October 17, 2013

KOREA

Company News & Analysis Major Indices Close Chg Chg (%) NAVER (Buy/TP: W700,000) Raise TP KOSPI 2,040.61 6.00 0.29 3Q earnings to reaffirm LINE’s growth potential KOSPI 200 269.59 1.34 0.50 KOSDAQ 521.52 -4.16 -0.79 KT (Buy/TP: W44,000) Next step for KT’s media business: KT Media Hub Turnover ('000 shares, Wbn) Volume Value KOSPI 303,614 4,836 KOSPI 200 92,455 4,084 KOSDAQ 343,518 1,817

Market Cap (Wbn) Value KOSPI 1,195,012 KOSDAQ 121,826

KOSPI Turnover (Wbn) Buy Sell Net Foreign 1,272 990 282 Institutional 1,170 1,394 -224 Retail 2,360 2,392 -32

KOSDAQ Turnover (Wbn) Buy Sell Net Foreign 101 81 21 Institutional 74 136 -62 Retail 1,637 1,596 41

Program Buy / Sell (Wbn) Buy Sell Net KOSPI 874 687 187 KOSDAQ 23 16 7

Advances & Declines Advances Declines Unchanged KOSPI 348 463 73 KOSDAQ 330 567 84

KOSPI Top 5 Most Active Stocks by Value (Wbn) Price (W) Chg (W) Value KODEX LEVERAGE 12,920 100 307 Samsung Electronics 1,463,000 13,000 264 KEPCO 27,500 -2,000 206 NHN 610,000 15,000 186 88,800 3,800 168

KOSDAQ Top 5 Most Active Stocks by Value (Wbn) Price (W) Chg (W) Value DILLI 2,780 -65 54 CJ E&M 36,450 -450 54 MAXROTEC 7,040 -80 45 Seoul Semiconductor 43,350 -1,250 40 Celltrion 47,950 -200 38 Note: As of October 17, 2013

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.

NAVER (035420 KS) 3Q earnings to reaffirm LINE’s growth potential

IT services 3Q LINE revenue to soar 1,273% YoY to W178bn Cumulative LINE downloads topped 270mn on October 14th, rising from 260mn on Earnings Preview September 30th. We expect cumulative downloads will meet our year-end forecast of October 17, 2013 330mn. We estimate LINE revenue surged to W178bn in 3Q, up 1,273% YoY and 59.5% QoQ. In 3Q, four to five LINE games have landed in the top-ten highest grossing mobile games in (Maintain) Buy Japan, including the puzzle game PokoPang (developed by Treenod and released in June). Target Price (12M, W) 700,000 LINE currently services 37 games as of end-3Q, an increase from 32 at end-2Q. In 4Q, the Share Price (10/16/13, W) 595,000 mobile messaging service plans to: 1) release localized mobile games in Taiwan, 2) add app store payment partners to promote the switch to paid apps, and 3) introduce new Expected Return 18% profit models (music streaming and e-commerce services).

Marketing spend jumps in 3Q; Look for LINE growth and seasonal strength in 4Q OP (13F, Wbn) 573 Effective August 1st, NAVER will change its accounting method for recognizing LINE Consensus OP (13F, Wbn) 715 revenue to booking net game revenue (the portion (35%) of gross game revenue that EPS Growth (13F, %) 23.3 goes to LINE). Previously, the company recognized gross game revenue, which included Market EPS Growth (13F, %) 20.9 commissions paid to app stores and the share of revenue given to developers. P/E (13F, x) 42.5 We estimate NAVER’s 3Q revenue climbed 41.1% YoY to W616.7bn. Display ad revenue Market P/E (13F, x) 10.6 likely contracted 18.7% YoY amid the absence of sports and political events and sluggish KOSPI 2,034.61 economic conditions, but we believe this was more than offset by a sharp increase in Market Cap (Wbn) 19,613 both mobile search-ad and LINE revenue (latter based on gross game revenue). Shares Outstanding (mn) 33 Free Float (%) 76.8 We forecast 3Q operating profit to markedly decline QoQ and YoY to W109.8bn. We Foreign Ownership (%) 56.8 mainly attribute this to aggressive global promotional events, which likely pushed up Beta (12M) 1.08 marketing spend to W98bn (vs. W42bn in 2Q). 52-Week Low (W) 215,000 Raise TP by 4.5% to W700,000 following share gains of peer group 52-Week High (W) 639,000 We maintain our Buy call on NAVER and raise our target price to W700,000 (from (%) 1M 6M 12M W670,000) in light of the recent share appreciation of its global peers (Facebook, Absolute 12.5 96.7 115.9 Google, etc.). We derived our target price by applying the P/Es of global peers, Google Relative 11.4 90.9 111.1 and Facebook, to our 2014F EPS (based on the operating profit contributions of the Share price online portal business and LINE). 260 KOSPI

210 The shares of Facebook, which have lately shown a high stock correlation with NAVER, is th 160 set to announce its 3Q earnings results on October 30 (local time). The Bloomberg

110 consensus calls for a 50.5% rise in revenue and 108.4% surge in operating profit for 3Q.

60 Mobile ad revenue is estimated to jump 392% YoY to US$750mn, contributing 44.7% to 10/12 2/13 6/13 10/13 overall ad revenue.

Daewoo Securities Co., Ltd. FY (Dec.) 12/10 12/11 12/12 12/13F 12/14F 12/15F Revenue (Wbn) 1,785 2,121 2,389 2,430 3,491 4,098 Internet/Game/Entertainment OP (Wbn) 590 660 702 573 1,023 1,206 Chang-kwean Kim OP Margin (%) 33.1 31.1 29.4 23.6 29.3 29.4 +822-768-4321 NP (Wbn) 473 450 546 461 710 853 [email protected] EPS (W) 9,830 9,350 11,346 13,992 21,543 25,864

ROE (%) 41.0 31.0 31.4 25.9 37.5 35.7 P/E (x) 36.2 35.4 31.4 42.5 27.6 23.0 P/B (x) 9.5 7.1 6.3 31.1 16.1 10.1 Note: 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 the U.S. PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES & DISCLAIMERS IN APPENDIX 1 AT THE END OF REPORT.

KT (030200 KS/Buy)

Next step for KT’s media business: KT Media Hub

 KT Media Hub in charge of KT’s IPTV operation, mobile IPTV, advertisements and content businesses Company Update  KT Media Hub to contribute to KT’s subscriber retention and profit margin growth October 17, 2013 near-term, as the control tower of the group’s media business  Watch for KT Media Hub’s transformation into a total media content group in the long term

Daewoo Securities Co., Ltd.  Maintain Buy and target price of W44,000 for KT which has a promising media business and attractive dividend yield of 5.6% Media/Telecom service Jee-hyun Moon 1. As KT expands media business, attention now on next phase of growth +822-768-3615 KT’s media and content revenue is currently growing at an impressive rate of over 30% YoY. [email protected] The KT group has been expanding its dominance in the pay-TV market, with more than 6mn media subscribers from IPTV and satellite TV (KT Skylife) combined. Now that KT has secured quantitative growth, much attention is being focused on what the next chapter will be for the

company. Lately, there have been talks among lawmakers of potentially regulating pay-TV market share based on total media subscribers.

Going forward, KT plans to seek ways to boost its media subscriber base beyond IPTV to new media segments like mobile IPTV. It is also looking to expand its content and convergence services and improve its ARPU by driving additional revenue streams. And by building on its broad subscriber base, the company intends to launch a series of new business initiatives. All in all, we believe KT’s media business is on track to achieve qualitative growth. Leading the charge is KT Media Hub, the group’s media content company, which was spun off from KT in late October 2012.

Figure 1. KT’s media and content sales are growing along with its subscriber base (Wbn) ('000 ppl) 400 7,200 KT media content sales (L) KT media subscribers (R)

300 6,400

200 5,600

100 4,800

0 4,000 1Q11 3Q11 1Q12 3Q12 1Q13 3Q13F

Notes: Consolidated basis. IPTV, satellite and content combined; Numbers reflect our forecast from 3Q13 Source: KT, KDB Daewoo Securities Research

FY (Dec.) 12/10 12/11 12/12 12/13F 12/14F 12/15F Revenue (Wbn) 20,009 21,258 23,790 23,468 24,236 24,991 OP (Wbn) 2,008 1,748 1,214 1,241 1,359 1,496 OP Margin (%) 10.0 8.2 5.1 5.3 5.6 6.0 NP (Wbn) 1,477 1,435 1,057 976 1,073 1,182 EPS (W) 5,655 5,497 4,048 3,738 4,111 4,527 ROE (%) 13.7 12.6 8.8 7.8 8.3 8.8 P/E (x) 8.2 6.5 8.8 9.5 8.7 7.9 P/B (x) 1.1 0.9 0.9 0.9 0.9 0.8 Notes: All figures are based on consolidated K-IFRS; NP refers to 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 the U.S. PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES & DISCLAIMERS IN APPENDIX 1 AT THE END OF REPORT.

Key Universe Valuations October 17, 2013

※All data as of close October 16, 2013, unless otherwise noted.

13F Earnings growth Mkt Cap Price P/E (x) P/B (x) ROE (%) Ticker Company Div Yield OP EPS (Wbn) (W) (%) 13F 14F 13F 14F 13F 14F 13F 14F 13F 14F 005930 Samsung Electronics 213,584 1,450,000 0.6 34.4 11.6 37.5 14.7 7.7 6.8 1.7 1.3 24.2 22.5 005380 Hyundai Motor 58,594 266,000 0.8 2.7 8.6 1.9 5.2 8.7 8.3 1.5 1.3 18.1 16.3 012330 28,376 291,500 0.8 -4.0 18.4 -3.8 12.7 8.3 7.4 1.5 1.3 18.6 17.7 005490 POSCO 27,159 311,500 2.5 -14.9 45.1 -29.1 66.5 15.3 9.2 0.6 0.6 4.4 6.9 000270 Motors 26,105 64,400 1.1 5.3 6.2 3.3 8.4 6.5 6.0 1.4 1.1 21.3 19.2 000660 SK Hynix 23,721 33,400 0.5 - 18.9 - 22.0 8.5 7.0 2.1 1.6 24.8 24.0 055550 Shinhan Financial Group 21,884 46,150 0.2 -10.3 14.2 -10.1 13.7 11.6 10.2 0.8 0.8 7.1 7.6 009540 Hyundai Heavy 21,394 281,500 -31.9 47.9 -5.8 72.5 23.1 13.4 1.3 1.2 5.4 8.6 051910 LG Chem 21,074 318,000 1.3 4.1 25.6 3.1 26.2 15.3 12.1 2.0 1.8 13.7 15.3 032830 Samsung Life 20,800 104,000 2.0 0.0 9.3 4.2 4.3 18.1 17.4 1.1 1.0 6.0 5.8 035420 NHN 19,613 595,000 0.1 -18.4 78.5 23.3 54.0 42.5 27.6 31.1 16.1 25.9 37.5 017670 SK Telecom 19,016 235,500 4.4 26.0 29.6 66.0 25.6 9.9 7.9 1.8 1.6 15.6 18.0 015760 KEPCO 18,938 29,500 - 80.9 - 295.0 33.8 8.6 0.4 0.4 1.1 4.3 105560 KB Financial Group 16,092 41,650 -3.3 11.4 3.8 11.4 9.2 8.2 0.6 0.6 6.9 7.4 096770 SK Innovation 14,147 153,000 2.0 21.1 18.1 18.9 24.7 10.2 8.2 0.9 0.9 8.8 10.1 086790 Hana Financial Group 12,002 41,400 -8.7 10.0 -22.8 12.7 8.7 7.7 0.6 0.6 8.8 7.3 000810 Samsung F&M 11,559 244,000 2.8 20.2 14.1 19.2 14.4 11.1 9.7 1.2 1.1 11.7 11.9 066570 LG Electronics 11,472 70,100 0.4 32.1 45.6 670.8 115.3 24.6 11.4 1.2 1.1 4.2 8.8 003550 LG Corp. 11,095 64,300 1.5 5.1 11.4 15.8 5.4 10.4 9.9 1.0 0.9 9.4 9.2 033780 KT&G 10,736 78,200 4.1 -5.8 5.2 -1.8 6.4 14.8 13.9 2.0 1.8 13.8 13.8 010140 Samsung Heavy 10,112 43,800 1.3 11.2 5.6 26.8 8.4 10.0 9.2 1.5 1.3 17.7 16.5 000830 Samsung C&T 9,967 63,800 0.9 -7.1 34.4 -17.3 22.4 27.5 22.5 0.9 0.9 3.2 3.7 003600 SK Holdings 9,510 202,500 1.5 12.7 19.6 20.0 9.6 7.6 7.0 2.2 1.7 10.7 10.8 030200 KT 9,296 35,600 5.2 2.3 9.5 -7.7 10.0 9.5 8.7 0.9 0.9 7.8 8.3 010950 S-Oil 8,759 77,800 3.9 19.5 39.4 25.2 42.8 12.4 8.7 1.6 1.4 13.1 16.9 034220 LG Display 8,677 24,250 1.9 19.4 -27.8 126.3 11.8 16.5 14.7 0.9 0.8 5.1 5.5 006400 Samsung SDI 8,611 189,000 0.9 -43.6 152.4 -66.1 42.3 17.9 12.6 1.2 1.1 6.7 9.2 086280 8,081 215,500 1.0 2.6 10.7 -4.8 14.5 17.1 14.9 3.5 2.9 22.2 21.0 161390 Hankook Tire 7,916 63,900 1.0 258.3 4.8 262.0 2.5 9.4 9.2 2.0 1.7 23.2 19.4 051900 LG Household & Health Care 7,809 500,000 0.7 16.8 12.2 14.5 13.1 25.5 22.5 5.7 4.6 26.0 23.9 011170 Lotte Chemical 7,403 216,000 0.9 36.1 68.3 27.0 56.0 17.2 11.1 1.2 1.1 6.9 9.9 004020 Hyundai Steel 7,252 85,000 0.6 -10.1 65.3 -27.0 37.6 12.5 9.1 0.7 0.7 5.8 7.5 042660 DSME 7,081 37,000 0.9 -14.7 60.0 -11.0 131.5 35.9 15.5 1.5 1.4 4.2 9.1 000720 Hyundai E&C 6,893 61,900 1.2 13.5 22.2 1.2 34.4 13.4 10.0 1.4 1.3 10.8 13.2 024110 Industrial Bank of Korea 6,767 12,300 0.3 -26.5 16.3 -19.6 16.1 8.5 7.3 0.5 0.5 6.6 7.3 009150 Samsung Electro-Mechanics 6,319 84,600 1.3 21.8 9.6 16.7 11.5 12.8 11.5 1.6 1.4 12.5 12.4 035250 Kangwon Land 6,247 29,200 3.2 11.6 15.4 19.7 16.6 17.6 15.1 2.3 2.1 14.3 15.4 088350 Hanwha Life 5,923 6,820 3.5 - - 3.5 1.6 9.8 9.6 0.8 0.8 8.6 8.3 036460 KOGAS 5,917 64,100 -2.5 27.4 -91.8 1075.1 165.0 14.0 1.0 1.0 0.4 4.6 034730 SK C&C 5,875 117,500 1.2 10.3 5.2 30.7 5.9 12.6 11.9 2.1 1.9 19.5 18.3 010130 Korea Zinc 5,803 307,500 1.7 -13.2 20.7 -10.3 25.4 11.6 9.2 1.4 1.2 12.3 13.8 078930 GS 5,510 59,300 2.5 7.4 39.5 -18.8 56.8 14.0 8.9 1.0 0.9 6.2 9.2 001800 Orion 5,379 901,000 0.3 -3.6 7.9 -1.9 16.2 36.2 31.1 5.0 4.3 14.0 14.1 090430 Amorepacific 5,092 871,000 0.7 -4.1 10.2 -2.1 14.9 22.8 19.8 2.5 2.2 10.8 11.3 032640 LG Uplus 4,999 11,450 2.7 395.6 24.9 - 37.8 13.8 10.0 1.5 1.3 9.2 11.7 010060 OCI 4,794 201,000 2.0 -43.8 381.3 - - - 14.6 1.7 1.6 - 10.6 001300 Cheil Industries 4,730 90,200 0.8 1.7 26.8 98.6 -17.8 11.4 13.9 1.7 1.7 12.6 10.3 034020 Doosan Heavy I&C 4,671 44,000 1.8 3.9 6.6 1028.4 19.4 10.9 9.1 1.4 1.4 9.5 11.2 021240 COWAY 4,589 59,500 3.7 33.0 14.0 116.7 3.4 17.7 17.1 5.0 4.2 29.1 25.0 011210 4,477 174,000 0.3 3.6 14.9 4.3 17.3 10.3 8.7 2.1 1.7 21.3 20.2 Source: KDB Daewoo Securities Research

Market Data October 17, 2013

※All data as of close October 17, 2013, unless otherwise noted.

Other Major Indices Economic Indicators Close Net Chg 1D (%) YTD (%) Close 1D ago 1M ago 1Y ago MSCI Korea* 443.63 -1.14 -0.26 3.36 USD/KRW 1,067.10 1,067.90 1,082.20 1,107.10 KOSPI 2,040.61 6.00 0.29 0.47 JPY100/KRW 1,078.75 1,086.92 1,092.03 1,403.70 KOSDAQ 521.52 -4.16 -0.79 3.97 EUR/KRW 1,443.15 1,444.66 1,443.28 1,449.53 Dow Jones* 15,373.83 205.82 1.36 14.62 3Y Treasury 2.85 2.87 2.85 2.81 S&P 500* 1,721.54 23.48 1.38 17.72 3Y Corporate 3.26 3.28 3.25 3.32 NASDAQ* 3,839.43 45.42 1.20 23.36 DDR2 1Gb* 1.63 1.64 1.59 1.17 Philadelphia Semicon* 501.58 5.08 1.02 25.48 NAND 16Gb* 3.58 3.59 3.26 1.96 FTSE 100* 6,571.59 22.48 0.34 9.03 Oil (Dubai)* 107.22 108.42 106.92 110.74 Nikkei 225 14,586.51 119.37 0.83 36.47 Gold* 1,282.00 1,273.00 1,317.80 1,744.70 Hang Seng* 23,228.33 -108.19 -0.46 -0.36 Customer deposits (Wbn)* 15,412 16,163 19,440 17,551 Taiwan (Weighted) 8,374.68 42.50 0.51 7.65 Equity type BC (Wbn)(Oct. 15) 86,588 86,567 89,374 95,511 Note: * as of October 16, 2013 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 Samsung Electronics 108.05 NHN 17.49 KODEX LEVERAGE 29.82 KEPCO 61.01 KODEX 200 51.43 Samsung F&M Insurance 13.70 15.61 Samsung Electronics 55.96 Hynix 42.61 KEPCO 11.00 NHN 13.25 KODEX 200 44.34 KB Financial Group 34.09 NHN Entertainment 10.00 Mando 10.08 Hyundai Steel 31.44 Hyundai Steel 29.04 Mando 9.82 9.09 Kia Motors 21.69 Samsung Heavy Ind. 25.34 Hyundai Mipo Dockyard 9.69 Hyundai Mipo Dockyard 8.96 Hynix 20.51 KT 18.85 Hanwha Chemical 8.45 Kumho Petrochemical 8.65 KT 19.13 DSME 18.59 Kia Motors 7.18 Hanwha Chemical 8.22 TIGER200 12.17 TIGER200 13.83 LG Uplus 6.79 Daelim Industrial 6.50 Samsung Engineering 10.87 Hyundai Mobis 12.77 SEMCO 6.39 LG Fashion 6.15 Samsung SDI 10.52 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 INICIS 9.62 Seoul Semiconductor 3.35 Finetec 4.77 CJ E&M 8.20 CJ O Shopping 5.40 POSCO ICT 2.25 Woory Industrial 1.40 CJ O Shopping 6.44 Duk San Hi Metal 2.21 HyVISION 1.43 Seobu T&D 0.75 SK Broadband 5.98 Taewoong 2.11 Melfas 1.19 Hyunjin Materials 0.70 Seoul Semiconductor 4.46 SK Broadband 2.10 SEEGENE 1.04 Megastudy 0.65 GNCENERGY 3.27 Finetec 1.83 Suprema 0.87 ANP 0.61 Modetour Network 2.73 Medy-tox 1.80 Megastudy 0.87 P&T 0.61 Techno Semichem 2.55 Gamevil 1.75 CTC Bio 0.76 Interpark 0.60 SMEC 1.72 Techno Semichem 1.16 ViroMed 0.52 Humax 0.47 TK Corp. 1.66 STC 1.03 Binex 0.47 e-LITECOM 0.42 KEBT 1.61 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 1,463,000 13,000 215,499 Celltrion 47,950 -200 4,819 Hyundai Motor 264,500 -1,500 58,263 Seoul Semiconductor 43,350 -1,250 2,528 Hyundai Mobis 293,000 1,500 28,522 Paradise 25,100 -150 2,283 POSCO 312,000 500 27,202 CJ O Shopping 333,900 -5,100 2,072 Kia Motors 63,800 -600 25,862 Ssangyong E&C 136,800 0 1,999 Hynix 33,800 400 24,005 Dongsuh 26,200 -600 1,550 Shinhan Financial Group 47,000 850 22,287 GS Home Shopping 231,600 -3,600 1,520 Samsung Electronics (P) 965,000 12,000 22,034 CJ E&M 36,450 -450 1,383 Hyundai Heavy Industries 288,500 7,000 21,926 SK Broadband 4,360 -195 1,290 LG Chem 320,000 2,000 21,207 POSCO ICT 8,900 -430 1,220 Source: Korea Exchange