 10.0 0.8 0.8 2.2 6.2 004020 7,611 65,300 0.8 63.8 8.1 20.4 14.3 7.6 6.6 0.5 0.5 6.9 7.3 161390 7,420 59,900 1.2 9.7 8.4 9.6 8.7 8.7 8.0 1.6 1.4 19.7 18.1 051900 LG Household & Health Care 7,208 461,500 0.8 10.2 10.1 8.4 10.8 21.2 19.1 4.4 3.7 23.4 21.5 090430 Amorepacific 6,933 1,186,000 0.5 10.1 10.6 14.9 13.5 27.0 23.8 3.0 2.7 11.3 11.6 010950 S-Oil 6,924 61,500 4.8 136.0 28.1 132.8 28.1 9.9 7.7 1.2 1.1 12.8 14.9 010140 Samsung Heavy 6,845 29,650 1.7 9.8 12.8 34.6 16.3 8.0 6.9 1.0 0.8 13.8 14.2 006400 Samsung SDI 6,743 148,000 1.0 - 103.3 191.1 18.7 18.4 15.5 0.9 0.9 5.1 5.8 035250 6,632 31,000 3.4 13.8 9.1 12.5 11.4 16.8 15.1 2.2 2.1 14.7 15.2 139480 Emart 6,551 235,000 0.6 8.7 11.4 9.7 13.7 12.8 11.2 0.9 0.9 7.5 8.0 010130 Korea Zinc 6,180 327,500 1.5 36.5 2.4 47.2 4.1 9.4 9.0 1.3 1.1 14.6 13.5 011170 Lotte Chemical 5,998 175,000 0.6 26.3 68.0 66.2 75.1 14.4 8.2 0.9 0.8 6.5 10.4 036460 KOGAS 5,917 64,100 2.6 3.4 17.6 - 40.3 16.7 11.9 0.7 0.7 4.4 5.9 000720 Hyundai E&C 5,891 52,900 0.9 10.7 29.9 9.6 37.0 10.8 7.9 1.1 1.0 10.5 13.0 088350 Hanwha Life 5,863 6,750 - - - - 0.0 0.0 021240 COWAY 5,800 75,200 1.5 5.3 14.7 -2.9 15.8 22.8 19.7 5.7 4.7 25.5 24.8 042660 DSME 5,742 30,000 1.0 33.9 39.3 29.3 50.4 15.6 10.3 1.1 1.0 7.3 10.1 036570 NCsoft 4,868 222,000 0.3 89.4 31.2 131.8 21.3 13.2 10.9 3.0 2.4 27.7 25.9 009150 Samsung Electro-Mechanics 4,848 64,900 1.2 -5.1 31.3 -5.0 32.4 16.1 12.1 1.1 1.1 7.3 9.0 001800 Orion 4,767 798,000 0.4 1.5 13.1 7.5 20.6 30.3 25.1 3.7 3.3 13.2 14.1 018880 Halla Climate Control 4,489 42,050 1.9 7.7 - 8.1 - 13.3 2.3 18.7 0.0 047050 Daewoo International 4,475 39,300 0.8 104.9 31.3 165.9 26.9 12.2 9.6 1.7 1.5 15.1 16.5 032640 LG Uplus 4,410 10,100 2.5 20.3 19.0 43.5 29.2 11.0 8.5 1.2 1.0 9.5 11.3 078930 GS 4,386 47,200 2.9 42.4 18.0 37.2 19.5 8.6 7.2 0.6 0.6 7.7 8.6 Source: KDB Daewoo Securities Research

Market Data March 20, 2014

※All data as of close March 20, 2014, unless otherwise noted.

Other Major Indices Economic Indicators Close Net Chg 1D (%) YTD (%) Close 1D ago 1M ago 1Y ago MSCI Korea* 413.39 -1.66 -0.40 -6.58 USD/KRW 1,070.70 1,067.90 1,067.10 1,110.20 KOSPI 1,919.52 -18.16 -0.94 -2.42 JPY100/KRW 1,045.50 1,052.95 1,042.75 1,167.83 KOSDAQ 541.79 -0.46 -0.08 9.17 EUR/KRW 1,480.03 1,487.85 1,465.56 1,427.88 Dow Jones* 16,222.17 -114.02 -0.70 -1.33 3Y Treasury 2.87 2.83 2.86 2.60 S&P 500* 1,860.77 -11.48 -0.61 1.57 3Y Corporate 3.30 3.26 3.28 2.94 NASDAQ* 4,307.60 -25.71 -0.59 3.97 DDR2 1Gb* 1.74 1.74 1.79 1.72 Philadelphia Semicon* 576.69 -0.50 -0.09 9.27 NAND 16Gb* 3.03 3.03 3.10 3.00 FTSE 100* 6,573.13 -32.15 -0.49 -2.16 Oil (Dubai)* 103.04 103.09 106.91 105.25 Nikkei 225 14,224.23 -238.29 -1.65 -10.59 Gold* 1,341.30 1,359.00 1,320.60 1,611.30 Hang Seng* 21,568.69 -14.81 -0.07 -7.59 Customer deposits (Wbn)* 13,982 13,948 13,556 18,579 Taiwan (Weighted) 8,597.33 -92.13 -1.06 -0.18 Equity type BC (Wbn)(Mar. 18) 83,427 83,275 84,512 91,374 Note: * as of March 19, 2014 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 23.46 NHN 29.05 LG Display 31.56 KODEX LEVERAGE 159.17 Hyundai Mobis 6.77 SK Energy 22.46 KODEX INVERSE 29.96 Samsung Heavy Ind. 20.93 Hyundai Merchant Marine 6.46 POSCO 19.69 POSCO 22.74 Hyundai Merchant Marine 18.27 Hana Financial Group 5.13 Samsung Electronics 15.85 Kia Motors 21.93 16.79 Hyundai Mipo Dockyard 4.61 Hyundai Motor 15.55 LG Electronics 17.06 Hynix 16.49 KODEX LEVERAGE 4.36 Kia Motors 14.94 NHN 15.63 Hyundai Steel 14.40 3.88 LG Household & Health Care 12.13 SK Telecom 11.13 Hyundai Mipo Dockyard 11.48 Woongjin Coway 3.58 Hyundai Eng. & Cosnt. 12.03 SK Chemical 7.74 LG Chem 11.18 Shinhan Financial Group 3.39 KB Financial Group 11.57 Corp. 5.80 Shinhan Financial Group 10.70 Kangwon Land 3.07 Samsung Heavy Ind. 9.86 SK Networks 5.44 KB Financial Group 9.90 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 SM 3.98 Medy-tox 2.77 GOLFZON 3.07 SK Broadband 3.78 NaturalendoTech 3.61 Celltrion 2.36 e-LITECOM 2.20 Nowcom 3.62 Nowcom 3.20 SK Broadband 1.90 YG Entertainment 1.35 Semiconductor 2.83 Daum Communications 2.26 Seoul Semiconductor 1.71 SM C&C 1.25 Maeil Dairy Industry 2.63 Wemade 2.01 Paradise 1.51 Kyungdong Pharm 1.18 NaturalendoTech 1.70 ATTO 1.58 Interpark 1.16 CJ E&M 1.13 Macrogen 1.33 POSCO ICT 1.56 LION CHEMTECH 1.07 Techno Semichem 1.12 Nongwoo Bio 1.22 KH Vatec 1.42 GS Home Shopping 1.00 SBS Contents Hub 1.06 Access Bio(Reg.S) 0.96 Gamevil 1.36 Com2us 0.94 GS Home Shopping 0.99 Nasmedia 0.93 CJ O Shopping 1.12 Maeil Dairy Industry 0.88 Woory Industrial 0.98 Koh Young 0.86 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 1,262,000 -7,000 185,892 Celltrion 40,900 -700 4,111 Hyundai Motor 229,500 -1,500 50,553 Paradise 34,500 -150 3,138 Hyundai Mobis 299,000 -5,000 29,106 Seoul Semiconductor 48,800 -1,000 2,845 NHN 815,000 -18,000 26,865 CJ O Shopping 387,700 2,700 2,406 Hynix 36,950 -50 26,242 Ssangyong E&C 136,800 0 1,999 POSCO 287,500 1,000 25,066 CJ E&M 41,600 50 1,611 KEPCO 37,700 -100 24,202 GS Home Shopping 240,700 -3,300 1,580 Kia Motors 56,900 -200 23,065 Dongsuh 15,300 -100 1,525 Samsung Electronics (P) 980,000 -11,000 22,377 POSCO ICT 8,790 80 1,336 Shinhan Financial Group 43,800 -1,150 20,770 SK Broadband 4,115 -175 1,218 Source: