Hyundai Steel (004020 KS ) Shadows cast by shrinking automotive steel margins Steel Stock has lost half of its value post-merger, mainly because of automotive steel margin erosion Company Report January 13, 2020 Following its merger with in July 2015, ’s market value from 2016 to 2018 averaged around W7.2tr. However, the stock has continued t o lose value since 2019, closing at W3.8tr on Friday, down 48% (or W3.4tr) from its 2016-18 average. The company’s stock decline is ultimately the result of shrinking profits. Hyundai Steel’s annual consolidated operating profit averaged W1.4tr from 2016 t o (Maintain) Buy 2018 (adjusting for the ordinary wage effects in 2018), but that figure slumped to an estimated W0.5tr in 2019. While the steel market downturn triggered by US-China Target Price (12M, W) ▼▼▼ 37,000 trade disputes was partly to blame, we believe the bigger cause was the margin erosion of automotive steel supplies to Hyundai Motor (HMC; 005380 KS/Buy/TP: Share Price (01/10/20, W) 28,800 W178,000/CP: W113,500) and Motors (000270 KS/Trading Buy/TP: W53,000/CP: W40,400), which have an outsized impact on the steelmaker’s profits. Expected Return 28% Automotive steel price negotiations have not reflected market dynamics

Iron production costs (the weighted average of iron ore and coking coal prices), which OP (19F, Wbn) 476 had fallen steadily since 2011, have been on the rise since late 2015. In won terms, Consensus OP (19F, Wbn) 540 production costs have jumped to an average of W3 00,000/tonne, up from W150,000/tonne in 4Q15. However, the price of Hyundai Steel’s automotive steel to EPS Growth (19F, %) -97.9 HMC/Kia was raised by only roughly W60,000/tonne during that period (in 2Q17). This Market EPS Growth (19F, %) -34.1 suggests that Hyundai Steel’s automotive steel margins have contract ed by around P/E (19F, x) 502.6 W90,000/tonne, which translates to a decline in full-year profit of approximately Market P/E (19F, x) 15.2 W400bn. KOSPI 2,206.39 While higher costs do not always lead to product price hikes, we believe the limited Market Cap (Wbn) 3,843 extent of Hyundai Steel’s automotive steel price hike was not the result of market Shares Outstanding (mn) 133 dynamics, given that: 1) steel prices (based on China’s HRC export prices) have Free Float (%) 62.4 increased from US$300/tonne to US$500/tonne during that period; and 2) the average Foreign Ownership (%) 22.1 ASP of CRC at one rival has increased by W150,000/tonne. Beta (12M) 1.14 52-Week Low 28,200 Maintain Buy, but cut TP 52-Week High 51,700 We maintain our Buy rating on Hyundai Steel, as: 1) we believe the automotive steel (%) 1M 6M 12M margin decline has largely been priced in; 2) steel prices have continued to move Absolute -6.6 -28.0 -41.1 higher after rebounding in November 2019; and 3) prices of non-automotive steel Relative -11.2 -32.8 -44.9 products are likely to be raised. However, we adjusted down our earnings estimates, as we believe automotive steel prices were frozen in 2H19, and price hikes look unlikely

130 Hyundai Steel KOSPI this year, as well. As such, we cut our target price by 11.9% from W42,000 to W37,000.

110

90

70

50 1.19 5.19 9.19 1.20

Mirae Asset Daewoo Co., Ltd.

[ Metals & Mining/Machinery ] FY (Dec.) 12/16 12/17 12/18 12/19F 12/20F 12/21F Revenue (Wbn) 16,692 19,166 20,780 20,281 19,529 20,294 Jaekwang Rhee +822 -3774 -6022 OP (Wbn) 1,445 1,368 1,026 476 586 675 [email protected] OP margin (%) 8.7 7.1 4.9 2.3 3.0 3.3

NP (Wbn) 850 716 399 8 226 293 EPS (W) 6,371 5,366 2,988 63 1,697 2,199 ROE (%) 5.4 4.4 2.4 0.0 1.3 1.6

P/E (x) 8.9 10.9 15.1 502.6 17.0 13.1 P/B (x) 0.5 0.5 0.4 0.2 0.2 0.2 Dividend yield (%) 1.3 1.3 1.7 2.4 2.6 2.6 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

January 13, 2020 Hyundai Steel

Figure 1. Hyundai Steel’s market cap Figure 2. Hyundai Steel’s OP

(Wtr) (Wbn) OP 10 1,600 1,445 1,368 9 1,400 1,300

1,200 8 Ordinary wage-related expenses 1,000 7 800 6 2016-18 avg.: W7.2tr 600 5,860 4,760 5 400

4 200 1/10/20: W3.8tr 3 0 1/16 6/16 11/16 4/17 9/17 2/18 7/18 12/18 5/19 10/19 16 17 18 19F 20F

Source: Bloomberg, Mirae Asset Daewoo Research Source: Bloomberg, Mirae Asset Daewoo Research

Figure 3. Hyundai Steel’s automotive steel prices and iron production costs

(W'000/tonne) (W'000/tonne) 1,150 Automotive steel price (L) Iron production costs (R) 500

1,100 450 400 1,050 350 1,000 300 950 250 900 200

850 150

800 100 1Q12 3Q12 1Q13 3Q13 1Q14 3Q14 1Q15 3Q15 1Q16 3Q16 1Q17 3Q17 1Q18 3Q18 1Q19 3Q19 1Q20

Note: Automotive steel prices are based on media estimates. Source: Fastmarkets MB, press reports, Mirae Asset Daewoo Research

Figure 4. Hyundai Steel’s automotive steel prices and China’s HRC export prices

(W'000/tonne) (W'000/tonne) 1,150 Automotive steel price (L) China's HRC export price (R) 650

600 1,100 550 1,050 500

1,000 450

950 400 350 900 300 850 250

800 200 1Q12 3Q12 1Q13 3Q13 1Q14 3Q14 1Q15 3Q15 1Q16 3Q16 1Q17 3Q17 1Q18 3Q18 1Q19 3Q19 1Q20

Note: Automotive steel prices are based on media estimates. Source: Platts, press reports, Mirae Asset Daewoo Research

Mirae Asset Daewoo Research 2 January 13, 2020 Hyundai Steel

Figure 5. Iron ore prices Figure 6. Coking coal prices

(US$/tonne) (RMB/tonne) (US$/tonne) (RMB/tonne) 130 China iron ore import price (L) 1,000 350 China coking coal export price (L) 1,600 China iron ore futures price (R) China coking coal futures price (R) 120 900 1,500 300 110 1,400 800 100 250 1,300 90 700 1,200 80 200 600 1,100 70 150 500 60 1,000

50 400 100 900 1/17 5/17 9/17 1/18 5/18 9/18 1/19 5/19 9/19 1/17 5/17 9/17 1/18 5/18 9/18 1/19 5/19 9/19

Source: Fastmarkets MB, WIND, Mirae Asset Daewoo Research Source: Fastmarkets MB, WIND, Mirae Asset Daewoo Research

Figure 7. Steel scrap prices Figure 8. Graphite electrode and ferro-vanadium prices

(W'000/tonne) ('000 JPY/tonne) (RMB/tonne) China graphite electrode price (L) (US$/tonne) 400 Korea scrap price (L) 40 140,000 China ferro-vanadium export price (R) 160,000 380 Japan scrap price (R) 38 120,000 140,000 360 36 120,000 340 34 100,000 320 32 100,000 80,000 300 30 80,000 280 28 60,000 60,000 260 26 40,000 40,000 240 24 20,000 220 22 20,000 200 20 0 0 1/17 5/17 9/17 1/18 5/18 9/18 1/19 5/19 9/19 1/17 6/17 11/17 4/18 9/18 2/19 7/19 12/19

Source: Steel Daily, Mirae Asset Daewoo Research Source: ICCSINO, Fastmarkets MB, Mirae Asset Daewoo Research

Figure 9. HRC prices Figure 10. Heavy plate prices

(W'000/tonne) Korea HRC price (L) (RMB/tonne) (W'000/tonne) (RMB/tonne) 850 China HRC price (R) 4,600 850 Korea heavy plate price (L) 4,800 China heavy plate price (R) 4,400 4,600 800 800 4,400 4,200 750 4,200 750 4,000 4,000 3,800 700 3,800 700 3,600 650 3,600 3,400 650 3,400 600 3,200 3,200

600 3,000 550 3,000 1/17 5/17 9/17 1/18 5/18 9/18 1/19 5/19 9/19 1/17 5/17 9/17 1/18 5/18 9/18 1/19 5/19 9/19

Source: Steel Daily, SMM, Mirae Asset Daewoo Research Source: Steel Daily, SMM Mirae Asset Daewoo Research

Mirae Asset Daewoo Research 3 January 13, 2020 Hyundai Steel

Figure 11. CRC prices Figure 12. Galvanized steel sheet prices

(W'000/tonne) Korea CRC price (L) (RMB/tonne) (W'000/tonne) (RMB/tonne) 900 China CRC price (R) 5,100 1,000 Korea galvanized steel sheet price (L) 5,500 China galvanized steel sheet price (R) 4,900 5,400 950 850 5,300 4,700 5,200 900 800 4,500 5,100 4,300 850 5,000

750 4,100 4,900 800 4,800 3,900 700 4,700 750 3,700 4,600 650 3,500 700 4,500 1/17 5/17 9/17 1/18 5/18 9/18 1/19 5/19 9/19 1/17 5/17 9/17 1/18 5/18 9/18 1/19 5/19 9/19

Source: Steel Daily, SMM, Mirae Asset Daewoo Research Source: Steel Daily, SMM, Mirae Asset Daewoo Research

Figure 13. Stainless CRC prices Figure 14. Steel rebar prices

(W'000/tonne) (RMB/tonne) (W'000/tonne) Korea steel rebar price (L) (RMB/tonne) 3,100 Korea stainless CRC price (L) 18,000 750 China steel rebar price (R) 5,000 3,000 China stainless CRC price (R) 4,800 17,000 2,900 700 4,600

2,800 16,000 4,400 650 4,200 2,700 15,000 4,000 2,600 600 3,800 2,500 14,000 3,600 2,400 550 3,400 13,000 2,300 3,200 2,200 12,000 500 3,000 1/17 5/17 9/17 1/18 5/18 9/18 1/19 5/19 9/19 1/17 5/17 9/17 1/18 5/18 9/18 1/19 5/19 9/19

Source: Steel Daily, SMM, Mirae Asset Daewoo Research Source: Steel Daily, SMM, Mirae Asset Daewoo Research

Figure 15. H-beam prices Figure 16. Specialty round bar prices

(W'000/tonne) (W'000/tonne) 900 1,100

850 1,050

800 1,000

750 950

700 900

650 850

600 800 1/17 5/17 9/17 1/18 5/18 9/18 1/19 5/19 9/19 1/17 5/17 9/17 1/18 5/18 9/18 1/19 5/19 9/19

Source: Steel Daily, Mirae Asset Daewoo Research Source: SNM News, Mirae Asset Daewoo Research

Mirae Asset Daewoo Research 4 January 13, 2020 Hyundai Steel

Table 1. Quarterly and annual earnings (Wbn, %) 1Q19 2Q19 3Q19 4Q19F 1Q20F 2Q20F 3Q20F 4Q20F 2018 2019F 2020F Revenue 5,072 5,572 5,047 4,590 4,757 5,008 4,757 5,008 20,780 20,281 19,529 Hyundai Steel (parent) 4,478 5,017 4,459 4,060 4,227 4,478 4,227 4,478 18,611 18,014 17,409 Subsidiaries 594 555 589 530 530 530 530 530 2,170 2,267 2,120 Operating profit 212 233 34 (3) 94 167 158 167 1,026 476 586 Hyundai Steel (parent) 169 218 34 (4) 85 157 148 157 933 417 546 Subsidiaries 43 14 0 1 10 10 10 10 93 59 40 OP margin 4.2 4.2 0.7 (0.1) 2.0 3.3 3.3 3.3 4.9 2.3 3.0 Hyundai Steel (parent) 3.8 4.4 0.8 (0.1) 2.0 3.5 3.5 3.5 5.0 2.3 3.1 Subsidiaries 7.3 2.6 0.0 0.2 1.9 1.9 1.9 1.9 4.3 2.6 1.9 Pretax profit 156 132 (65) (81) 42 89 80 89 570 143 301 Net profit (controlling) 114 46 (68) (80) 32 67 61 67 399 12 226 Source: Company data, Mirae Asset Daewoo Research estimates

Figure 17. Revenue breakdown Figure 18. OP breakdown

(Wtr) (Wbn) 6 Subsidiaries Parent 300 Subsidiaries Parent

5 250

200 4 150 3 100 2 50

1 0

0 -50 3Q18 4Q18 1Q19 2Q19 3Q19 3Q18 4Q18 1Q19 2Q19 3Q19

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

Figure 19. Parent revenue breakdown by product Figure 20. Parent sales volume breakdown by product

Other Heavy plate Steel rebar Other Heavy plate Steel rebar (%) (%) HRC Section steel CRC HRC Section steel CRC 100 100 90 90 80 80 70 70 60 60

50 50 40 40 30 30 20 20 10 10 0 0 3Q18 4Q18 1Q19 2Q19 3Q19 3Q18 4Q18 1Q19 2Q19 3Q19 Source: Company data, Mirae Asset Daewoo Research Source: Company data, Mirae Asset Daewoo Research

Mirae Asset Daewoo Research 5 January 13, 2020 Hyundai Steel

Table 2. Global peer group earnings and valuation metrics (Wbn, x, %)

Market Revenue Operating profit OP margin P/E P/B ROE

cap 18 19F 18 19F 18 19F 18 19F 18 19F 18 19F Hyundai Steel 3,830 20,780 20,873 1,026 570 5.9 3.3 8.3 25.7 0.2 0.2 2.4 0.8 Major domestic steel companies POSCO 20,750 64,978 64,639 5,543 4,176 8.5 6.5 7.0 9.0 0.4 0.5 3.8 5.0 525 5,965 5,745 145 231 2.4 4.0 -- -- 0.3 0.3 (14.5) (0.6) SeAH Besteel 497 3,278 3,002 56 49 1.7 1.6 19.4 20.0 0.3 0.3 1.1 1.3 Average 4.2 4.0 13.2 14.5 0.3 0.3 (3.2) 1.9 Major global steel companies (ex-China) ArcelorMittal 20,028 83,678 83,138 7,196 1,986 8.6 2.4 2.9 116.5 0.4 0.4 12.7 (0.3) 16,591 62,054 65,491 1,531 686 2.5 1.0 4.5 48.7 0.5 0.5 7.9 0.9 JFE 9,304 38,908 39,827 1,713 558 4.4 1.4 4.6 22.5 0.4 0.4 8.6 2.0 Nucor 18,813 27,588 25,995 3,659 2,184 13.3 8.4 7.0 12.9 1.7 1.6 25.4 12.6 Tata Steel 8,942 24,650 24,553 3,512 1,941 14.2 7.9 6.0 11.6 0.8 0.8 15.7 7.4 US Steel 2,140 15,604 14,948 1,237 51 7.9 0.3 2.4 -- 0.5 0.5 29.6 (2.1) Average 8.5 3.6 4.6 42.4 0.7 0.7 16.7 3.4 Major Chinese steel companies Baoshan 21,448 50,773 48,510 4,729 2,847 9.3 5.9 6.0 10.4 0.7 0.7 12.6 6.8 Hesteel 4,570 20,122 21,071 1,594 547 7.9 2.6 7.6 11.4 0.6 0.5 7.7 4.4 Angang 5,050 17,494 17,063 1,871 569 10.7 3.3 ------15.3 4.5 Maanshan 3,864 13,633 12,787 1,323 555 9.7 4.3 ------22.8 8.4 Shougang 3,100 10,942 11,142 860 428 7.9 3.8 7.7 12.3 0.7 0.7 9.3 5.8 Average 9.1 4.0 7.1 11.4 0.7 0.6 13.5 6.0 HMC 24,251 96,813 105,012 2,422 3,537 2.5 3.4 18.3 9.2 0.3 0.4 1.7 4.6 Kia 16,458 54,170 56,829 1,157 1,965 2.1 3.5 13.5 8.1 0.6 0.6 4.3 7.3 23,493 35,149 37,719 2,025 2,371 5.8 6.3 12.4 9.9 0.8 0.7 6.3 7.6 5,194 16,866 18,179 710 861 4.2 4.7 11.9 11.1 1.2 1.1 10.6 10.6 1,285 7,880 7,598 5 130 0.1 1.7 -- 17.9 0.4 0.4 (1.8) 2.4 Average 2.9 3.9 14.0 11.2 0.7 0.7 4.2 6.5 Source: Bloomberg

Mirae Asset Daewoo Research 6 January 13, 2020 Hyundai Steel

Figure 21. Share performances of major Korean steel Figure 22. Share performances of major global (ex-China) companies steel companies

(-2Y=0) (-2Y=0) 70 Hyundai Steel 80 ArcelorMittal POSCO Nippon 50 Dongkuk Steel Mill 60 JFE SeAH Besteel Nucor Tata 40 30 US 20 10 0 -10 -20

-30 -40

-50 -60 1/17 4/17 7/17 10/17 1/18 4/18 7/18 10/18 1/17 4/17 7/17 10/17 1/18 4/18 7/18 10/18

Source: Bloomberg, Mirae Asset Daewoo Research Source: Bloomberg, Mirae Asset Daewoo Research

Figure 23. Share performances of major Chinese steel Figure 24. Share performances of major listed Hyundai Motor companies Group companies

(-2Y=0) (-2Y=0) HMC Kia 80 Baoshan Hesteel 20 Hyundai Mobis Hyundai Glovis Angang Maanshan Hyundai Wia 10 60 Shougang Shandong 0 40 -10

20 -20

0 -30 -40 -20 -50 -40 -60

-60 -70 1/17 4/17 7/17 10/17 1/18 4/18 7/18 10/18 1/17 4/17 7/17 10/17 1/18 4/18 7/18 10/18

Source: Bloomberg, Mirae Asset Daewoo Research Source: Bloomberg, Mirae Asset Daewoo Research

Mirae Asset Daewoo Research 7 January 13, 2020 Hyundai Steel

Table 3. TP calculation Sustainable ROIC % 4.3 WACC % 7.1 Fundamental EV/IC x 0.6 IC Wbn 25,000 EV Wbn 15,133 Net debt Wbn 10,000 Minority interest Wbn 327 Fair market cap Wbn 4,806 No. of shares mn 131 TP W 37,000 Source: Mirae Asset Daewoo Research estimates

Figure 25. EV/EBITDA Figure 26. EV/IC

(x) (x) 14.0 12MF EV/EBITDA 2.3 12MF EV/IC

13.0 2.1

12.0 1.9 +1 SD 11.0 1.7 +1 SD 10.0 1.5 Avg. 9.0 1.3 Avg. 8.0 1.1 -1 SD

7.0 0.9 -1 SD 6.0 0.7

5.0 0.5 11 12 13 14 15 16 17 18 19 20 11 12 13 14 15 16 17 18 19 20

Source: WISEfn, Mirae Asset Daewoo Research Source: WISEfn, Mirae Asset Daewoo Research

Figure 27. Market cap and OP Figure 28. EV/IC and ROIC

(Wtr) OP (R) (Wbn) (x) (%) 14 Market cap (L) 1,600 2.3 ROIC (R) 9 2.1 12MF EV/IC (L) 8 12 1,400 1.9 7 1,200 10 1.7 6 1,000 8 1.5 5 800 6 1.3 4 600 1.1 3 4 400 0.9 2 2 200 0.7 1

0 0 0.5 0 11 12 13 14 15 16 17 18 19 20 11 12 13 14 15 16 17 18 19 20

Source: WISEfn, Mirae Asset Daewoo Research Source: WISEfn, Mirae Asset Daewoo Research

Mirae Asset Daewoo Research 8 January 13, 2020 Hyundai Steel

Hyundai Steel (004020 KS/Buy/TP: W37,000)

Comprehensive Income Statement (Summarized) Statement of Financial Condition (Summarized) (Wbn) 12/18 12/19F 12/20F 12/21F (Wbn) 12/18 12/19F 12/20F 12/21F Revenue 20,780 20,281 19,529 20,294 Current Assets 8,769 10,565 11,162 11,787 Cost of Sales 18,708 18,732 17,846 18,479 Cash and Cash Equivalents 762 2,315 3,294 3,629 Gross Profit 2,072 1,549 1,683 1,815 AR & Other Receivables 2,655 2,864 2,657 2,761 SG&A Expenses 1,046 1,072 1,098 1,141 Inventories 4,919 4,905 4,730 4,915 Operating Profit (Adj) 1,026 476 586 675 Other Current Assets 433 481 481 482 Operating Profit 1,026 476 586 675 Non-Current Assets 24,536 24,533 24,204 23,905 Non-Operating Profit -456 -333 -285 -285 Investments in Associates 126 130 130 130 Net Financial Income -314 -304 -310 -310 Property, Plant and Equipment 20,785 20,368 20,122 19,896 Net Gain from Inv in Associates 18 13 0 0 Intangible Assets 1,653 1,580 1,497 1,424 Pretax Profit 570 143 301 390 Total Assets 33,305 35,097 35,365 35,691 Income Tax 162 124 72 94 Current Liabilities 6,703 6,226 6,363 6,492 Profit from Continuing Operations 408 19 229 296 AP & Other Payables 3,118 2,591 2,748 2,856 Profit from Discontinued Operations 0 0 0 0 Short-Term Financial Liabilities 3,057 3,072 3,072 3,072 Net Profit 408 19 229 296 Other Current Liabilities 528 563 543 564 Controlling Interests 399 8 226 293 Non-Current Liabilities 9,579 10,607 10,607 10,607 Non-Controlling Interests 9 10 2 3 Long-Term Financial Liabilities 8,318 9,132 9,132 9,132 Total Comprehensive Profit 88 312 229 296 Other Non-Current Liabilities 1,261 1,475 1,475 1,475 Controlling Interests 80 312 229 297 Total Liabilities 16,282 16,833 16,971 17,099 Non-Controlling Interests 8 0 0 0 Controlling Interests 16,696 17,927 18,056 18,251 EBITDA 2,617 2,039 2,115 2,173 Capital Stock 667 667 667 667 FCF (Free Cash Flow) 377 15 1,077 434 Capital Surplus 3,914 3,914 3,914 3,914 EBITDA Margin (%) 12.6 10.1 10.8 10.7 Retained Earnings 11,561 11,471 11,598 11,794 Operating Profit Margin (%) 4.9 2.3 3.0 3.3 Non-Controlling Interests 327 337 339 342 Net Profit Margin (%) 1.9 0.0 1.2 1.4 Stockholders' Equity 17,023 18,264 18,395 18,593

Cash Flows (Summarized) Forecasts/Valuations (Summarized) (Wbn) 12/18 12/19F 12/20F 12/21F 12/18 12/19F 12/20F 12/21F Cash Flows from Op Activities 1,575 1,027 2,277 1,634 P/E (x) 15.1 502.6 17.0 13.1 Net Profit 408 19 229 296 P/CF (x) 2.0 1.9 1.8 1.8 Non-Cash Income and Expense 2,541 2,162 1,863 1,854 P/B (x) 0.4 0.2 0.2 0.2 Depreciation 1,491 1,470 1,447 1,425 EV/EBITDA (x) 6.4 6.9 6.1 5.7 Amortization 99 93 83 73 EPS (W) 2,988 63 1,697 2,199 Others 951 599 333 356 CFPS (W) 22,102 16,342 15,677 16,116 Chg in Working Capital -817 -640 519 -161 BPS (W) 126,082 135,311 136,270 137,731 Chg in AR & Other Receivables 23 -157 174 -101 DPS (W) 750 750 750 750 Chg in Inventories -832 76 175 -185 Payout ratio (%) 24.1 525.0 43.0 33.2 Chg in AP & Other Payables 198 -301 4 52 Dividend Yield (%) 1.7 2.4 2.6 2.6 Income Tax Paid -279 -253 -72 -94 Revenue Growth (%) 8.4 -2.4 -3.7 3.9 Cash Flows from Inv Activities -1,165 -1,006 -1,200 -1,200 EBITDA Growth (%) -8.9 -22.1 3.7 2.7 Chg in PP&E -1,154 -1,015 -1,200 -1,200 Operating Profit Growth (%) -25.0 -53.6 23.1 15.2 Chg in Intangible Assets -4 -10 0 0 EPS Growth (%) -44.3 -97.9 2,593.7 29.6 Chg in Financial Assets 1,434 25 0 0 Accounts Receivable Turnover (x) 7.9 7.6 7.3 7.7 Others -1,441 -6 0 0 Inventory Turnover (x) 4.6 4.1 4.1 4.2 Cash Flows from Fin Activities -419 501 -98 -98 Accounts Payable Turnover (x) 14.0 13.7 13.6 13.8 Chg in Financial Liabilities -300 830 0 0 ROA (%) 1.2 0.1 0.6 0.8 Chg in Equity 0 0 0 0 ROE (%) 2.4 0.0 1.3 1.6 Dividends Paid -99 -99 -98 -98 ROIC (%) 2.8 0.6 1.7 2.0 Others -20 -230 0 0 Liability to Equity Ratio (%) 95.6 92.2 92.3 92.0 Increase (Decrease) in Cash -9 1,553 978 336 Current Ratio (%) 130.8 169.7 175.4 181.6 Beginning Balance 771 762 2,315 3,294 Net Debt to Equity Ratio (%) 60.6 52.6 46.9 44.6 Ending Balance 762 2,315 3,294 3,629 Interest Coverage Ratio (x) 3.1 1.5 1.8 2.1 Source: Company data, Mirae Asset Daewoo Research estimates

Mirae Asset Daewoo Research 9 January 13, 2020 Hyundai Steel

APPENDIX 1

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

Company (Code) Date Rating Target Price (W) Hyundai Steel Hyundai Steel (004020) 01/10/2020 Buy 37,000 80,000 10/30/2019 Buy 42,000 10/06/2019 Buy 48,000 60,000 06/25/2019 Buy 59,000 01/27/2019 Buy 64,000 40,000 12/19/2018 Buy 58,000 20,000 06/25/2018 Buy 72,000

04/08/2018 Buy 64,000 0 01/26/2018 After 1yr Jan 18 Jan 19 Jan 20 01/26/2017 Buy 76,000

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 84.05% 9.82% 6.13% 0.00% Investment Banking Services 76.67% 13.33% 10.00% 0.00% * Based on recommendations in the last 12-months (as of December 31, 2019)

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 Hyundai Steel as an underlying asset; 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.

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Mirae Asset Daewoo Research 10 January 13, 2020 Hyundai Steel

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.

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Mirae Asset Daewoo Research 11 January 13, 2020 Hyundai Steel

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