November 6, 2020 One-Asia Morning Focus

Today’s reports Cosmax (192820 KS/Buy/TP: W145,000) Initiate coverage – Beneficiary of fast-growing Chinese market Kakao (035720 KS/Buy/TP: W460,000) – Another earnings beat; increasing expectations on 4Q20 Korean Air (003490 KS/Hold/TP: W22,000) Downgrade rating – Cargo is the only earnings driver Hyundai Department Store (069960 KS/Buy/TP: W90,000) – Meaningful recovery expected in 4Q20 Studio Dragon (253450 KQ/Buy/TP: W107,000) – OP margin jumps 7%p on China effects CJ ENM (035760 KQ/Buy/TP: W185,000) – Media margins improve J Contentree (036420 KS/Trading Buy/TP: W34,000) – A mixed performance Cafe24 (042000 KQ/Hold/TP: W58,000) – Still lacking growth potential Global performance monitor: Two-day change (%) Asia xJPN World EM World DM Korea Japan China Taiwan HK India Indonesia Singapore Thailand Index 1.60 1.85 4.07 3.53 3.63 1.06 2.04 3.25 2.52 4.47 4.96 4.67 Growth 1.78 1.08 6.19 4.34 5.52 0.00 2.67 3.63 1.70 6.04 4.90 5.89 Value 1.55 1.82 1.79 2.65 1.56 2.59 1.21 2.74 3.26 3.06 5.03 3.54 Semicon. & equip. 2.98 2.97 4.91 6.34 5.88 2.22 2.85 4.63 N/A N/A N/A N/A Tech hardware & equip. 2.24 2.24 4.36 3.28 4.57 4.48 1.00 4.00 -2.07 N/A 1.93 N/A Comm. & prof. services 4.26 4.26 5.42 3.45 5.42 0.36 1.55 N/A 3.11 8.89 N/A N/A Software & services 2.06 2.29 6.27 2.44 8.71 1.96 1.79 2.01 3.23 N/A 1.96 N/A Media & entertainment 0.09 0.34 5.33 6.97 2.49 1.90 2.56 -1.62 3.18 N/A N/A N/A Consumer goods 2.47 2.76 4.00 3.08 4.16 5.09 1.18 N/A 4.23 3.47 N/A 7.35 Consumer services 4.88 5.42 3.76 1.23 4.95 2.92 1.58 3.18 3.19 1.78 3.71 2.83 F&B & tobacco 1.54 2.01 2.62 3.35 2.72 3.09 0.87 2.18 2.85 4.07 1.12 4.99 Food & staples retailing 1.46 3.29 1.97 1.68 1.55 3.99 -0.83 3.13 3.31 N/A 3.11 8.86 Retailing -0.88 -0.33 4.13 1.37 3.13 2.07 0.78 0.01 0.47 4.34 1.15 0.78 HH & personal products 0.17 0.68 2.67 1.59 3.90 4.85 2.28 N/A 1.74 2.40 N/A N/A Pharma & life sciences 3.53 3.68 6.01 6.41 10.49 1.78 1.96 1.77 2.90 3.14 N/A N/A Autos & parts 4.12 4.10 3.30 3.20 1.22 11.90 3.86 -1.60 1.87 1.43 N/A N/A Transportation 2.39 3.55 2.93 2.16 2.27 3.49 1.26 1.24 3.54 N/A 2.13 6.29 Capital goods 1.76 2.33 2.33 2.47 2.97 4.45 2.06 1.54 3.26 N/A 4.07 1.96 Materials 1.59 2.29 1.69 3.49 2.30 4.18 1.05 N/A 2.56 5.41 N/A 4.10 Real estate 2.80 2.11 2.52 0.77 3.95 3.60 0.15 3.62 1.32 N/A 5.44 4.55 Energy 1.99 3.57 1.79 3.81 2.41 1.77 1.69 N/A 5.34 1.20 2.27 3.99 Banks 1.59 1.81 1.21 0.11 0.18 2.31 0.94 2.70 -0.39 4.62 5.31 0.41 Diversified financials 0.78 3.27 3.54 2.14 3.49 1.81 1.95 -0.81 5.77 N/A 3.85 1.80 Telecom services 0.49 0.76 0.40 2.64 2.25 2.08 0.74 0.23 0.36 8.76 7.53 4.95 Utilities 1.34 2.16 1.35 1.13 1.07 2.30 0.71 1.60 1.19 1.90 N/A 7.70

Key thematic ETFs: Change (%) Market movers Mkt cap US dollar total returns (%) Robotics & AI (Global X) Name Ctry Sector (US$mn) 1D 1M 3M 6M 1Y 3Y Cloud Computing (Global X) Top seven performers Lithium & Battery (Global X) Global Power Synergy TH Utilities 5,479 13.6 7.0 -11.7 -7.0 -29.8 28.9 Internet of Things (Global X) Hanwha Solutions KR Materials 6,875 13.2 17.3 74.8 278.6 196.8 51.6 Digitalisation (iShares) Silergy TW Information tech. 6,912 10.2 15.0 18.5 91.2 160.5 255.0 FinTech (Global X) Energy Absolute TH Utilities 5,254 9.7 11.9 -11.8 17.0 -0.2 9.9 Genomics & Biotech (Global X) Telekomunikasi ID Commun. services 19,082 8.7 7.6 -7.2 -8.1 -32.7 -27.2 Health & Wellness (Global X) Gulf Energy TH Utilities 11,874 8.7 4.1 -7.4 -14.4 -11.1 NA Ageing Population (iShares) Seegene KR Healthcare 6,634 8.3 5.2 8.1 249.7 1,228. 905.6 EM Consum Growth (iShares) Bottom seven performers Clean Energy (iShares) United Microelectronics TW Information tech. 13,307 -3.1 7.7 26.3 120.0 135.6 138.5 Water Resources (Invesco) Meralco PH Utilities 6,905 -1.5 7.9 18.5 23.0 -5.5 25.2 Agribusiness (iShares) Advantech TW Information tech. 7,789 -1.3 1.7 -4.4 23.7 11.3 78.0 Global Infrastructure (iShares) Realtek Semiconductor TW Information tech. 6,321 -1.1 -2.9 -6.5 57.1 69.3 245.1 ESG US Leaders (iShares) Delta Electronics TW Information tech. 17,260 -0.9 1.2 -4.6 46.9 47.4 57.3 2D 10D GlobalWafers TW Information tech. 6,600 -0.7 12.4 4.1 22.3 26.5 61.9 (6)(3)0369121518

Novatek TW Information tech. 5,761 -0.7 5.1 -8.4 55.2 36.3 186.5

This publication contains summaries of reports prepared by Mirae Asset Daewoo Co., Ltd. and/or its non-US affiliates (“Mirae Asset Daewoo”). Please review the compliance notices contained in the original reports. 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. Mirae Asset 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. Mirae Asset 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.

November 6, 2020 One-Asia Morning Focus

MSCI valuations (DM, EM, Asia ex-JP)

17 12M forward P/E (x) 22 2.0 12M trailing P/B (x) 2.8 21 16 20 2.6 1.8 15 19 2.4 14 18 1.6 17 13 2.2 16 1.4 12 15 2.0 11 14 1.2 13 1.8 10 12 9 11 1.0 1.6 Nov-19 Feb-20 May-20 Aug-20 Nov-19 Feb-20 May-20 Aug-20 MSCI Asia ex-JP (L) MSCI World EM (L) MSCI World DM (R) MSCI Asia ex-JP (L) MSCI World EM (L) MSCI World DM (R)

MSCI 12M forward P/E (x) Currencies (vs. USD) Value Change(%) Korea Vietnam 1D 3M YTD

13 19 KRW 1,128.2 -0.84 -5.11 -2.45 CNY 6.6 -1.09 -4.50 -4.68 11 16 JPY 103.7 -0.79 -1.81 -4.62 IDR 14,380.0 -1.27 -1.17 3.58 9 13 HKD 7.8 0.00 0.07 -0.46 TWD 28.5 -0.40 -2.83 -4.86 7 10 Nov-19 Feb-20 May-20 Aug-20 Nov-19 Feb-20 May-20 Aug-20 SGD 1.4 -0.54 -1.26 0.46 THB 30.9 -0.83 -0.39 3.09 Indonesia India 19 24 INR 74.4 -0.45 -0.72 4.23 22 PHP 48.3 -0.18 -1.55 -4.61 17 20 MYR 4.2 -0.42 -1.05 1.47 15 18 VND 23,176.0 -0.01 0.00 0.02 13 16 Commodities 11 14 Latest Change (%) 9 12 Nov-19 Feb-20 May-20 Aug-20 Nov-19 Feb-20 May-20 Aug-20 close 1D 3M YTD Crude oil (US$/bbl) 41.2 3.9 -0.8 -39.2 Hong Kong China Thermal coal (US$/tonne) 58.4 0.0 11.3 -12.8 19 16 Iron ore (US$/tonne) 116.8 0.3 13.4 27.7 15 17 Copper (US$/tonne) 6,748.0 -0.6 13.3 9.6 14 Nickel (US$/tonne) 15,391.0 0.2 21.3 9.9 15 13 Tin (US$/tonne) 18,120.0 0.5 6.7 7.5 12 Gold (US$/ozt) 1,894.6 -0.7 6.8 24.7 13 11 Palm oil (INR/tonne) 907.1 1.6 16.3 4.2

11 10 Soybean oil (c/lb) 35.1 1.4 33.8 2.4 Nov-19 Feb-20 May-20 Aug-20 Nov-19 Feb-20 May-20 Aug-20 Corn (US$/bu) 4.1 1.0 25.7 2.5 Wheat (US$/bu) 6.1 -0.3 24.8 8.5 Source: FactSet, Mirae Asset Daewoo Research (updated on 11/05/20 at 23:00 KST)

[Korea] Cosmetics November 6, 2020

Cosmax Buy (192820 KS) (Initiate)

Beneficiary of fast-growing Chinese market TP: W145,000 Upside: 35.5%

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

Investment points Biggest beneficiary of move toward e-commerce in the domestic cosmetics market  With consumers increasingly turning to online channels for cosmetics purchases, we expect competition among online platforms to intensify and more small cosmetics players to emerge. - Online sales accounted for 44% of total domestic cosmetics sales in 3Q20, supported by diversified distribution channels (e.g., social media).  Against this backdrop, new business opportunities should open up for Cosmax, which is likely to partner with both new and established online beauty firms. - Cosmax boasts diverse cosmetics formulations and tight quality control. Solid exposure to China’s fast-growing cosmetics OEM/ODM market  We estimate the size of China’s cosmetics OEM/ODM market at CNY57.2bn (as of end-2019), only 1.5 times bigger than that of Korea. - Chinese consumers are gaining an appetite for ODM-branded beauty products.  Cosmax is poised to solidify its market-leading position on the back of its solid R&D capabilities and track record. - Cosmax’s R&D spending as a percentage of revenue is at least three times higher than that of Chinese rival Nox Bellcow, and the company has experience supplying to global customers (e.g., L'Oreal).

Two-track strategy 1) Margin improvement domestically; 2) top-line growth for the Guangzhou subsidiary  We project the domestic cosmetics OEM/ODM market to expand around 5% annually from 2020 onward.  Encouragingly, the proportion of online beauty firms in the customer mix and the mix of margin-oriented orders in the order backlog appear to be growing at both the domestic operation and the Shanghai subsidiary.  The Guangzhou subsidiary stands to benefit from the strong performance of key customer Perfect Diary (which has been actively incubating sub-brands).

Recommendation Initiate with a Buy rating and target price of W145,000  Shares of Cosmax have rallied this year, which we attribute entirely to EPS improvements.  We expect shares to re-rate higher in tandem with the pickup in China’s consumer spending.  Trading at a 12-month forward P/E of 15.2x, shares look significantly undervalued.  Our target price implies a 12-month forward P/E of 20.2x. We applied different target multiples to the domestic and overseas operations, reflecting differences in the growth outlook. Key data Current price (11/5/20, W) 107,000 Market cap (Wbn) 1,075 180 Cosmax KOSPI 160 OP (20F, Wbn) 89 Shares outstanding (mn) 10 140 Consensus OP (20F, Wbn) 84 Free float (%) 71.3 120 EPS growth (20F, %) 80.4 Foreign ownership (%) 27.2 100 P/E (20F, x) 18.7 Beta (12M) 0.80 80 60 Market P/E (20F, x) 16.2 52-week low (W) 60,700 11.19 3.20 7.20 11.20 KOSPI 2,413.79 52-week high (W) 126,000

Share performance Earnings and valuation metrics (%) 1M 6M 12M (Dec.) 2017 2018 2019 2020F 2021F 2022F Absolute -10.1 24.0 29.9 Revenue (Wbn) 884 1,260 1,331 1,477 1,609 1,721 Relative -12.2 -2.6 15.3 OP (Wbn) 35 52 54 89 116 140 OP margin (%) 4.0 4.1 4.1 6.0 7.2 8.1 NP (Wbn) 19 33 32 57 75 83 EPS (W) 1,876 3,246 3,167 5,713 7,435 8,267 ROE (%) 8.8 13.5 10.5 17.2 19.7 18.7 P/E (x) 62.4 40.0 25.2 18.7 14.4 12.9 P/B (x) 5.4 4.9 2.3 2.8 2.4 2.1 Div. yield (%) 0.3 0.5 1.1 1.0 1.0 1.2 Notes: Under consolidated K-IFRS; NP is attributable to owners of the parent Source: Company data, Mirae Asset Daewoo Research estimates Analysts who prepared this report are registered as research analysts in Korea but not in any other jurisdiction, including the US. PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES AND DISCLAIMERS IN APPENDIX 1 AT THE END OF REPORT. [Korea] Internet November 6, 2020

Kakao Buy (035720 KS) (Maintain)

Another earnings beat; increasing expectations on TP: W460,000 4Q20 Upside: 26.7%

Mirae Asset Daewoo Co., Ltd. Chang-kwean Kim [email protected] HeeSeok Lim [email protected]

Another earnings beat Growth businesses perform strongly, and margins improve on cost control  For 3Q20, Kakao announced revenue of W1.1tr (+41% YoY) and operating profit of W120.2bn (+104% YoY).  Revenue and operating profit beat consensus estimates (W1.03tr and W115.3bn, respectively) and our expectations.  1) Talk Biz revenue jumped 75% YoY on a surge in Bizboard ad sales; 2) New Biz revenue (finance, commerce, etc.) soared 139% YoY; and 3) paid content revenue expanded 62% YoY, fueled by webtoons (KakaoPage and Piccoma).  OP margin continued to improve, rising to 10.9% in 3Q20 (from 10.2% in 1Q20 and 10.3% in 2Q20).

New businesses still in early Building a platform ecosystem across commerce, mobility, payment/finance, and content stages of growth  We expect daily revenue from Bizboard ads (a major cash cow) to reach W1bn in December, up from W0.5bn in 4Q19. KakaoTalk’s ad inventory is increasing, and the number of advertisers surpassed 12,000 in September.  In 3Q20, Kakao Commerce’s (gift shop, Talk Store, Makers, etc.) GMV grew 68% YoY.  In 3Q20, Kakao Mobility saw demand for its premium taxi service triple YoY. Leveraging its mobility big data, the company is expanding its income models to include driver-for-hire, parking, and bike services.  In 3Q20, Kakao Pay’s transaction volume grew 38% YoY to W17.9tr. The company is expanding user accessibility by broadening its offline/online merchant network and providing a variety of financial products on Kakao Pay Securities accounts.

Earnings momentum to Share prices to keep climbing as long as growth momentum continues continue into 4Q20 and 2021  For 4Q20, we see revenue and operating profit expanding 42% and 75% YoY, respectively.  We adjust up our 2020-21 operating profit estimates by 2.7% and 1.0%, respectively.  A series of subsidiary IPOs (including finance, KakaoPage, and Kakao Japan) are expected in 2021.  We reaffirm our Buy rating and target price of W460,000 on Kakao.

Key data Current price (11/5/20, W) 363,000 Market cap (Wbn) 32,034 310 Kakao KOSPI OP (20F, Wbn) 445 Shares outstanding (mn) 88 260 Consensus OP (20F, Wbn) 439 Free float (%) 69.1 210

160 EPS growth (20F, %) - Foreign ownership (%) 31.8

110 P/E (20F, x) 62.9 Beta (12M) 0.54

60 Market P/E (20F, x) 16.2 52-week low (W) 134,000 11.19 3.20 7.20 11.20 KOSPI 2,413.79 52-week high (W) 412,000

Share performance Earnings and valuation metrics (%) 1M 6M 12M (Dec.) 2017 2018 2019 2020F 2021F 2022F Absolute -2.0 94.6 144.4 Revenue (Wbn) 1,972 2,417 3,070 4,127 5,440 6,584 Relative -4.3 52.8 117.0 OP (Wbn) 165 73 207 445 874 1,182 OP margin (%) 8.4 3.0 6.7 10.8 16.1 18.0 NP (Wbn) 109 48 -301 506 675 843 EPS (W) 1,602 613 -3,585 5,775 7,648 9,552 ROE (%) 2.9 1.0 -5.8 9.2 11.2 12.4 P/E (x) 85.5 168.0 - 62.9 47.5 38.0 P/B (x) 2.3 1.7 2.5 5.6 5.0 4.4 Div. yield (%) 0.1 0.1 0.1 0.0 0.0 0.0 Notes: Under consolidated K-IFRS; NP is attributable to owners of the parent Source: Company data, Mirae Asset Daewoo Research estimates Analysts who prepared this report are registered as research analysts in Korea but not in any other jurisdiction, including the US. PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES AND DISCLAIMERS IN APPENDIX 1 AT THE END OF REPORT. [Korea] Airlines November 6, 2020

Korean Air Hold (003490 KS) (Downgrade)

Cargo is the only earnings driver TP: W22,000 Upside: 7.3%

Mirae Asset Daewoo Co., Ltd. Jay JH Ryu [email protected]

3Q20 review Disappointing parent OP of W7.6bn (-94% YoY)  For 3Q20, Korean Air’s parent-based revenue came in at W1.6tr. Revenue declined 87% YoY in passenger and expanded 59% YoY in cargo.  Parent-based operating profit fell 94% YoY to W7.6bn. We believe consolidated operating profit was around breakeven. - Earnings fell short of the consensus due to a drop in the international passenger L/F and a QoQ decline in cargo yield. - Revenue passenger kilometers (RPK) dropped 91% YoY amid continued weakness on international routes. - Revenue freight tonne kilometers (RFTK) grew 20% YoY; we estimate cargo yield increased more than 40% YoY but slowed on a QoQ basis.  Despite F/X translation gains of W134.2bn, Korean Air incurred a massive (parent) net loss of W385.9bn, hurt by a W300bn impairment loss on its LA-based hotel business.

4Q20 outlook Limited liquidity risks; expectations for strong cargo seasonality in 4Q20  Korean Air has raised W1.2tr through a rights offering and is set to dispose of its in-flight catering business (proceeds estimated at W800bn).  If Korean Air receives W1tr in government support through the business stabilization fund, liquidity risks should be limited for the time being. The fund’s interest rate needs to be negotiated.  The company will be able to secure additional liquidity if the Songhyeon-dong land sale (valued at W450-700bn) comes through.  Looking to 4Q20, we anticipate slight earnings improvement driven by strong seasonality for the cargo business.

Recommendation Downgrade to Hold  We maintain our target price of W22,000 on Korean Air but downgrade our recommendation to Hold, as the stock’s upside potential has fallen to 7.3%.  We recommend focusing on: 1) potential “air bubble” agreements and their impact on air travel demand; and 2) margin improvements following the disposal of the in-flight catering business.

Key data Current price (11/5/20, W) 20,500 Market cap (Wbn) 3,571 120 Korean Air KOSPI OP (20F, Wbn) 87 Shares outstanding (mn) 175 100 Consensus OP (20F, Wbn) 191 Free float (%) 67.7 80 EPS growth (20F, %) - Foreign ownership (%) 12.6

60 P/E (20F, x) - Beta (12M) 1.55

40 Market P/E (20F, x) 16.2 52-week low (W) 11,373 11.19 3.20 7.20 11.20 KOSPI 2,413.79 52-week high (W) 24,335

Share performance Earnings and valuation metrics (%) 1M 6M 12M (Dec.) 2017 2018 2019 2020F 2021F 2022F Absolute 6.2 28.3 -6.6 Revenue (Wbn) 12,092 13,012 12,683 7,595 7,583 7,734 Relative 3.8 0.8 -17.1 OP (Wbn) 940 671 257 87 351 353 OP margin (%) 7.8 5.2 2.0 1.1 4.6 4.6 NP (Wbn) 792 -168 -629 -1,068 -138 -124 EPS (W) 7,152 -1,455 -5,432 -7,582 -785 -710 ROE (%) 29.4 -5.1 -22.1 -39.2 -5.0 -4.8 P/E (x) 4.0 - - - - - P/B (x) 0.9 1.1 1.0 1.3 1.4 1.4 Div. yield (%) 0.7 0.7 0.0 0.0 0.0 0.0 Notes: Under consolidated K-IFRS; NP is attributable to owners of the parent Source: Company data, Mirae Asset Daewoo Research estimates Analysts who prepared this report are registered as research analysts in Korea but not in any other jurisdiction, including the US. PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES AND DISCLAIMERS IN APPENDIX 1 AT THE END OF REPORT. [Korea] Retail November 6, 2020

Hyundai Department Store Buy (069960 KS) (Maintain)

Meaningful recovery expected in 4Q20 TP: W90,000 Upside: 46.1%

Mirae Asset Daewoo Co., Ltd. Myoungjoo Kim [email protected] Minjeong Kyeong [email protected]

3Q20 review Earnings beat on duty-free improvement  For 3Q20, Hyundai Department Store (HDS) reported consolidated revenue of W662.3bn (+24.5% YoY) and operating profit of W44.7bn (-26.5% YoY).  The department store division’s operating profit fell 27.4% YoY to W56.4bn, while the duty-free division’s operating loss narrowed YoY to W11.8bn.  Department store: Revenue continued to contract due to the implementation of level 2.5 social distancing rules (from Aug. 30 to Sep. 13).  Duty-free: Operating loss narrowed thanks to sharp growth in daily revenue, driven by: 1) higher average spending by large daigou; and 2) the company’s increased supplies of popular items.

Pent-up demand is coming Department store/duty-free to meaningfully recover in 4Q20  The relaxation of social distancing rules (to level 1) has led to a sharp rebound in department store traffic.  With the pandemic still ongoing, overseas travel looks unlikely to resume anytime soon.  The transfer in demand from overseas travel to domestic consumption is positive to department store sales. We see same-store sales (SSS) growing 3-4% in 4Q20.  China’s consumer confidence remains healthy, and buying demand from daigou should remain robust.  We expect duty-free losses to continue to narrow in 4Q20.

Recommendation and valuation Maintain Buy and TP of W90,000  Valuation looks inexpensive, with the stock trading at a 2021F P/E of 6.4x.  We believe any additional negatives in the duty-free sector are limited.  Overseas travel spending accounts for 4-5% of the retail market. In 4Q20, we expect department stores to perform strongly due to: 1) the transfer in demand from overseas travel to domestic consumption; and 2) government stimulus to boost consumer spending. This is likely to trigger a rise in share prices.  We maintain our Buy call on HDS. Key data Current price (11/5/20, W) 61,600 Market cap (Wbn) 1,442 140 Hyundai Department Store KOSPI OP (20F, Wbn) 157 Shares outstanding (mn) 23 120 Consensus OP (20F, Wbn) 146 Free float (%) 58.3 100 EPS growth (20F, %) -43.6 Foreign ownership (%) 15.4 80 P/E (20F, x) 13.2 Beta (12M) 0.64

60 Market P/E (20F, x) 16.2 52-week low (W) 53,000 11.19 3.20 7.20 11.20 KOSPI 2,413.79 52-week high (W) 90,000

Share performance Earnings and valuation metrics (%) 1M 6M 12M (Dec.) 2016 2017 2018 2019 2020F 2021F Absolute 8.3 -13.1 -18.3 Revenue (Wbn) 1,832 1,848 1,862 2,199 2,429 3,386 Relative 5.8 -31.8 -27.5 OP (Wbn) 383 394 357 292 157 342 OP margin (%) 20.9 21.3 19.2 13.3 6.5 10.1 NP (Wbn) 276 254 239 194 109 226 EPS (W) 11,784 10,841 10,211 8,296 4,677 9,677 ROE (%) 7.7 6.6 5.9 4.6 2.6 5.1 P/E (x) 9.2 9.6 8.9 10.0 13.2 6.4 P/B (x) 0.7 0.6 0.5 0.4 0.3 0.3 Div. yield (%) 0.6 0.8 1.0 1.2 1.6 1.6 Notes: Under consolidated K-IFRS; NP is attributable to owners of the parent Source: Company data, Mirae Asset Daewoo Research estimates Analysts who prepared this report are registered as research analysts in Korea but not in any other jurisdiction, including the US. PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES AND DISCLAIMERS IN APPENDIX 1 AT THE END OF REPORT. [Korea] Media November 6, 2020

Studio Dragon Buy (253450 KQ) (Maintain)

OP margin jumps 7%p on China effects TP: W107,000 Upside: 33.3%

Mirae Asset Daewoo Co., Ltd. Jeong-yeob Park [email protected]

3Q20 review: A positive surprise Revenue of W106.3bn (-19.0% YoY) and stronger-than-expected OP of W16bn (+46.8% YoY)  Despite a decline in programming due to captive channels’ production cost cuts, Studio Dragon’s 3Q20 margins improved on the back of the increasing value of its library.  OP margin gained 6.8%p YoY to 15.1% on lower production/amortization expenses and the recognition of licensing sales to China (which carry zero expenses).  Programming: Revenue contracted 24.8% YoY to W45.7bn, hurt by a decline in the number of produced titles and an unfavorable comparison (due to a big-budget title in 3Q19).  Licensing: Revenue related to the licensing of two older titles to China was partially recognized, and ASP of OTT-bound content gained 25% for new titles and 60% for old titles.  Costs: Amortization expenses fell to more normalized levels thanks to the preemptive amortization of big-budget titles in 2H19-1H20.  Content performance indicators (Netflix ranking) were impressive. We believe this will help spur further demand for the company’s content.

A preview of 2021 1) China revenue, 2) ASP gains, and 3) amortization normalization to continue in 2021  Chinese OTTs are starting to pursue licensing rights as they prepare for expansion beyond mainland China to Southeast Asia.  Some of these licensing sales require advance payments regardless of whether the titles are aired. The recognition of licensing sales to China is beginning to take place.  Walt Disney (Disney+) and AT&T (HBO) are looking to catch up in the OTT space by expanding their content libraries and geographical coverage. Latecomers’ strong will to spend should fuel competition for quality content (price and volume).  Production/amortization expenses should normalize partly thanks to preemptive amortization of big-budget titles (Arthdal Chronicles and The King: Eternal Monarch) in 2H19-1H20.

Maintain Buy and TP of W107,000; Platform diversification  stronger negotiating power  multiple expansion a clear buying opportunity  The high OP margin in 3Q20 despite an unfavorable programming environment points to improvements in underlying profitability in 2021 and beyond.  In December, Sweet Home and True Beauty—two highly anticipated titles targeting the global audience—will air on Netflix and tvN, respectively.  We believe the 2021 operating profit consensus (which has been consistently lowered and now stands at W68bn) has a strong chance of being revised up, assuming: 1) a sharp increase in production capacity backed by a webtoon IP/platform/content partnership with NAVER; and 2) recognition of revenue from China. Key data Current price (11/5/20, W) 80,300 Market cap (Wbn) 2,259 150 Studio Dragon KOSDAQ OP (20F, Wbn) 59 Shares outstanding (mn) 30 130

110 Consensus OP (20F, Wbn) 53 Free float (%) 38.3

90 EPS growth (20F, %) 63.5 Foreign ownership (%) 9.5

70 P/E (20F, x) 52.2 Beta (12M) 0.36

50 Market P/E (20F, x) 16.2 52-week low (W) 69,100 11.19 3.20 7.20 11.20 KOSDAQ 844.80 52-week high (W) 92,500

Share performance Earnings and valuation metrics (%) 1M 6M 12M (Dec.) 2016 2017 2018 2019 2020F 2021F Absolute -4.7 4.7 0.8 Revenue (Wbn) 0 287 380 469 529 635 Relative -3.2 -20.5 -19.8 OP (Wbn) 0 33 40 29 59 80 OP margin (%) - 11.5 10.5 6.2 11.2 12.6 NP (Wbn) 0 24 36 26 44 57 EPS (W) 0 1,050 1,278 941 1,540 1,899 ROE (%) 0.0 12.9 9.3 6.4 9.7 11.4 P/E (x) - 61.9 72.3 85.9 52.2 42.3 P/B (x) - 4.9 6.5 5.3 5.1 4.6 Div. yield (%) - 0.0 0.0 0.0 0.0 0.0 Notes: Under consolidated K-IFRS; NP is attributable to owners of the parent Source: Company data, Mirae Asset Daewoo Research estimates Analysts who prepared this report are registered as research analysts in Korea but not in any other jurisdiction, including the US. PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES AND DISCLAIMERS IN APPENDIX 1 AT THE END OF REPORT. [Korea] Media November 6, 2020

CJ ENM Buy (035760 KQ) (Maintain)

Media margins improve TP: W185,000 Upside: 36.5%

Mirae Asset Daewoo Co., Ltd. Jeong-yeob Park [email protected]

3Q20 review Revenue of W798.6bn (-30.7% YoY) and stronger-than-expected OP of W71bn (+10.9% YoY)  Despite an unfavorable environment (ads/film/music), CJ ENM delivered stronger-than- anticipated 3Q20 results due to enhanced digital capabilities across its business segments.  The media division posted operating profit of W29.3bn (+82.1% YoY), with strong growth in digital revenue (+34.4% YoY) offsetting negative growth in TV ads (-17% YoY). Media OP margin improved 4.1%p YoY to 7.9% on a meaningful decline in production costs and cost efficiency.  The commerce division recorded operating profit of W42.4bn (+44.2% YoY). Digital revenue grew sharply (+24.7% YoY), supported by a focus on products related to contactless demand in the food, living, and kids categories.  Despite the strong showing of the movie Deliver Us from Evil, the film division turned to an operating loss of W4.1bn, hurt by a plunge in nationwide theater attendance (-70.9%) and a drop in ancillary licensing revenue.  Despite a sharp fall in live performance revenue, the music division swung to operating profit of W3.5bn, supported by online concerts (IZ*ONE) and digital music sales (-6% YoY).

Improving media fundamentals Margin recovery to continue on the back of digital enhancement  CJ ENM’s media mix is improving, with the share of the growing digital segment increasing at the expense of the share of the struggling TV ad segment.  The increasing exposure to digital formats (e.g., YouTube and Tving) should help the media business return to stable profits. The decline in production costs (-21.7% YoY) confirmed in the 3Q20 results is also encouraging.  We expect video ads to continue to thrive. In addition, Tving could potentially enter into partnerships and produce original content.  Robust earnings should continue in 4Q20 on the back of highly anticipated titles (True Beauty and Sweet Home) and the commerce business (fall/winter items).

Valuation Maintain Buy and TP of W185,000  Our target valuation of W4tr represents the sum of the value of CJ ENM’s equity holdings (W2.3tr) and the value of its key businesses (W2.1tr), minus net debt (W0.4tr). For equity holdings, we conservatively applied a 40% discount. (We may reduce our discount depending on how the company utilizes its equity stakes.) For key businesses, we applied a P/NOPLAT of 15x for media/music/film and 10x for commerce.  We recommend overweighting the stock, as: 1) media profits should improve on increasing exposure to digital, the bottoming out of TV ads, and production cost cuts; and 2) share price gains are likely despite our conservative approach to the value of the firm’s equity holdings. Key data Current price (11/5/20, W) 135,500 Market cap (Wbn) 2,971 140 CJ ENM KOSDAQ OP (20F, Wbn) 259 Shares outstanding (mn) 22 120

100 Consensus OP (20F, Wbn) 246 Free float (%) 46.8

80 EPS growth (20F, %) 18.2 Foreign ownership (%) 20.7

60 P/E (20F, x) 24.1 Beta (12M) 0.83

40 Market P/E (20F, x) 16.2 52-week low (W) 81,500 11.19 3.20 7.20 11.20 KOSDAQ 844.80 52-week high (W) 174,000

Share performance Earnings and valuation metrics (%) 1M 6M 12M (Dec.) 2016 2017 2018 2019 2020F 2021F Absolute -6.0 9.9 -22.1 Revenue (Wbn) 2,209 2,260 2,360 3,790 3,375 3,923 Relative -4.5 -16.5 -38.0 OP (Wbn) 179 224 182 269 259 323 OP margin (%) 8.1 9.9 7.7 7.1 7.7 8.2 NP (Wbn) 23 131 163 104 123 167 EPS (W) 3,769 21,054 11,514 4,754 5,618 7,631 ROE (%) 2.6 13.5 8.6 3.7 4.1 5.3 P/E (x) 43.2 11.0 17.5 33.6 24.1 17.8 P/B (x) 1.1 1.4 1.4 1.0 0.8 0.8 Div. yield (%) 1.5 1.3 0.6 0.9 1.0 1.0 Notes: Under consolidated K-IFRS; NP is attributable to owners of the parent Source: Company data, Mirae Asset Daewoo Research estimates Analysts who prepared this report are registered as research analysts in Korea but not in any other jurisdiction, including the US. PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES AND DISCLAIMERS IN APPENDIX 1 AT THE END OF REPORT. [Korea] Media November 6, 2020

J Contentree Trading Buy (036420 KS) (Maintain)

A mixed performance TP: W34,000 Upside: 23.4%

Mirae Asset Daewoo Co., Ltd. Jeong-yeob Park [email protected]

3Q20 review: In line with our Revenue of W103.9bn (-27.4% YoY) and an operating loss of W7.8bn (turn to loss YoY) projection  In 3Q20, J Contentree’s broadcasting division delivered strong earnings on robust licensing revenue, but the multiplex division was hurt by a sharp fall in nationwide theater attendance.  The broadcasting division posted operating profit of W9.1bn (+94.6% YoY), supported by sales to global OTTs and the licensing of old titles to multi-platforms.  The licensing of 1H20 hits (The World of the Married, etc.) continued, and exports to Netflix increased due to the introduction of Wednesday/Thursday drama slots.  The multiplex division posted an operating loss of W15.1bn, as attendance at directly operated theaters slumped 72.2% YoY (vs. -70.9% nationwide) amid COVID-19 and a lack of content.  Cost-saving efforts continued across the company, but the effects were limited due to the high percentage of fixed costs.

Mixed outlook Robust broadcasting vs. massive multiplex losses  We forecast broadcasting operating profit to grow sharply from W1.5bn in 2019 to W26.8bn in 2020 and W46.4bn in 2021.  The company has demonstrated its content competitiveness with hits like Itaewon Class and The World of the Married. The popularity of K-dramas has also led to solid sales of older titles.  The much-anticipated 4Q20 drama Hush (starring Hwang Jung-min) is expected to be presold to Netflix. In addition, a Netflix original based on a webtoon series is set to premiere in 1Q21.  For the multiplex division, however, losses look inevitable despite cost-saving efforts (rent reductions and layoffs), given market deterioration. With the absence of content investments, theater attendance is unlikely to return to prior levels (170-190mn) anytime soon.

Recommendation Maintain Trading Buy and TP of W34,000  At the broadcasting division, positive changes are continuing, with pricing for OTTs rising and licensing volume increasing (Netflix deal).  However, lingering uncertainties surrounding the multiplex business make it hard to justify the stock’s current valuation (2021F P/E of 37x).  Theater attendance could rebound in 2021 (vs. 2020 forecast of 60mn, down 70% YoY), but a long-term margin recovery looks challenging.  We think OP margin could recover to 10% if movie investments resume and theater attendance returns to previous levels (180mn).  We recommend focusing on: 1) potential theater market realignment in the long term; and 2) China events in broadcasting in the near term. Key data Current price (11/5/20, W) 27,550 Market cap (Wbn) 451 120 J Contentree KOSPI OP (20F, Wbn) -40 Shares outstanding (mn) 16 100 Consensus OP (20F, Wbn) -34 Free float (%) 57.7 80 EPS growth (20F, %) - Foreign ownership (%) 4.5 60 P/E (20F, x) - Beta (12M) 1.24

40 Market P/E (20F, x) 16.2 52-week low (W) 20,350 11.19 3.20 7.20 11.20 KOSPI 2,413.79 52-week high (W) 43,550

Share performance Earnings and valuation metrics (%) 1M 6M 12M (Dec.) 2016 2017 2018 2019 2020F 2021F Absolute 7.8 -17.5 -26.7 Revenue (Wbn) 335 420 511 554 388 452 Relative 5.3 -35.2 -35.0 OP (Wbn) 29 33 35 35 -40 32 OP margin (%) 8.7 7.9 6.8 6.3 -10.3 7.1 NP (Wbn) 19 6 18 1 -48 12 EPS (W) 1,591 532 1,448 78 -2,972 747 ROE (%) 26.3 5.3 7.4 0.3 -16.0 4.4 P/E (x) 23.1 97.5 30.8 494.4 - 36.9 P/B (x) 5.0 3.8 1.9 1.7 1.6 1.5 Div. yield (%) 0.0 0.0 0.0 0.0 0.0 0.0 Notes: Under consolidated K-IFRS; NP is attributable to owners of the parent Source: Company data, Mirae Asset Daewoo Research estimates Analysts who prepared this report are registered as research analysts in Korea but not in any other jurisdiction, including the US. PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES AND DISCLAIMERS IN APPENDIX 1 AT THE END OF REPORT. [Korea] Internet Solutions November 6, 2020

Cafe24 Hold (042000 KQ) (Maintain)

Still lacking growth potential TP: W58,000 Downside: -2.5%

Mirae Asset Daewoo Co., Ltd. Chang-kwean Kim [email protected] HeeSeok Lim [email protected]

3Q20 GMV growth slows Solid revenue, but margins contract on sluggish GMV  For 3Q20, Cafe24 reported revenue of W62.5bn (+19% YoY) and operating profit of W2.5bn (+49% YoY). GMV of shopping malls using Cafe24's solutions grew 15% YoY to W2.6tr.  Revenue was better than our projection (W58bn), but operating profit and GMV were weaker than our expectations (W4bn and W2.7tr, respectively).  OP margin contracted to 3.9% in 3Q20 from 7.0% in 2Q20.

In need of new income models Amid continued strong growth of e-commerce, signs of market bifurcation are emerging or progress overseas  In 3Q20, online shopping GMV grew 24.6% YoY and reached the highest level YTD.  By category, fashion (which accounts for a large portion of Cafe24’s GMV) saw a 9% YoY rise in GMV. Within fashion, the sports/leisure segment saw a 39% YoY increase in GMV.  In 3Q20, NAVER’s shopping mall GMV climbed 42% YoY and Kakao’s commerce GMV expanded 68% YoY, outpacing the broader market.  This suggests that, despite the strong growth of the online shopping market, Cafe24’s growth is being constrained by: 1) the relative underperformance of the fashion segment; and 2) the rising market share of large internet companies.  That said, we expect 4Q20 earnings to benefit from an easy comparison resulting from weak fashion sales in 4Q19 due to warm weather.

Structural growth potential still Maintain Hold and TP of W58,000 unclear  For 4Q20, we forecast revenue and operating profit to grow to W71bn (+18% YoY) and W4bn (+91% YoY), respectively.  We adjust up our 2020-21 revenue estimates by 3% and 4%, respectively.  We maintain our Hold rating and target price of W58,000, which we derived using a 2020F P/S ratio.  We believe the company is in need of a new share price catalyst, such as market share gains or overseas expansion.

Key data Current price (11/5/20, W) 59,500 Market cap (Wbn) 561 150 Cafe24 KOSDAQ 130 OP (20F, Wbn) 9 Shares outstanding (mn) 9 110 Consensus OP (20F, Wbn) 11 Free float (%) 69.4 90 EPS growth (20F, %) 11.1 Foreign ownership (%) 19.5 70 P/E (20F, x) 75.4 Beta (12M) 1.12 50 30 Market P/E (20F, x) 16.2 52-week low (W) 20,500 11.19 3.20 7.20 11.20 KOSDAQ 844.80 52-week high (W) 73,700

Share performance Earnings and valuation metrics (%) 1M 6M 12M (Dec.) 2017 2018 2019 2020F 2021F 2022F Absolute -1.0 29.3 3.5 Revenue (Wbn) 143 165 217 247 275 283 Relative 0.6 -1.7 -17.7 OP (Wbn) 7 16 10 9 16 25 OP margin (%) 4.9 9.7 4.6 3.6 5.8 8.8 NP (Wbn) 5 -28 7 7 12 21 EPS (W) 641 -3,149 710 789 1,263 2,193 ROE (%) 37.1 -45.9 5.9 6.2 9.2 14.1 P/E (x) - - 72.1 75.4 47.1 27.1 P/B (x) - 9.4 4.1 4.5 4.1 3.6 Div. yield (%) - 0.0 0.0 0.0 0.0 0.0 Notes: Under consolidated K-IFRS; NP is attributable to owners of the parent Source: Company data, Mirae Asset Daewoo Research estimates Analysts who prepared this report are registered as research analysts in Korea but not in any other jurisdiction, including the US. PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES AND DISCLAIMERS IN APPENDIX 1 AT THE END OF REPORT.