LG Corp. (003550 KS ) Betting on Automotive Electronics

LG Corp. (003550 KS ) Betting on automotive electronics

Holding companies Electronics affiliates’ net profit contribution is increasing; LGE’s earnings improvement will be key Company Update LG Corp. recognizes the earnings of most of its listed subsidiaries—LG Electronics (LGE ; September 14, 2018 066570 KS/Buy/TP: W110,000/CP: W71,500), LG Chem (051910 KS/Buy/TP: W460,000/CP: W350,000), LG Uplus (032640 KS/Buy/TP: W19,000/CP: W17,400), etc.—

under equity method, and consolidates the earnings of its unlisted subsidiaries (Serveone, LG CNS, etc.). (Maintain) Buy While unlisted subsidiaries have delivered notable earnings improvements since 2015, we believe the rate of earnings growth will begin to moderate in 2018. As such, we Target Price (12M, W) ▼ 100,000 think LG Corp.’s re-rating will hinge on whether its electronics affiliates , such as LGE, LG Innotek (011070 KS/Buy/TP: W210,000/CP: W130,500), and LG Display (LGD; 034220 Share Price (09/13/18, W) 71,400 KS/Buy/TP: W27,000/CP: W20,250), can restore their competitiveness and impr ove earnings. Electronics affiliates, led by LGE , make up more than half of LG Corp.’s total Expected Return 40% assets and revenue (profit). As such, LG Corp.’ s stock has naturally exhibited a strong correlation with LGE.

OP (18F, Wbn) 2,196 At the group level, the automotive electronics business is being actively driven by LGE, alongside LG Chem, LG Innotek, and LGD, as a future growth engine. In particular, the Consensus OP (18F, Wbn) 2,270 acquisition of Austrian auto parts maker ZKW, which closed in August, is expected to EPS Growth (18F, %) -23.0 diversify the group’s product portfolio and create synergies with its existing Market EPS Growth (18F, %) 13.7 automotive electronics businesses. ZKW will also be consolidated starting in P/E (18F, x) 6.8 September, contributing to earnings growth. Market P/E (18F, x) 8.8 Further group restructuring is likely KOSPI 2,286.23 At a special shareholder meeting in June, LG Corp. appointed Koo Kwang-mo as its new Market Cap (Wbn) 12,321 chairman, signaling the beginning of the group’s fourth-generation leadership. In Shares Outstanding (mn) 176 addition, Vice Chairman Koo Bon-joon plans to resign at the end of the year. As such, Free Float (%) 53.4 we expect discussions about the separation of group affiliates to gather traction. Foreign Ownership (%) 34.4 Similar to past experiences with LS Group and GS Group, we believe LG Group will choose Beta (12M) 1.08 to separate its affiliates through spin-offs and share swaps. That said, uncertainties are 52-Week Low 69,000 likely to remain high until there is clarity on which affiliates will be spun off. 52-Week High 94,900 Meanwhile, with the calculation of inheritance taxes on the LG Corp. stake (11.3%) held by (%) 1M 6M 12M late Chairman Koo Bon-moo having been finalized, we expect the stake transfer to take Absolute -2.2 -21.0 -14.4 place within November and believe a number of options will be explored to fund the taxes. Relative -3.8 -13.8 -11.6 Cut TP to W100,000, but maintain Buy 120 LG Corp. KOSPI We lower our target price on LG Corp. by 16.7% to W100,000 (from W120,000), mainly 110 due to the YTD decline in the value of the company’s stakes in subsidiaries, including 100 LGE and LG Chem. Still, we maintain our Buy rating in light of the upside potential 90 implied in our target price.

80 The stock remains undervalued, trading at a 2018F P/E of 6.8x and a 57% discount to 70 9.17 1.18 5.18 9.18 NAV. We note that since 2010, LG Corp. shares have rebounded sharply after falling to a P/E of 8x. New businesses led by LGE should make gradual progress in 2H18, providing upside momentum to shares. Mirae Asset Daewoo Co., Ltd.

[ Holding Companies/IT Services ] FY (Dec.) 12/15 12/16 12/17 12/18F 12/19F 12/20F Revenue (Wbn) 9,965 9,674 11,841 12,764 13,883 15,355 Dae -ro Jeong +822 -3774 -1634 OP (Wbn) 1,139 1,323 2,186 2,196 2,378 2,582 [email protected] OP margin (%) 11.4 13.7 18.5 17.2 17.1 16.8

Su Yeon Lee NP (Wbn) 944 1,075 2,396 1,844 2,035 2,227 +822 -3774 -7162 EPS (W) 5,369 6,111 13,623 10,485 11,572 12,662 [email protected] ROE (%) 7.5 8.0 16.0 10.9 10.8 10.7

P/E (x) 13.2 9.8 6.7 6.8 6.2 5.6 P/B (x) 1.0 0.8 1.0 0.7 0.6 0.6 Dividend yield (%) 1.8 2.2 1.4 1.8 1.8 1.8 Note: All figures are based on consolidated K-IFRS; NP refers to net profit attributable to controlling interests Source: Company data, Mirae Asset Daewoo Research estimates

September 14, 2018 LG Corp.

Figure 1. LG Corp.’s NAV breakdown Figure 2. Combined OP of Serveone and LG CNS

Real estate Other (Wbn) 3.2 2.7 700 LG CNS Brand royalties Serveone 5.9 600 LGE, 13.6

500 281 272 400 268 Other investment securities, 24.6 223 LG Chem 300 28.4 156 200 153 84 338 286 292 LG H&H 100 187 211 21.6 128 133 0 14 15 16 17 18F 19F 20F

Source: FnGuide, Mirae Asset Daewoo Research Source: Company data, Mirae Asset Daewoo Research

Figure 3. LGE’s contribution to LG Corp’s net profit Figure 4. Shares of LG Corp. and LGE move in sync (attributable to controlling interests)

(Wbn) (%) (W) 2,500 Net profit (L) 40 120000 LG Corp. LGE LGE contribution (R) 100000 2,000 30 80000 1,500 20 60000 1,000 40000 Correlation coefficient: +0.93 10 500 (from 1/1/16) 20000

0 0 0 12 13 14 15 16 17 18F 19F 20F 1/16 7/16 1/17 7/17 1/18 7/18

Source: Company data, Mirae Asset Daewoo Research Source: FnGuide, Mirae Asset Daewoo Research

Figure 5. LG Corp. (30% stake) acquired ZKW jointly with LGE Figure 6. LG Group’s automotive electronics business value

(70%) chain Company ZKW Country Austria CEO Armin Schaller de Oliveira 1. Issuer Capital stock (W) 45,945,200 Major business Manufacture of automotive headlamps No. of shares acquired - Acquisition value (W) 421,938,434,691 2. Equity capital (W) 16,179,510,378,758 Acquisition % of equity capital 2.61 Classification Large corporation 3. Post - No. of shares - acquisition stake Stake (%) 30 4. Method Cash-for-stock Competiveness improvement via acquisition of new growth driver and 5. Purpose business portfolio enhancement Source: DART, Mirae Asset Daewoo Research Source: Media reports, Mirae Asset Daewoo Research

Mirae Asset Daewoo Research 2 September 14, 2018 LG Corp.

Table 1. 3Q18 preview (Wbn, %) 3Q18F Growth 3Q17 2Q18 Mirae Asset Consensus QoQ YoY Daewoo Revenue 2,970.0 2,960.3 3,062.0 3,115.8 3.4 3.1 Operating profit 572.0 524.0 584.1 588.8 11.5 2.1 Net profit 821.8 468.9 470.1 506.4 0.3 -42.8 OP margin 19.3 17.7 19.1 18.9 1.4 -0.2 Net margin 27.7 15.8 15.4 16.3 -0.5 -12.3 Source : Company data, FnGuide , Mirae Asset Daewoo Research

Table 2. Quarterly and annual earnings (Wbn) 2017 2018F 3Q18 growth 2019F 1Q 2Q 3Q 4Q Annual 1Q 2Q 3QF 4QF Annual QoQ YoY Revenue 2,589 2,854 2,970 3,428 11,841.1 2,850 2,960 3,062 3,892 12,764 13,883 3.4 3.1 General revenue 1,984 2,287 2,465 3,072 9,808.4 2,274 2,470 2,488 3,418 10,650 11,351 0.7 1.0 Equity-method gains 504 443 385 245 1,577.1 473 367 443 339 1,622 2,000 20.8 15.1 LG Chem 155 182 157 100 592.9 155 148 147 128 579 667 -0.8 -6.3 LGE 237 142 92 33 503.9 218 75 142 91 526 921 89.4 54.1 LG H&H 56 48 57 30 190.8 62 58 59 44 223 246 2.4 3.2 LG Uplus 49 41 47 61 198.9 40 45 55 48 189 207 21.5 17.0 LG Hausys 4 10 5 3 21.8 2 2 8 5 17 26 312.1 49.7 Other 101 124 121 111 455.6 103 123 131 135 492 532 5.9 8.4 Cost of sales 1,895 2,192 2,301 2,905 9,293.9 2,143 2,340 2,372 3,298 10,154 11,057 1.4 3.1 Gross profit 694 662 669 523 2,547.2 707 620 690 594 2,610 2,827 11.2 3.1 SG&A expenses 77 92 97 96 361.3 93 96 105 121 415 449 9.8 8.9 Operating profit 617 570 572 427 2,185.8 615 524 584 473 2,196 2,378 11.5 2.1 Financial income -10 -3 -3 -10 -24.4 20 22 -8 -7 28 -2 TTR RR Non-operating profit 174 4 409 -8 579.9 45 24 -4 -10 56 24 TTR TTR Pretax profit 781 571 979 410 2,741.3 626 521 573 456 2,176 2,400 10.0 -41.5 Net profit 753 542 835 305 2,435.6 556 475 478 360 1,869 2,059 0.6 -42.8 Controlling interests 748 529 822 297 2,395.9 554 469 470 351 1,844 2,035 0.3 -42.8 Source : Company data, Mirae Asset Daewoo Research

Table 3. Major listed subsidiaries (Wbn, %) 2017 2018F 3Q18 growth 2019F 1Q 2Q 3Q 4Q Annual 1Q 2Q 3QF 4QF Annual QoQ YoY LGE Revenue 14,657 14,551 15,224 16,964 61,396 15,123 15,019 15,953 16,977 63,073 67,629 6.2 4.8 OP 922 664 516 367 2,468 1,108 771 800 601 3,279 3,584 3.7 54.9 OP margin 6.3 4.6 3.4 2.2 4.0 7.3 5.1 5.0 3.5 5.2 5.3 -0.1 1.6 Net profit 795 497 318 115 1,726 717 283 422 270 1,692 2,091 48.9 32.6 LG Chem Revenue 6,487 6,382 6,397 6,432 25,698 6,554 7,052 7,196 7,147 27,949 31,418 2.0 12.5 OP 797 727 790 615 2,928 651 703 652 590 2,596 2,855 -7.3 -17.5 OP margin 12.3 11.4 12.3 9.6 11.4 9.9 10.0 9.1 8.3 9.3 9.1 -0.9 -3.3 Net profit 531 577 521 316 1,945 531 478 441 385 1,835 1,989 -7.6 -15.3 Note: Based on market consensus Source : Fn Guide , company data, Mirae Asset Daewoo Research

Mirae Asset Daewoo Research 3 September 14, 2018 LG Corp.

Table 4. Major consolidated subsidiaries (Wbn, %) 201 7 201 8F 3Q1 8 growth 2019F 1Q 2Q 3Q 4Q Annual 1Q 2Q 3QF 4QF Annual QoQ YoY Serveone Revenue 1,466 1,654 1,749 2,024 6,894 1,683 1,834 1,810 2,193 7,519 8,097 -1.3 3.4 OP 48 65 72 26 211 65 70 73 78 286 292 5.6 2.0 OP margin 3.3 3.9 4.1 1.3 3.1 3.9 3.8 4.1 3.6 3.8 3.6 0.3 -0.1 Net profit 38 39 52 12 141 45 54 53 37 189 189 -2.4 2.0 LG CNS Revenue 572 684 763 985 3,003 612 656 981 1,202 3,451 3,681 49.6 28.6 OP 19 36 58 102 216 35 35 76 121 268 272 115.8 31.8 OP margin 3.4 5.3 7.6 10.4 7.2 5.7 5.4 7.8 10.1 7.8 7.4 2.4 0.2 Net profit -3 28 39 36 100 19 28 45 85 176 171 58.7 14.9 Source : Company data, Mirae Asset Daewoo Research

Table 5. Valuation (Wbn, W, %) Value Notes

1. Operating value 2,632

Royalty income 1,707 10x 2018F after-tax OP

Real estate 926 Fair value of real estate investments

2. Value of investment assets 25,620 Listed subsidiaries 21,667 Based on market value

Unlisted subsidiaries 3,952 Based on book value and fair value 3. Total asset value (1+2) 28,252

4. Net borrowings (-) -797 As of end-2Q18 5. NAV (3+4) 29,049 Market cap 12,460 Common + preferred

Discount to NAV 57.1 6. No. of shares outstanding (‘000 Total shares outstanding (including preferred shares, excluding 175,771 shares) treasury shares) 7. NAV per share 165,265 8. Theoretical target price 99,159 40% discount to NAV

Target price 100,000 Previous target price: W120,000

Current share price 71,400 Based on September 13, 2018 close

Upside potential 40.1 Source : Mirae Asset Daewoo Research

Table 6. Value of investment securities (No. of shares, Wbn, W) Book Current No. of shares Stake Value Notes value price Listed 21,667 Based on September 13, 2018 close subsidiaries LGE 55,094,582 33.7% 2,559 71,500 3,939 LG Chem 23,534,211 33.3% 1,278 350,000 8,237

LG Uplus 157,376,777 36.0% 1,162 17,400 2,738

LG International 9,571,336 24.7% 297 21,850 209

LG Hausys 3,006,673 33.5% 184 71,900 216

LG H&H 5,315,500 34.0% 142 1,182,000 6,283

GⅡR 5,798,593 35.0% 39 7,700 45

Unlisted 3,952 subsidiaries LG CNS 74,076,292 85.0% 331 2,185 Based on K-OTC trading price Serveone 5,000,000 100.0% 250 1,514 Based on target P/E of 8.0x LG MMA 1,200,000 50.0% 115 115 Book value

LG Mgmt Dev. Inst. 1,200,000 100.0% 17 17 Book value

LG Hitachi 245,000 49.0% 14 14 Book value

LG Sports 600,000 100.0% 106 106 Book value Source : DART, FnGuide, Mirae Asset Daewoo Research

Mirae Asset Daewoo Research 4 September 14, 2018 LG Corp.

Figure 7. P/E band Figure 8. Discount to NAV trend

(Wtr) (%) 30 70 14.0x 60 25 12.0x

50 20 10.0x

8.0x 40 15 6.0x 30 10 20 5 10

0 0 04 06 08 10 12 14 1618F 18 06 07 08 09 10 11 12 13 14 15 16 17 18 Note: Excluded one-off profits in 2018 Source: Mirae Asset Daewoo Research Source : FnGuide, Mirae Asset Daewoo Research

Figure 9. Separation of LG Group and GS Group in 2004

(First step) Establishment of GS Holdings via spin-off from LG Corp.

(Second step) Completion of split via share swaps (through cross-trading)

Source: DART, Mirae Asset Daewoo Research

Mirae Asset Daewoo Research 5 September 14, 2018 LG Corp.

LG Corp. (003550 KS/Buy/TP: W100,000)

Comprehensive Income Statement (Summarized) Statement of Financial Condition (Summarized) (Wbn) 12/17 12/18F 12/19F 12/20F (Wbn) 12/17 12/18F 12/19F 12/20F Revenue 11,841 12,764 13,883 15,355 Current Assets 5,368 6,246 7,295 8,934 Cost of Sales 9,294 10,154 11,057 12,281 Cash and Cash Equivalents 1,310 2,073 2,567 2,961 Gross Profit 2,547 2,610 2,826 3,074 AR & Other Receivables 3,023 3,531 4,000 5,054 SG&A Expenses 361 415 449 493 Inventories 110 128 146 184 Operating Profit (Adj) 2,186 2,196 2,378 2,582 Other Current Assets 925 514 582 735 Operating Profit 2,186 2,196 2,378 2,582 Non-Current Assets 16,280 17,601 17,810 19,157 Non-Operating Profit 555 -20 22 52 Investments in Associates 12,753 13,796 15,296 16,796 Net Financial Income -19 -7 0 0 Property, Plant and Equipment 1,912 2,453 2,250 2,067 Net Gain from Inv in Associates 0 0 0 0 Intangible Assets 94 84 67 54 Pretax Profit 2,741 2,176 2,400 2,634 Total Assets 21,648 23,847 25,105 28,091 Income Tax 329 307 341 380 Current Liabilities 3,944 3,838 3,198 4,009 Profit from Continuing Operations 2,413 1,869 2,059 2,254 AP & Other Payables 2,262 2,641 2,992 3,781 Profit from Discontinued Operations 23 0 0 0 Short-Term Financial Liabilities 382 123 123 124 Net Profit 2,436 1,869 2,059 2,254 Other Current Liabilities 1,300 1,074 83 104 Controlling Interests 2,396 1,844 2,035 2,227 Non-Current Liabilities 1,525 1,901 1,967 2,117 Non-Controlling Interests 40 25 24 27 Long-Term Financial Liabilities 1,013 1,400 1,400 1,400 Total Comprehensive Profit 2,395 1,966 2,059 2,254 Other Non-Current Liabilities 512 501 567 717 Controlling Interests 2,356 1,948 2,035 2,228 Total Liabilities 5,468 5,739 5,166 6,126 Non-Controlling Interests 39 18 24 26 Controlling Interests 16,003 17,934 19,740 21,738 EBITDA 2,443 2,385 2,598 2,778 Capital Stock 879 879 879 879 FCF (Free Cash Flow) 766 845 1,220 2,318 Capital Surplus 2,366 2,366 2,366 2,366 EBITDA Margin (%) 20.6 18.7 18.7 18.1 Retained Earnings 13,010 14,849 16,655 18,653 Operating Profit Margin (%) 18.5 17.2 17.1 16.8 Non-Controlling Interests 177 175 199 226 Net Profit Margin (%) 20.2 14.4 14.7 14.5 Stockholders' Equity 16,180 18,109 19,939 21,964

Cash Flows (Summarized) Forecasts/Valuations (Summarized) (Wbn) 12/17 12/18F 12/19F 12/20F 12/17 12/18F 12/19F 12/20F Cash Flows from Op Activities 1,058 1,580 1,220 2,318 P/E (x) 6.7 6.8 6.2 5.6 Net Profit 2,436 1,869 2,059 2,254 P/CF (x) 15.6 14.3 9.9 8.5 Non-Cash Income and Expense -1,412 -993 -797 -782 P/B (x) 1.0 0.7 0.6 0.6 Depreciation 229 168 204 183 EV/EBITDA (x) 6.4 4.9 4.2 3.8 Amortization 28 21 17 13 EPS (W) 13,623 10,485 11,572 12,662 Others -1,669 -1,182 -1,018 -978 CFPS (W) 5,822 4,982 7,176 8,370 Chg in Working Capital -55 82 -1,059 -132 BPS (W) 91,003 101,985 112,257 123,619 Chg in AR & Other Receivables -718 -523 -469 -1,054 DPS (W) 1,300 1,300 1,300 1,300 Chg in Inventories -48 -18 -17 -38 Payout ratio (%) 9.2 12.0 10.9 9.9 Chg in AP & Other Payables 709 389 351 788 Dividend Yield (%) 1.4 1.8 1.8 1.8 Income Tax Paid -155 -395 -341 -380 Revenue Growth (%) 22.4 7.8 8.8 10.6 Cash Flows from Inv Activities -689 -516 1,002 -196 EBITDA Growth (%) 50.8 -2.4 8.9 6.9 Chg in PP&E -259 -710 0 0 Operating Profit Growth (%) 65.2 0.5 8.3 8.6 Chg in Intangible Assets -26 1 0 0 EPS Growth (%) 122.9 -23.0 10.4 9.4 Chg in Financial Assets -263 -94 -87 -196 Accounts Receivable Turnover (x) 4.2 3.9 3.7 3.4 Others -141 287 1,089 0 Inventory Turnover (x) 54.7 107.1 101.4 93.2 Cash Flows from Fin Activities -140 -343 -228 -228 Accounts Payable Turnover (x) 4.8 4.1 3.9 3.6 Chg in Financial Liabilities -487 128 0 1 ROA (%) 11.8 8.2 8.4 8.5 Chg in Equity 1 0 0 0 ROE (%) 16.0 10.9 10.8 10.7 Dividends Paid -243 -460 -229 -229 ROIC (%) 71.9 82.1 73.1 66.0 Others 589 -11 1 0 Liability to Equity Ratio (%) 33.8 31.7 25.9 27.9 Increase (Decrease) in Cash 214 730 494 394 Current Ratio (%) 136.1 162.8 228.1 222.8 Beginning Balance 1,129 1,343 2,073 2,567 Net Debt to Equity Ratio (%) -2.2 -5.9 -8.2 -9.9 Ending Balance 1,343 2,073 2,567 2,961 Interest Coverage Ratio (x) 57.9 106.4 0.0 0.0 Source: Company data, Mirae Asset Daewoo Research estimates

Mirae Asset Daewoo Research 6 September 14, 2018 LG Corp.

APPENDIX 1

Important Disclosures & Disclaimers 2-Year Rating and Target Price History

Company (Code) Date Rating Target Price (W) LG Corp. LG Corp.(003550) 09/13/2018 Buy 100,000 150,000 03/13/2018 Buy 120,000 11/09/2017 Buy 115,000 100,000 08/15/2017 Buy 100,000 05/16/2017 Buy 95,000 11/11/2016 After 1yr 50,000 11/11/2015 Buy 90,000

0 Sep 16 Sep 17 Sep 18

Stock Ratings Industry Ratings Buy : Relative performance of 20% or greater Overweight : Fundamentals are favorable or improving Trading Buy : Relative performance of 10% or greater, but with volatility Neutral : Fundamentals are steady without any material changes Hold : Relative performance of -10% and 10% Underweight : Fundamentals are unfavorable or worsening Sell : Relative performance of -10% Ratings and Target Price History (Share price (─), Target price (▬), Not covered ( ■), Buy (▲), Trading Buy (■), Hold (●), Sell ( ◆)) * Our investment rating is a guide to the relative return of the stock versus the market over the next 12 months. * Although it is not part of the official ratings at Mirae Asset Daewoo Co., Ltd., we may call a trading opportunity in case there is a technical or short-term material development. * The target price was determined by the research analyst through valuation methods discussed in this report, in part based on the analyst’s estimate of future earnings. * The achievement of the target price may be impeded by risks related to the subject securities and companies, as well as general market and economic conditions.

Equity Ratings Distribution & Investment Banking Services Buy Trading Buy Hold Sell Equity Ratings Distribution 73.40% 14.78% 11.82% 0.00% Investment Banking Services 77.42% 9.68% 12.90% 0.00% * Based on recommendations in the last 12-months (as of June 30, 2018)

Disclosures As of the publication date, Mirae Asset Daewoo Co., Ltd. has acted as a liquidity provider for equity-linked warrants backed by shares of LG Corp. as an underlying asset, and other than this, Mirae Asset Daewoo has no other special interests in the covered companies.

Analyst Certification The research analysts who prepared this report (the “Analysts”) are registered with the Korea Financial Investment Association and are subject to Korean securities regulations. They are neither registered as research analysts in any other jurisdiction nor subject to the laws or regulations thereof. Each Analyst responsible for the preparation of this report certifies that (i) all views expressed in this report accurately reflect the personal views of the Analyst about any and all of the issuers and securities named in this report and (ii) no part of the compensation of the Analyst was, is, or will be directly or indirectly related to the specific recommendations or views contained in this report. Mirae Asset Daewoo Co., Ltd. (“Mirae Asset Daewoo”) policy prohibits its Analysts and members of their households from owning securities of any company in the Analyst’s area of coverage, and the Analysts do not serve as an officer, director or advisory board member of the subject companies. Except as otherwise specified herein, the Analysts have not received any compensation or any other benefits from the subject companies in the past 12 months and have not been promised the same in connection with this report. Like all employees of Mirae Asset Daewoo, the Analysts receive compensation that is determined by overall firm profitability, which includes revenues from, among other business units, the institutional equities, investment banking, proprietary trading and private client division. At the time of publication of this report, the Analysts do not know or have reason to know of any actual, material conflict of interest of the Analyst or Mirae Asset Daewoo except as otherwise stated herein.

Disclaimers This report was prepared by Mirae Asset Daewoo, a broker-dealer registered in the Republic of Korea and a member of the Korea Exchange. Information and opinions contained herein have been compiled in good faith and from sources believed to be reliable, but such information has not been independently verified and Mirae Asset Daewoo makes no guarantee, representation or warranty, express or implied, as to the fairness, accuracy, completeness or correctness of the information and opinions contained herein or of any translation into English from the Korean language. In case of an English translation of a report prepared in the Korean language, the original Korean language report may have been made available to investors in advance of this report. The intended recipients of this report are sophisticated institutional investors who have substantial knowledge of the local business environment, its common practices, laws and accounting principles and no person whose receipt or use of this report would violate any laws or regulations or subject Mirae Asset Daewoo or any of its affiliates to registration or licensing requirements in any jurisdiction shall receive or make any use hereof. This report is for general information purposes only and it is not and shall not be construed as an offer or a solicitation of an offer to effect transactions in any securities or other financial instruments. The report does not constitute investment advice to any person and such person shall not be treated as a client of Mirae Asset Daewoo by virtue of receiving this report. This report does not take into account the particular investment objectives, financial

Mirae Asset Daewoo Research 7 September 14, 2018 LG Corp.

situations, or needs of individual clients. The report is not to be relied upon in substitution for the exercise of independent judgment. Information and opinions contained herein are as of the date hereof and are subject to change without notice. The price and value of the investments referred to in this report and the income from them may depreciate or appreciate, and investors may incur losses on investments. Past performance is not a guide to future performance. Future returns are not guaranteed, and a loss of original capital may occur. Mirae Asset Daewoo, its affiliates and their directors, officers, employees and agents do not accept any liability for any loss arising out of the use hereof. Mirae Asset Daewoo may have issued other reports that are inconsistent with, and reach different conclusions from, the opinions presented in this report. The reports may reflect different assumptions, views and analytical methods of the analysts who prepared them. Mirae Asset Daewoo may make investment decisions that are inconsistent with the opinions and views expressed in this research report. Mirae Asset Daewoo, its affiliates and their directors, officers, employees and agents may have long or short positions in any of the subject securities at any time and may make a purchase or sale, or offer to make a purchase or sale, of any such securities or other financial instruments from time to time in the open market or otherwise, in each case either as principals or agents. Mirae Asset Daewoo and its affiliates may have had, or may be expecting to enter into, business relationships with the subject companies to provide investment banking, market-making or other financial services as are permitted under applicable laws and regulations. No part of this document may be copied or reproduced in any manner or form or redistributed or published, in whole or in part, without the prior written consent of Mirae Asset Daewoo.

Distribution United Kingdom: This report is being distributed by Mirae Asset Securities (UK) Ltd. in the United Kingdom only to (i) investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the “Order”), and (ii) high net worth companies and other persons to whom it may lawfully be communicated, falling within Article 49(2)(A) to (E) of the Order (all such persons together being referred to as “Relevant Persons”). This report is directed only at Relevant Persons. Any person who is not a Relevant Person should not act or rely on this report or any of its contents. United States: Mirae Asset Daewoo is not a registered broker-dealer in the United States and, therefore, is not subject to U.S. rules regarding the preparation of research reports and the independence of research analysts. This report is distributed in the U.S. by Mirae Asset Securities (USA) Inc., a member of FINRA/SIPC, to “major U.S. institutional investors” in reliance on the exemption from registration provided by Rule 15a-6(b)(4) under the U.S. Securities Exchange Act of 1934, as amended. All U.S. persons that receive this document by their acceptance hereof represent and warrant that they are a major U.S. institutional investor and have not received this report under any express or implied understanding that they will direct commission income to Mirae Asset Daewoo or its affiliates. Any U.S. recipient of this document wishing to effect a transaction in any securities discussed herein should contact and place orders with Mirae Asset Securities (USA) Inc. Mirae Asset Securities (USA) Inc. accepts responsibility for the contents of this report in the U.S., subject to the terms hereof, to the extent that it is delivered to a U.S. person other than a major U.S. institutional investor. Under no circumstances should any recipient of this research report effect any transaction to buy or sell securities or related financial instruments through Mirae Asset Daewoo. The securities described in this report may not have been registered under the U.S. Securities Act of 1933, as amended, and, in such case, may not be offered or sold in the U.S. or to U.S. persons absent registration or an applicable exemption from the registration requirements. Hong Kong: This report is distributed in Hong Kong by Mirae Asset Securities (HK) Limited, which is regulated by the Hong Kong Securities and Futures Commission. The contents of this report have not been reviewed by any regulatory authority in Hong Kong. This report is for distribution only to professional investors within the meaning of Part I of Schedule 1 to the Securities and Futures Ordinance of Hong Kong (Cap. 571, Laws of Hong Kong) and any rules made thereunder and may not be redistributed in whole or in part in Hong Kong to any person. All Other Jurisdictions: Customers in all other countries who wish to effect a transaction in any securities referenced in this report should contact Mirae Asset Daewoo or its affiliates only if distribution to or use by such customer of this report would not violate applicable laws and regulations and not subject Mirae Asset Daewoo and its affiliates to any registration or licensing requirement within such jurisdiction.

Mirae Asset Daewoo Research 8 September 14, 2018 LG Corp.

Mirae Asset Daewoo International Network

Mirae Asset Daewoo Co., Ltd. (Seoul) Mirae Asset Securities (HK) Ltd. Mirae Asset Securities (UK) Ltd. Global Equity Sales Team Suites 1109-1114, 11th Floor 41st Floor, Tower 42 Mirae Asset Center 1 Building Two International Finance Centre 25 Old Broad Street, 26 Eulji-ro 5-gil, Jung-gu, Seoul 04539 8 Finance Street, Central London EC2N 1HQ Korea Hong Kong United Kingdom China Tel: 82-2-3774-2124 Tel: 852-2845-6332 Tel: 44-20-7982-8000

Mirae Asset Securities (USA) Inc. Mirae Asset Wealth Management (USA) Inc. Mirae Asset Wealth Management (Brazil) CCTVM 810 Seventh Avenue, 37th Floor 555 S. Flower Street, Suite 4410, Rua Funchal, 418, 18th Floor, E-Tower Building Vila New York, NY 10019 Los Angeles, California 90071 Olimpia USA USA Sao Paulo - SP 04551-060 Brasil Tel: 1-212-407-1000 Tel: 1-213-262-3807 Tel: 55-11-2789-2100

PT. Mirae Asset Sekuritas Indonesia Mirae Asset Securities (Singapore) Pte. Ltd. Mirae Asset Securities (Vietnam) LLC Equity Tower Building Lt. 50 6 Battery Road, #11-01 7F, Saigon Royal Building Sudirman Central Business District Singapore 049909 91 Pasteur St. Jl. Jend. Sudirman, Kav. 52 -53 Jakarta Selatan Republic of Singapore District 1, Ben Nghe Ward, Ho Chi Minh City 12190 Vietnam Indonesia Tel: 62-21-515-3281 Tel: 65-6671-9845 Tel: 84-8-3911-0633 (ext.110) Mirae Asset Securities Mongolia UTsK LLC Mirae Asset Investment Advisory (Beijing) Co., Ltd Beijing Representative Office #406, Blue Sky Tower, Peace Avenue 17 2401B, 24th Floor, East Tower, Twin Towers 2401A, 24th Floor, East Tower, Twin Towers 1 Khoroo, Sukhbaatar District B12 Jianguomenwai Avenue, Chaoyang District B12 Jianguomenwai Avenue, Chaoyang District Ulaanbaatar 14240 Beijing 100022 Beijing 100022 Mongolia China China

Tel: 976-7011-0806 Tel: 86-10-6567-9699 Tel: 86-10-6567-9699 (ext. 3300) Shanghai Representative Office Ho Chi Minh Representative Office 38T31, 38F, Shanghai World Financial Center 7F, Saigon Royal Building 100 Century Avenue, Pudong New Area Shanghai 91 Pasteur St. 200120 District 1, Ben Nghe Ward, Ho Chi Minh City China Vietnam

Tel: 86-21-5013-6392 Tel: 84-8-3910-7715

Mirae Asset Daewoo Research 9