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November 30, 2015 November 30, 2015 KOREA Sector News & Analysis Major Indices Close Chg Chg (%) Food & Beverage (Overweight) KOSPI 1,991.97 -37.02 -1.82 Impact of soju price hike KOSPI 200 244.24 -4.83 -1.94 KOSDAQ 688.38 -5.83 -0.84 Healthcare (Overweight) Healthcare Weekly Briefing Turnover ('000 shares, Wbn) Volume Value KOSPI 446,112 6,410 Economy & Strategy Update KOSPI 200 115,702 4,940 Fixed Income Monthly KOSDAQ 627,230 3,447 Prepare for a yield decline Market Cap (Wbn) Value KOSPI 1,263,673 KOSDAQ 199,424 KOSPI Turnover (Wbn) Buy Sell Net Foreign 3,090 3,638 -548 Institutional 825 788 37 Retail 2,364 1,998 366 KOSDAQ Turnover (Wbn) Buy Sell Net Foreign 375 381 -5 Institutional 109 199 -90 Retail 2,952 2,860 92 Program Buy / Sell (Wbn) Buy Sell Net KOSPI 2,547 3,238 -690 KOSDAQ 229 243 -14 Advances & Declines Advances Declines Unchanged KOSPI 205 626 49 KOSDAQ 305 751 62 KOSPI Top 5 Most Active Stocks by Value (Wbn) Price (W) Chg (W) Value Samsung Electronics 1,284,000 -43,000 677 KODEX LEVERAGE 10,015 -395 250 Hanmi Pharm 794,000 -32,000 200 Hyundai Motor 147,500 -3,500 154 KODEX INVERSE 8,215 160 151 KOSDAQ Top 5 Most Active Stocks by Value (Wbn) Price (W) Chg (W) Value Daum Communications 120,600 4,500 363 BARUN 3,460 795 153 CJ E&M 84,400 1,400 146 Celltrion 86,300 -1,200 101 Timo Technology 4,960 -660 89 Note: As of November 30, 2015 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. Food & Beverage (Overweight/Maintain) Impact of soju price hike Hite Jinro, Korea’s largest soju maker, raises soju prices by 5.6% due to rising costs and government’s planned increase in empty bottle deposits and handling fees News Comment Price hike to lift Hite Jinro’s soju revenue by W40-45bn, assuming demand is November 30, 2015 unaffected Beer prices also likely to be raised, albeit with some time lag Daewoo Securities CCo.,o., Ltd. Hite Jinro raises soju prices by 5.6% [F&B/Tobacco] On November 27 th , Hite Jinro announced that it will raise the ex-factory price of its soju Woon-mok Baek +822-768-4158 (Chamisul Fresh and Chamisul Classic 360ml) by 5.6% (W54) to W1,015.7 per bottle (from [email protected] W961.7 currently). As a result of the ex-factory price hike (which is the first in three years), retail prices at convenience stores and hypermarkets are expected to rise by around W70-W100. It is not yet clear whether restaurants and bars will also raise prices. Other soju makers, such as Lotte Chilsung, Muhak, and Bohae Brewery, are likely to follow Hite Jinro’s lead and increase prices. The markup had already been anticipated since October due to the government’s decision to increase handling fees and refundable deposits of empty bottles. Handling fees refer to wholesalers’ and retailers’ cost of storing and transporting empty bottles recovered from purchasers, while deposits are the refunds consumers receive when returning empty bottles to retailers. The Ministry of Environment unveiled plans to raise handling fees and deposits of empty bottles starting January 21 st , 2016. For soju, handling fees will increase by W17 (to W33 from W16) and deposits by W60 (to W100 from W40). For beer, handling fees will increase by W14 (to W33 from W19) and deposits by W80 (to W130 from W50). Altogether, handling fees and deposits will surge 137.5% (W77) to W133 (from W56) for soju and 136.2% (W94) to W163 (from W69) for beer. Table 111.1. Soju price comparison Previous Revised Increase Price Composition PricePricePrice Composition (%)(%)(%) (W)(W)(W) (%)(%)(%) (W)(W)(W) (%)(%)(%) FFFactoryFactory price 451.6 37.1 476.9 37.1 5.65.65.6 Liquor tax 325.1 26.7 343.4 26.7 5.6 Education tax 97.5 8.0 103.0 8.0 5.6 Supply price 874.3 71.9 923.3 71.9 5.6 Value-added tax 87.4 7.2 92.3 7.2 5.6 Total taxes 510.1 41.9 538.7 41.9 5.6 ExExEx-Ex ---factoryfactory price 961.7 79.1 1,015.7 79.1 5.65.65.6 Tax burden (%) - 53.0 - 53.0 - Distribution margin 96.2 7.9 101.6 7.9 5.6 Retail margin 158.7 13.0 167.6 13.0 5.6 Consumer price 1,216.6 100.0 1,284.8 100.0 5.6 Notes: Based on a 360ml bottle of Chamisul Fresh; Consumer prices are estimates Source: KDB Daewoo Securities Research Beer prices are also likely to be raised, possibly three to six months after the soju price hikes. But given fiercer market competition, it may take longer for beer price increases to materialize. Analysts who prepared this report are registered as research analysts in Korea but not in any other jurisdiction, including tthehe U.S. PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES & DISCLAIMERS IN APPENDIX 1 AT THE END OF REPORT. Healthcare (Overweight/Maintain) Healthcare Weekly Briefing 1. Major issues Sector Update November 27, 2015 Hanmi signs out-licensing deal with ZAI Lab (November 23 rd ) Hanmi Pharmaceutical announced that it signed a US$92mn out-licensing deal with ZAI Lab of China for HM61713, an EGFR-targeted therapy for the treatment of lung cancer. Under the Daewoo Securities CCo.,o., Ltd. agreement, Hanmi will receive an upfront payment of $7 million plus running royalties, and [Healthcare] ZAI Lab, the licensee, will gain the exclusive rights to jointly develop and commercialize the drug in China (including Hong Kong and Macau). Hyun-tae Kim +822-768-3251 The out-licensing agreement provides further proof of Hanmi’s advanced R&D capabilities. [email protected] Looking ahead, progress in HM61713 clinical trials should help strengthen the firm’s Seung-min Kim medium/long-term fundamentals and future enterprise value. +822-768-4157 [email protected] Hanmi is also seeking partnerships with several other overseas counterparts, which should boost investor confidence in the pharmaceutical/biotechnology sector. Table 111.1. Summary of Hanmi PharmaceuticalPharmaceutical’’’’ss deal with ZAI Lab Detail Type of agreement - Out-licensing Licensee - ZAI Lab (China) Drug - HM61713, a targeted therapy for the treatment of EGFR mutation positive lung cancer - Under the agreement, ZAI Lab has the exclusive rights for the development, approval, production, and commercialization of HM61713 in China Agreement detail (including Hong Kong an d Macao) - Hanmi will receive an upfront payment of US$7mn and is entitled to potential milestone payments of US$85mn. Date of signing November 20, 2015 BOD resolution November 20, 2015 - Hanmi is also entitled to tiered royalties on future sales in addition to the aforementioned Other major details payments. that could affect investment decision - Hanmi will disclose any major changes to the agreement or other events related to the agreement in a prompt manner. Source: Dart, KDB Daewoo Securities Research Analysts who prepared this report are registered as research analysts in Korea but not in any other jurisdiction, including tthehe U.S. PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES & DISCLAIMERS IN APPENDIX 1 AT THE END OF REPORT. Fixed Income Monthly Prepare for a yield decline 1. Domestic economy peaked in 3Q; Skepticism over progress of recovery Considering current global economic conditions and the monetary policy environment, we expect bond yields to decline after the December FOMC meeting. On the domestic front, economic fundamentals and monetary policy should be particularly favorable for the bond market around the January MPC meeting, when 4Q Fixed Income Report economic data are set to be released. And the currently tight short-term funding market November 30, 2015 should loosen up in December with loan demand peaking in the month. Thus, we advise investors to view current yield levels as a buying opportunity despite the fact that w e Daewoo Securities CCo.,o., Ltd. could see fluctuations until the next FOMC meeting. [Fixed Income] At end-October, the bond market looked likely to become overheated due to long-term investors’ buying of long-term bonds. However, healthy 3Q GDP growth numbers and Yeo-sam Yoon the US rate hike possibility led to a cooldown. In addition, household debt has continued +822-768-4022 to snowball, and real estate presales have been robust. CPI growth , which began to fall [email protected] in 4Q14, picked up YoY on a low base effect. Nevertheless, we expect the base rate to be cut once again t o 1.25% in late 1Q16 in light of the Korean economy’s vulnerability to macro conditions.
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