December 29, 2015

KOREA

Sector News & Analysis Major Indices Close Chg Chg (%) (Overweight) KOSPI 1,966.31 2.25 0.11 Stocks to watch in January KOSPI 200 241.22 -0.57 -0.24 KOSDAQ 673.22 21.17 3.25

Turnover ('000 shares, Wbn) Volume Value KOSPI 395,493 3,758 KOSPI 200 61,073 2,475 KOSDAQ 549,107 2,910

Market Cap (Wbn) Value KOSPI 1,245,694 KOSDAQ 198,559

KOSPI Turnover (Wbn) Buy Sell Net Foreign 619 714 -95 Institutional 717 994 -276 Retail 2,297 2,032 265

KOSDAQ Turnover (Wbn) Buy Sell Net Foreign 174 117 57 Institutional 157 129 28 Retail 2,575 2,649 -74

Program Buy / Sell (Wbn) Buy Sell Net KOSPI 496 763 -267 KOSDAQ 97 54 42

Advances & Declines Advances Declines Unchanged KOSPI 463 369 46 KOSDAQ 768 302 66

KOSPI Top 5 Most Active Stocks by Value (Wbn) Price (W) Chg (W) Value Electronics 1,254,000 -12,000 291 Hanmi Pharm 736,000 93,000 200 KODEX LEVERAGE 9,940 150 131 KOREA AUTOGLASS 13,600 2,000 130 KODEX INVERSE 8,210 -60 118

KOSDAQ Top 5 Most Active Stocks by Value (Wbn) Price (W) Chg (W) Value 84,000 9,500 207 ViroMed 185,700 24,400 96 NTPIA 2,700 5 80 Timo Technology 4,050 450 66 Suncore 6,040 1,390 58 Note: As of December 29, 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.

Retail (Overweight/Maintain)

Stocks to watch in January

¢ HDS, GS Retail, BGF Retail, and Lotte Himart likely to report earnings growth in 4Q15 ¢ and HDHS to turn around in 1Q16 Sector Update ¢ Our top picks for January are HDS, Shinsegae, and HDHS December 29, 2015

Companies expected to report earnings improvement in 4Q Daewoo Securities CCo.,o., Ltd. (HDS) is believed to have enjoyed a pickup in earnings growth

[Retail] momentum in 4Q15, with consolidated gross merchandise sales (GMS) and operating profit rising 19.2% and 16.1% YoY, respectively. Same-store sales (SSS) growth is estimated at 3% Aiden Lee +822-768-3297 for 4Q. In addition, new stores are believed to have begun contributing to earnings, with the [email protected] Pangyo store turning to profit. Notably, all of the new stores opened this year are profitable except for the Sindorim store, which is believed to be only breaking even. We project HDS’s

operating profit to improve 17.3% in 2016 on the back of new outlet store openings in Dongdaemun (February), Songdo (April), and Jangji-dong, (August).

Convenience stores are believed to have maintained robust earnings growth in 4Q15. BGF Retail is expected to post consolidated revenue and operating profit growth of 19.8% and 22.4%, respectively, aided by a steady increase in store count and grocery sales growth. In 4Q alone, BGF Retail has increased its store count by over 300, continuing along its structural growth path.

Among retail plays, GS Retail is likely to deliver the greatest earnings growth in 4Q. Despite slowing convenience store earnings growth, the company’s operating profit is forecast to soar 47.0% YoY in 4Q on the back of supermarket margin gains and a positive earnings contribution from the hotel unit. However, we believe that the two major convenience store stocks (GS Retail and BGF Retail) will only begin to rise full swing in 1Q, despite likely earnings improvement in 4Q.

As for Lotte Himart, we estimate that 4Q operating profit jumped 23.2% YoY. However, we advise investors to take a short-term approach to the stock until revenue growth accelerates full swing on the back of stock-keeping unit (SKU) expansion.

Players likely to turn around in 1Q16

We expect Shinsegae to deliver earnings growth in 2016, aided by 1) expansion of existing sites and new store openings as well as 2) the operation of new downtown duty-free stores. Although there are concerns over the growth potential and profitability of the duty-free business, investor expectations will likely rise next year. Of note, concerns related to the transfer of the loss-making duty-free unit of Shinsegae Chosun Hotel (99% owned by Emart) to Shinsegae Duty Free (100% owned by Shinsegae) have decreased significantly, as Shinsegae Chosun Hotel has recently decided to shut down its duty-free store in . We expect operating profit at Shinsegae to grow by 7% YoY in 1Q16, and by more than 20% YoY starting in 2Q16.

For Hyundai Home Shopping (HDHS), we project operating profit to expand by 7.3% YoY, marking an end to the operating profit decline since 3Q14. The company’s ex-cash P/E (also adjusting for the value of its stakes in other firms) stands at only 0.2x. The company’s valuation appeal, while unlikely to drive up shares, should provide downside support, and we could see advances in line with earnings improvement going forward.

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.

Key Universe Valuations December 29, 2015

※All data as of close December 28, 2015, unless otherwise noted.

16F Earnings growth Mkt Cap Price P/E (x) P/B (x) ROE (%) Ticker Company Div Yield OP EPS (Wbn) (W) (%) 16F 17F 16F 17F 16F 17F 16F 17F 16F 17F 005930 184,713 1,254,000 2.2 2.2 5.1 5.3 7.6 9.8 9.1 1.0 0.9 11.7 11.4 005380 Hyundai Motor 32,821 149,000 3.4 15.6 -1.2 12.6 1.1 5.7 5.6 0.6 0.5 11.4 10.5 015760 KEPCO 31,874 49,650 3.0 8.3 0.5 -46.9 -1.5 4.7 4.8 0.4 0.4 9.8 8.9 090430 AmorePacific 24,202 414,000 0.3 33.4 31.0 25.2 31.7 36.9 28.0 6.9 5.7 20.6 22.3 012330 24,093 247,500 1.4 15.0 7.2 22.5 5.8 6.4 6.1 0.8 0.7 13.4 12.6 000660 SK Hynix 22,714 31,200 1.3 -21.9 10.7 -22.9 11.3 6.8 6.1 0.9 0.8 14.1 13.8 032830 Samsung Life 22,100 110,500 - - - - 0.0 0.0 051910 LG Chem 22,002 332,000 1.2 10.2 23.4 28.4 24.2 15.4 12.4 1.7 1.5 11.5 12.9 000270 Motors 21,525 53,100 2.5 27.7 14.0 25.8 10.9 5.7 5.2 0.8 0.7 14.2 13.9 035420 NAVER 21,162 642,000 0.2 33.3 22.4 35.7 21.6 28.6 23.5 5.4 4.4 27.7 26.0 018260 Samsung SDS 19,809 256,000 0.2 12.2 1381.5 8.3 1338.7 41.3 2.9 4.0 1.7 10.1 82.3 055550 19,039 40,150 - - - - 0.0 0.0 034730 SK Holdings 17,625 250,500 0.8 9.0 13.4 4.3 -49.4 20.7 40.9 3.2 3.0 19.8 8.9 017670 SK Telecom 17,360 215,000 4.7 4.8 1.4 0.4 1.8 10.5 10.3 0.9 0.9 10.1 9.7 051900 LG Household & Health Care 16,508 1,057,000 0.5 21.6 16.8 22.7 18.6 31.7 26.8 7.1 5.8 25.7 24.4 005490 POSCO 14,778 169,500 3.5 0.7 26.7 516.9 72.9 13.4 7.7 0.3 0.3 2.7 4.5 000810 Samsung F&M 14,639 309,000 - - - - 0.0 0.0 033780 KT&G 14,553 106,000 3.4 -4.9 0.7 -9.4 2.0 15.3 14.9 2.1 1.9 14.7 13.9 105560 KB Financial Group 12,885 33,350 - - - - 0.0 0.0 003550 LG Corp. 12,355 71,600 1.4 8.3 0.0 5.2 2.1 11.3 11.1 0.9 0.8 8.2 7.8 096770 SK Innovation 12,298 133,000 2.4 4.2 9.9 18.9 13.9 11.1 9.8 0.7 0.7 6.8 7.3 010950 S-Oil 8,883 78,900 3.3 15.6 6.3 28.1 6.3 10.3 9.7 1.5 1.3 15.3 14.5 010130 Korea Zinc 8,793 466,000 1.4 22.0 16.2 23.5 17.4 13.2 11.2 1.5 1.4 12.4 13.0 034220 LG Display 8,695 24,300 2.1 -40.9 85.2 -43.9 110.7 14.1 6.7 0.7 0.6 4.9 9.7 066570 LG Electronics 8,575 52,400 1.5 58.8 19.7 146.9 21.0 9.9 8.2 0.7 0.7 7.6 8.6 035250 8,419 39,350 3.3 11.5 5.2 14.7 9.5 16.4 15.0 2.4 2.2 16.4 16.4 011170 Lotte Chemical 8,243 240,500 0.4 -1.5 13.7 21.2 17.6 6.6 5.6 0.9 0.8 15.2 15.4 006400 Samsung SDI 7,839 114,000 0.9 468.2 5.0 385.4 -81.4 5.2 27.7 0.6 0.6 12.3 2.2 047810 Korea Aerospace Industries 7,769 79,700 0.3 27.7 23.5 42.2 26.2 25.7 20.4 5.2 4.2 22.1 22.7 023530 Lotte Shopping 7,558 240,000 0.8 12.1 12.9 57.4 14.1 15.4 13.5 0.4 0.4 2.8 3.2 128940 7,530 736,000 158.4 12.8 816.5 7.9 101.1 93.6 12.3 10.9 13.0 12.4 030200 KT 7,403 28,350 2.8 1.1 0.3 -13.4 4.2 9.9 9.5 0.6 0.6 6.5 6.4 086280 7,256 193,500 1.0 9.5 8.4 57.8 2.4 12.5 12.2 2.0 1.8 17.6 15.6 086790 7,134 24,100 - - - - 0.0 0.0 001800 Orion 7,088 1,186,000 0.6 14.8 8.2 23.0 13.5 33.8 29.8 4.4 3.9 14.1 14.2 024110 7,011 12,600 - - - - 0.0 0.0 004020 6,979 52,300 1.4 6.8 9.9 7.6 31.6 8.0 6.1 0.4 0.4 5.6 6.9 009540 6,840 90,000 - 123.3 - 724.4 125.9 15.3 0.4 0.4 0.4 3.1 035720 6,815 113,400 0.2 92.2 38.3 76.3 40.8 43.3 30.8 2.5 2.3 6.0 7.9 088350 Hanwha Life 6,557 7,550 - - - - 0.0 0.0 021240 Coway 6,517 84,500 4.3 11.8 21.2 9.6 21.3 17.8 14.7 4.3 3.9 28.1 30.2 161390 5,735 46,300 1.0 7.1 14.0 7.7 14.9 8.0 7.0 1.0 0.9 12.8 13.0 009240 Hanssem 5,601 238,000 0.4 44.2 27.9 41.7 32.7 34.1 25.7 8.8 6.7 32.1 31.7 139480 Emart 5,366 192,500 0.8 21.2 13.5 -24.0 12.3 12.3 10.9 0.7 0.7 6.0 6.3 097950 CJ CheilJedang 5,040 383,000 0.6 8.6 9.5 28.5 33.2 19.0 14.2 1.6 1.4 8.9 10.8 005830 Dongbu Insurance 4,963 70,100 - - - - 0.0 0.0 078930 GS Holdings 4,711 50,700 2.7 -9.7 26.9 25.9 40.2 8.6 6.1 0.5 0.5 5.8 7.7 009150 Samsung Electro-Mechanics 4,706 63,000 1.0 25.4 29.0 240.2 32.7 18.0 13.6 1.0 1.0 6.0 7.5 036570 NCSOFT 4,616 210,500 1.8 29.6 21.8 34.4 24.9 17.7 14.2 2.6 2.3 16.5 18.1 009830 Hanwha Chemical 4,478 27,650 0.5 45.7 3.5 65.6 7.7 9.7 9.1 0.9 0.8 9.2 9.1 Source: KDB Daewoo Securities Research

Market Data December 29, 2015

※All data as of close December 29, 2015, unless otherwise noted.

Other Major Indices Economic Indicators Close Net Chg 1D (%) YTD (%) Close 1D ago 1M ago 1Y ago MSCI Korea* 359.95 -4.70 -1.29 -6.92 USD/KRW 1,165.00 1,171.00 1,145.70 1,099.50 KOSPI 1,966.31 2.25 0.11 2.07 JPY100/KRW 967.85 974.05 934.39 913.28 KOSDAQ 673.22 21.17 3.25 21.58 EUR/KRW 1,278.18 1,283.65 1,215.19 1,338.64 Dow Jones* 17,528.27 -23.90 -0.14 -1.71 3Y Treasury 1.66 1.68 1.80 2.13 S&P 500* 2,056.50 -4.49 -0.22 -0.08 3Y Corporate 2.11 2.12 2.18 2.46 NASDAQ* 5,040.99 -7.50 -0.15 6.65 DDR2 1Gb* 1.07 1.07 1.10 1.35 Philadelphia Semicon* 671.75 -2.64 -0.39 -2.18 NAND 16Gb* 1.46 1.46 1.48 2.18 FTSE 100* 6254.64 13.66 0.22 -4.48 Oil (Dubai)* 32.62 32.83 40.37 56.32 Nikkei 225 18,982.23 108.88 0.58 9.04 Gold* 1,070.50 1,077.20 1,056.20 1,195.30 Hang Seng* 21,919.62 -218.51 -0.99 -8.12 Customer deposits (Wbn)* 21,387 20,577 20,845 15,909 Taiwan (Weighted) 8,293.91 -64.58 -0.77 -10.57 Equity type BC (Wbn)(Dec. 24) 81,234 81,295 80,448 79,493 Note: * as of December 28, 2015 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 5.92 Samsung Electronics 60.31 CJ Corp. 12.33 Samsung Electronics 47.80 Hanmi Pharm 5.69 Samsung Electronics (P) 20.80 KODEX 200 9.20 SK Telecom 46.75 SK Energy 5.24 8.98 Hanmi Pharm 8.66 Industrial Bank of Korea 23.57 Shinhan Financial Group 5.06 KODEX 200 7.99 CJ Cheiljedang 7.55 POSCO 18.84 Kangwon Land 4.90 KOREA AUTOGLASS 7.93 7.34 Hyundai Motor 13.10 KT&G 4.20 CJ Corp. 7.85 6.24 LG Chem 12.87 KOREA AEROSPACE 4.03 Hyundai Eng. & Cosnt. 6.07 CJ CGV 5.19 Samsung Electronics (P) 11.31 KEPCO 3.70 ITSSKIN 5.84 Hanssem 5.15 Hynix 11.01 S&T DAEWOO 3.07 POSCO 4.26 Hanwha Chemical 5.07 KEPCO 10.68 AmorePacific 2.69 4.05 Hanmi Science 3.51 Woori Investment Securities 9.95 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 Celltrion 15.85 INTEROJO 2.27 Medy-tox 5.53 ViroMed 5.78 Daum Communications 4.34 Binex 1.83 Celltrion 5.36 SYPANEL 3.94 CJ E&M 3.51 DH PHARM 1.72 OCI Materials 4.21 KODI-M 2.87 Bio Space 2.44 ATTO 1.62 HLB 2.41 AHNLAB 2.54 iNtRON Bio 2.32 Boditech 1.59 Humedix 2.25 EO Technics 1.85 Medipost 2.03 DoubleUGames 1.33 iNtRON Bio 2.02 CJ E&M 1.53 SM 1.97 Seoul Semiconductor 1.22 Vieworks 1.91 ESV 1.31 Vieworks 1.59 GS Home Shopping 1.07 Com2us 1.80 COSON 1.23 OCI Materials 1.56 Digital Optics 0.96 Huons 1.67 DAWONSYS 1.19 SEEGENE 1.53 ACTCOS 0.91 Medipost 1.60 Paradise 1.06 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 1,254,000 -12,000 184,713 Celltrion 84,000 9,500 9,444 Hyundai Motor 149,000 -2,000 32,821 Daum Communications 113,400 2,800 6,815 KEPCO 49,650 250 31,874 Dongsuh 31,400 0 3,131 SAMSUNG C&T 142,000 3,500 26,936 CJ E&M 79,600 4,000 3,083 Samsung Electronics (P) 1,073,000 -2,000 24,500 Medy-tox 510,000 34,000 2,885 Amore Pacific 414,000 4,000 24,202 ViroMed 185,700 24,400 2,637 Hyundai Mobis 247,500 -2,000 24,093 LOEN 83,400 2,000 2,109 Hynix 31,200 300 22,714 Komipharm 38,200 3,700 2,075 Samsung Life Insurance 110,500 1,000 22,100 Paradise 17,600 -150 1,601 LG Chem 332,000 -1,500 22,002 EO Technics 125,300 7,800 1,538 Source: