January 16, 2020 Korea Morning Focus

Company News & Analysis Major Indices Close Chg Chg (%) Emart (139480/Buy/TP: W190,000) KOSPI 2,230.98 -7.90 -0.35 4Q19 preview: Tailwinds remain intact KOSPI 200 299.74 -1.79 -0.59 KOSDAQ 679.16 0.45 0.07

Turnover ('000 shares, Wbn) Volume Value KOSPI 733,886 5,946 KOSPI 200 70,381 3,444 KOSDAQ 894,708 4,234

Market Cap (Wbn) Value KOSPI 1,501,048 KOSDAQ 245,116

KOSPI Turnover (Wbn) Buy Sell Net Foreign 1,554 1,639 -85 Institutional 1,155 1,399 -244 Retail 3,201 2,885 316

KOSDAQ Turnover (Wbn) Buy Sell Net Foreign 451 461 -11 Institutional 138 234 -96 Retail 3,609 3,506 102

Program Buy / Sell (Wbn) Buy Sell Net KOSPI 1,322 1,246 76 KOSDAQ 421 448 -27

Advances & Declines Advances Declines Unchanged KOSPI 513 279 114 KOSDAQ 715 513 115

KOSPI Top 5 Most Active Stocks by Value (Wbn) Price (W) Chg (W) Value Electronics 59,000 -1,000 812 Namsun Aluminum 4,160 730 484 Hynix 98,200 -2,300 269 Hanchang 3,365 620 159 KODEX Kosdaq150 8,710 -60 157 Leverage

KOSDAQ Top 5 Most Active Stocks by Value (Wbn) Price (W) Chg (W) Value SK Bioland 24,000 -1,300 121 Mercury 11,350 2,110 108 KRTNet Corporation 3,825 305 101 Duckshin Housing 2,045 155 98 TK Chemical 2,425 150 98 Note: As of January 15, 2020

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Emart (139480 KS) 4Q19 preview: Tailwinds remain intact

Retail 4Q19 preview: Likely to miss consensus Company Report For 4Q19, we forecast Emart to deliver consolidated revenue of W4.81tr (+13.8% YoY) and operating profit of W32.3bn (-47% YoY). We expect operating profit to miss the January 16, 2020 consensus, hurt by 1) costs related to SSG Day promotions, 2) a weaker-than- anticipated recovery in same-store sales (SSS), and 3) wider losses at SSG.com.

Parent: We look for hypermarket SSS growth of -1.3% and operating profit of W48.7bn (-34.9% YoY). We expect operating profit to be weaker than our previous estimate, due (Maintain) Buy to 1) sluggish SSS in December and 2) continued losses at specialty stores. We also believe margins were weighed down by 1) the SSG Day event (for hypermarkets) and 2) Target Price (12M, W) 190,000 specialty store restructuring. SSG.com: We expect growth of around 26%. We estimate operating loss widened QoQ Share Price (01/15/20, W) 123,500 to W28.7bn. Online market share likely continued to expand in 4Q19. Currently, SSG.com is still facing some capacity shortages for next-morning deliveries and in Expected Return 54% some districts. We think the opening of a third NE.O online distribution center and increased fulfillments by offline stores will immediately contribute to growth. We expect SSG.com to continue to grow more rapidly than the market in 2020. OP (19F, Wbn) 193 Tailwinds remain intact Consensus OP (19F, Wbn) 208 Emart’s stock has lately come under pressure, affected by 1) tepid SSS in December and EPS Growth (19F, %) -59.9 2) slowing growth at SSG.com amid fewer promotions. However, we believe Emart’s Market EPS Growth (19F, %) -34.4 tailwinds remain intact. P/E (19F, x) 19.7 Offline: In December, Emart’s hypermarket SSS fell 3.6%. Still, we do not see this as a Market P/E (19F, x) 15.6 cause for concern, considering 1) the impact of holidays and 2) the success of the KOSPI 2,230.98 retailer’s recent one-day special discount event (the effects of which were likely equivalent to more than one holiday). We believe SSS will improve sharply YoY in 2020, Market Cap (Wbn) 3,443 given the recovery in CPI inflation, Coupang’s decelerating traffic, and the slowing Shares Outstanding (mn) 28 traffic decline across the hypermarket industry. Free Float (%) 68.2 Foreign Ownership (%) 32.3 Online: We estimate SSG.com’s growth was around 17-18% in December, much slower Beta (12M) 1.16 than in October-November due to fewer promotions. Considering high base effects 52-Week Low 105,500 (market growth was strong in December 2018) and major online platforms’ traffic growth trend in December 2019, we believe December online market growth modestly 52-Week High 198,000 slowed MoM (vs. 20.2% in November and 17.4% in October). Even with the promotion (%) 1M 6M 12M cuts, we think SSG.com grew in line with the overall market in December and are confident that its market share expanded in 4Q19. Absolute -6.1 -8.2 -37.5 Relative -8.6 -14.3 -41.2 Maintain Buy and TP of W190,000

120 Emart KOSPI We maintain our Buy rating and target price of W190,000 on Emart. While December’s disappointing top-line growth across both online and offline has dragged down Emart’s 100 stock, we expect the stock to bounce back on 1) a slower SSS decline and 2) solid online 80 growth. Emart is currently trading at a 2020F P/E of 13x, higher than in 2018, when offline weakness and online expectations had not been priced in. However, once the 60 retailer increases the utilization of its offline stores, beginning with the

40 Cheonggyecheon location, the resulting fixed asset efficiency could lead to operating 1.19 5.19 9.19 1.20 profit improvements and multiple expansion.

Mirae Asset Daewoo Co., Ltd.

[ Retail] FY (Dec.) 12/16 12/17 12/18 12/19F 12/20F 12/21F Revenue (Wbn) 14,615 15,515 17,049 19,039 19,946 21,054 Myoungjoo Kim +822-3774-1458 OP (Wbn) 569 585 463 193 277 331 [email protected] OP margin (%) 3.9 3.8 2.7 1.0 1.4 1.6

NP (Wbn) 376 616 450 181 252 299 EPS (W) 13,497 22,101 16,150 6,480 9,053 10,708 ROE (%) 5.1 7.7 5.5 2.1 2.8 3.2

P/E (x) 13.6 12.3 11.3 19.7 13.6 11.5 P/B (x) 0.7 0.9 0.6 0.4 0.4 0.4 Dividend yield (%) 0.8 0.6 1.1 1.6 1.6 1.6 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

Analysts who prepared this report are registered as research analysts in Korea but not in any other jurisdiction, including the U.S. PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES & DISCLAIMERS IN APPENDIX 1 AT THE END OF REPORT.

Mirae Asset Daewoo Research Key Universe Valuations January 16, 2020

※All data as of close January 14, 2020, unless otherwise noted.

19F Earnings growth Mkt Cap Price P/E (x) P/B (x) ROE (%) Ticker Company Div Yield OP EPS (Wbn) (W) (%) 19F 20F 19F 20F 19F 20F 19F 20F 19F 20F 005930 352,217 59,000 2.4 -53.2 41.0 -46.6 37.2 18.3 13.4 1.5 1.4 8.7 11.1 000660 SK Hynix 71,490 98,200 1.5 -64.8 -3.0 -61.6 -3.2 12.0 12.4 1.3 1.2 12.1 10.6 035420 NAVER 31,562 191,500 0.2 -17.8 77.0 -47.3 132.4 92.4 39.7 4.6 4.2 6.3 13.4 005380 Hyundai Motor 24,572 115,000 3.5 49.6 41.9 118.5 48.0 9.8 6.6 0.4 0.4 4.7 6.6 012330 23,350 245,000 2.0 17.9 16.4 24.3 17.1 10.2 8.7 0.7 0.7 7.3 7.9 051910 LG Chem 23,190 328,500 1.2 -55.7 70.9 -72.5 164.0 63.5 24.0 1.5 1.4 2.4 6.1 068270 22,652 176,500 - - - - 0.0 0.0 051900 LG H&H 22,209 1,422,000 0.7 11.7 13.9 15.2 15.2 28.2 24.5 6.1 5.2 20.1 19.6 005490 POSCO 21,099 242,000 4.5 -23.9 -9.2 37.8 -0.3 9.1 9.1 0.5 0.4 5.3 5.1 028260 Samsung C&T 20,297 107,000 1.9 -27.7 39.8 -42.8 17.9 20.9 17.7 0.7 0.6 4.0 3.9 105560 KB Financial Group 19,917 47,900 9.3 2.3 12.6 0.9 5.8 5.8 0.5 0.5 9.2 8.5 055550 19,679 41,500 12.3 3.9 10.0 -0.2 5.7 5.7 0.5 0.5 9.1 8.4 017670 SK Telecom 19,177 237,500 4.2 7.3 -3.5 -60.6 68.2 15.6 9.3 0.8 0.7 5.4 8.8 006400 Samsung SDI 18,395 267,500 0.4 -33.6 89.7 -37.7 75.8 43.1 24.5 1.5 1.4 3.6 5.9 015760 KEPCO 17,397 27,100 - - - - - 141.9 0.3 0.3 - 0.2 034730 SK Holdings 17,273 245,500 2.0 -2.8 21.5 -36.6 11.0 12.2 11.0 0.9 0.8 8.2 8.3 000270 Motors 16,701 41,200 2.2 70.4 29.1 79.8 24.5 8.0 6.5 0.6 0.5 7.4 8.5 018260 Samsung SDS 15,282 197,500 1.3 10.4 12.3 10.3 11.8 22.0 19.7 2.3 2.1 11.1 11.3 032830 Samsung Life 14,720 73,600 - - - - 0.0 0.0 035720 14,658 170,000 0.1 179.1 115.5 220.9 96.5 86.4 44.0 2.8 2.6 3.2 6.1 090430 AmorePacific 13,709 234,500 0.5 -8.4 18.7 -0.9 19.1 41.6 35.0 3.5 3.2 7.2 8.1 036570 NCsoft 13,590 619,000 1.0 6.0 76.9 33.5 52.9 24.3 15.9 4.2 3.4 21.6 27.0 096770 SK Innovation 12,668 137,000 4.7 -42.8 18.2 -68.7 92.4 24.9 12.9 0.7 0.6 2.8 5.4 003550 LG Corp. 12,648 73,300 3.4 -28.0 45.0 -18.4 16.8 8.5 7.3 0.7 0.6 8.1 8.9 066570 LG Electronics 11,390 69,600 1.1 -6.4 13.9 -42.2 106.7 17.6 8.5 0.8 0.8 4.9 9.4 000810 Samsung F&M 10,849 229,000 - - - - 0.0 0.0 086790 10,614 35,350 4.6 2.7 14.8 -6.2 4.1 4.4 0.4 0.3 9.2 8.1 009150 Samsung Electro-Mechanics 9,972 133,500 0.8 -30.5 18.6 -39.3 60.9 26.0 16.2 1.8 1.6 7.6 10.7 010950 S-Oil 9,626 85,500 0.4 -13.3 197.8 -54.2 948.9 84.4 8.0 1.5 1.3 1.8 17.3 009540 KSOE 9,130 129,000 - 88.1 - -39.1 37.2 61.1 0.8 0.8 2.1 1.3 251270 8,480 98,900 1.8 57.7 14.5 36.9 38.8 28.3 1.8 1.7 4.9 6.3 010130 Korea Zinc 7,982 423,000 2.6 12.2 15.7 25.4 9.3 12.1 11.0 1.2 1.1 10.2 10.3 091990 Celltrion Healthcare 7,484 52,000 - 144.5 435.7 165.0 122.1 46.1 4.2 4.0 3.7 9.3 011170 Lotte Chemical 7,472 218,000 4.8 -46.0 12.7 -54.7 32.3 10.4 7.9 0.6 0.5 5.5 6.9 030200 KT 6,841 26,200 4.2 -2.4 -1.1 -7.8 21.0 10.8 8.9 0.5 0.5 4.7 5.5 024110 6,493 11,250 0.6 -0.8 -1.0 -2.3 4.3 4.4 0.3 0.3 8.0 7.3 018880 Hanon Systems 6,005 11,250 - - - - 0.0 0.0 032640 LG Uplus 5,720 13,100 5.0 -11.8 10.9 -16.7 15.0 14.3 12.4 0.8 0.8 5.8 6.4 034220 LG Display 5,582 15,600 ------0.4 0.5 - - 086280 5,306 141,500 2.3 21.0 2.9 4.6 29.7 11.6 8.9 1.1 1.0 10.2 12.0 267250 5,228 321,000 5.8 -1.6 92.1 74.3 199.2 11.2 3.7 0.6 0.5 6.0 16.5 Holdings 010140 4,719 7,490 - - - - - 47.8 0.7 0.7 - 1.7 000720 Hyundai E&C 4,644 41,700 1.2 12.4 10.9 42.6 -6.7 8.5 9.2 0.7 0.6 8.3 7.3 029780 Samsung Card 4,490 38,750 11.7 -28.6 1.7 6.8 12.8 12.0 0.7 0.6 1.5 1.6 008770 4,141 105,500 0.3 22.5 20.6 33.9 28.6 28.6 22.2 4.2 3.6 17.7 19.2 004020 4,110 30,800 2.4 -53.6 23.0 -97.9 2611.5 492.2 18.2 0.2 0.2 0.0 1.3 071050 Korea Investment Holdings 4,057 72,800 - - - - 0.0 0.0 023530 Lotte Shopping 3,890 137,500 3.8 -2.6 14.7 - 16.9 16.6 14.2 0.3 0.3 2.0 2.3 004990 3,834 36,550 2.2 91.0 11.9 198.2 20.3 7.0 5.8 0.4 0.4 7.5 8.3 028050 3,724 19,000 102.6 8.0 373.7 -1.2 11.4 11.6 2.7 2.2 26.7 20.9 Source: Mirae Asset Daewoo Research

Mirae Asset Daewoo Research Market Data January 16, 2020

※All data as of close January 15, 2020, unless otherwise noted.

Other Major Indices Economic Indicators Close Net Chg 1D (%) YTD (%) Close 1D ago 1M ago 1Y ago MSCI Korea* 489.26 2.36 0.48 3.33 USD/KRW 1,153.10 1,155.70 1,188.60 1,121.40 KOSPI 2,230.98 -7.90 -0.35 2.57 JPY100/KRW 1,048.42 1,051.35 1,085.23 1,036.75 KOSDAQ 679.16 0.45 0.07 0.76 EUR/KRW 1,283.11 1,286.93 1,329.57 1,286.41 Dow Jones* 28,939.67 32.62 0.11 1.41 3Y Treasury 1.39 1.39 1.40 1.80 S&P 500* 3,283.15 -4.98 -0.15 0.78 3Y Corporate 1.97 1.97 1.96 2.26 NASDAQ* 9,251.33 -22.60 -0.24 1.75 DDR4 8Gb* 3.22 3.20 2.97 6.11 Philadelphia Semicon* 1,894.64 3.85 0.20 0.36 NAND MLC 64G* 2.48 2.46 2.33 2.65 FTSE 100* 7,622.35 4.75 0.06 0.24 Oil (Dubai)* 64.78 65.68 64.92 58.92 Nikkei 225 23,916.58 -108.59 -0.45 3.07 Gold* 1,544.60 1,550.60 1,475.60 1,291.30 Hang Seng* 28,885.14 -69.80 -0.24 1.20 Customer deposits (Wbn)* 27,979 27,641 24,948 23,368 Taiwan (Weighted) 12,091.88 -87.93 -0.72 -0.07 Equity type BC (Wbn)(Jan. 13) 89,133 88,679 83,243 86,605 Note: * as of January 14, 2020 Source: KSDA, FnGuide, 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 Samsung Electronics (P) 30.66 Samsung Electronics 175.99 Samsung Electronics 14.29 Hynix 87.73 KODEX 200 23.68 Hyundai Motor 19.75 Hyundai Motor 7.65 Samsung Electronics (P) 49.07 Samsung SDI 14.30 SK Energy 19.06 Hite Jinro 7.49 KODEX 200 25.60 Kakao 13.11 LG Chem 14.67 CJ Cheiljedang 4.40 SEMCO 15.21 POSCO 12.77 Hynix 14.03 LG Chem 4.16 LG Innotek 8.85 Hite Jinro 11.73 Dongbu Hannong Chemical 7.93 Hyundai Eng. & Cosnt. 3.98 POSCO 8.79 NC Soft 11.18 Shinhan Financial Group 7.75 Hyundai Mipo Dockyard 3.13 Samsung SDI 8.12 SK Telecom 8.85 Kia Motors 6.07 OCI 2.99 KODEX KOSDAQ150 INVERSE 7.78 LG Household & Health Care 7.21 S-Oil 4.16 LG Electronics 2.87 Celltrion 7.61 LG Electronics 5.97 SEMCO 3.83 GS Construction 2.82 SK Energy 7.34 Source: KSDA, FnGuide

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 HLB 6.19 Koh Young 8.06 Minwise 2.40 Koh Young 5.59 Energy Solutions 3.73 Emerson Pacific 4.14 JYP Entertainment 2.36 Celltrion Healthcare 4.85 Deutsch Motors 3.31 Medy-tox 4.13 Newtree 1.82 ECOPROBM 3.66 PearlAbyss 3.09 UniTest 4.01 Dongjin Semichem 1.80 PearlAbyss 3.46 Seegene 2.82 BH,LTD. 3.75 Tes 1.79 CJ ENM 3.25 Celltrion Healthcare 2.66 MC Nex 3.48 Amotech 1.49 Medy-tox 3.16 Megastudy Edu 2.52 Tes 3.47 ADTechnology 1.40 HLB 2.97 DawonSys 2.26 Partrion 3.38 SAMT 1.24 SM 2.82 SFA Engineering 1.97 Victek 2.98 UniTest 1.19 BH,LTD. 2.68 KINX 1.65 OSSTEM IMPLANT 2.80 DawonSys 1.11 ViroMed 2.60 Source: KSDA, FnGuide

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 59,000 -1,000 352,217 Celltrion Healthcare 52,000 -400 7,484 Hynix 98,200 -2,300 71,490 HLB 113,400 1,400 4,847 Samsung Electronics (P) 49,250 -500 40,527 CJ ENM 159,400 -1,400 3,496 NAVER 191,500 1,000 31,562 PearlAbyss 195,000 -4,300 2,539 434,500 -500 28,749 86,400 200 2,428 Hyundai Motor 115,000 -1,000 24,572 KMW 57,200 600 2,278 Hyundai Mobis 245,000 1,000 23,350 Medy-tox 343,800 -21,700 1,999 LG Chem 328,500 -5,000 23,190 Paradise 21,600 100 1,964 Celltrion 176,500 -1,500 22,652 ViroMed 89,100 0 1,908 LG Household & Health Care 1,422,000 11,000 22,209 SK Materials 174,000 -1,300 1,835 Source: