Holding Companies IT Services/Software

Home , Bobcat Company, Doosan Group, DSME, Hanjin, Hanwha Techwin, POSCO

2018 Outlook

Holding Companies Growth strategy by group

IT Services/Software Cloud and blockchain

Dae-ro Jeong Su Yeon Lee +822-3774-1634 +822-3774-7162 [email protected] [email protected]

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. Contents

[Holding Companies] Growth strategy by group 3

I. SK Group 4

II. LG Group 8

III. Hanwha Group 11

IV. Doosan Group 14

V. Regulatory changes 17

VI. Top pick 20 SK Holdings (034730 KS/Buy)

[IT Services/Software] Key ICT issues for 2018 23

I. Cloud services 24

II. Blockchain 25

III. Top pick 26 Samsung SDS (018260 KS/Buy) [Holding Companies] Growth strategy by group

Domestic conglomerate • Domestic conglomerate rankings since 2001: only modest changes to the top 10; more significant shifts in the rankings by assets subsequent slots • 2018 keys: Fourth Industrial Revolution and new growth drivers • Most business groups are endeavoring to enhance competitiveness via business portfolio optimization and the development of new growth drivers.

Domestic conglomerate rankings by year

2001 2005 2010 2011 2012 2013 2014 2015 2016 2017 1 Samsung Samsung Samsung Samsung Samsung Samsung Samsung Samsung Samsung Samsung 2 Hyundai HMG HMG HMG HMG HMG HMG HMG HMG HMG 3LGLGSKSKSKSKSKSKSKSK 4SKSKLGLGLGLGLGLGLGLG 5 HMG Lotte Lotte Lotte Lotte Lotte Lotte Lotte Lotte Lotte 6 Hanjin KT POSCO POSCO POSCO POSCO POSCO POSCO POSCO POSCO 7 POSCO POSCO GS HHI HHI HHI HHI GS GS GS 8 Lotte Hanjin HHI GS GS GS GS HHI Hanwha Hanwha 9 Kumho GS Kumho Asiana Hanjin Hanjin Nonghyup Nonghyup Nonghyup HHI HHI 10 Hanwha Hanwha Hanjin Hanwha Hanwha Hanjin Hanjin Hanjin Nonghyup Nonghyup 11 Doosan HHI KT KT KT Hanwha Hanwha Hanwha Hanjin Shinsegae 12 Ssangyong Kumho Asiana Doosan Doosan Doosan KT KT KT Doosan KT Hyundai 13 Doosan Hanwha Kumho Asiana STX Doosan Doosan Doosan KT Doosan Oilbank 14 Hansol Dongbu STX STX CJ STX Shinsegae Shinsegae Shinsegae Hanjin 15 Dongbu Hyundai LS LS LS CJ CJ CJ CJ CJ 16 Daelim Shinsegae DSME CJ Kumho Asiana Shinsegae LS LS Booyoung Booyoung 17 Tongyang GM Daewoo Hynix Hynix Shinsegae LS DSME DSME LS LS 18 Hyosung CJ CJ Shinsegae DSME Dongbu Kumho Asiana Kumho Asiana DSME Daelim 19 CheilJedang LS Daelim DSME Dongbu Kumho Asiana Dongbu Daelim Daelim Kumho Asiana 20 Kolon Dongkuk Steel Dongbu Dongbu Daelim DSME Daelim Booyoung Kumho Asiana DSME Note: Based on total assets Source: FTC, Mirae Asset DaewooResearch

3| 2018 Outlook [Holding Companies - IT Services/Software] Mirae Asset Daewoo Research I. SK Group

Aggressive M&As • SK Group has established a business portfolio encompassing five segments: energy, chemicals, telecom, semiconductor, and other. • Energy and chemicals: Revenue decline is inevitable due to the fall in oil prices in 2014; Earnings have recently been solid thanks to favorable market conditions. • Semiconductor: SK Hynix (000660 KS/Buy/TP: W110,000/CP: W84,400) has delivered robust revenue growth since its acquisition in 2012, backed by solid demand from downstream industries. • The group has been strengthening its bio businesses, including SK Biopharmaceuticals.

SK Group’s revenue SK Group’s market cap (Wtr) (Wtr) 140 SK Holdings SK Hynix SK Telecom 200 Energy Chemical SK Innovation SK Materials SK Chemicals Telecom Semiconductor 120 SK Networks SKC Other Other

150 100

100 60

40 50

0 0 2011 2012 2013 2014 2015 2016 2017 2011 2012 2013 2014 2015 2016

Source: Mirae Asset Daewoo Research Source: Mirae Asset Daewoo Research

4| 2018 Outlook [Holding Companies - IT Services/Software] Mirae Asset Daewoo Research I. SK Group

Group structure

Chey Tae-won and affiliates Chey Chang-won

51.0% 30.9% SK Siltron 20.6%

99.4% SK Materials 49.1% SK Infosec [036490 KQ] SK Holdings 50.0% [034730 KS] Encarsales SK Chemicals SM Core [006120 KS] [007820 KQ] 34.8% 28.2%

25.2% 33.4%41.0% 39.1% 100% 83.1% 100% 100%100% 44.5% 24.0%

SK Telecom SK Innovation SKC SK Networks SK SK Forest SK Shipping SK E&S SK Biotek SK E&C [017670 KS] [096770 KS] [011790 KS] [001740 KS] Biopharm

100% 20.1% 48.9%64.5% 83.8% 100% 100% 66.0%50.0% 45.6%

SK SKHynix Iriver SK SK SK Gas SK Telink SK Syntec Initz Entis Broadband [000660 KS] [060570 KQ] Communications Planet [018670 KS]

31.0%

SK D&D [210980 KS]

Source: Mirae Asset Daewoo Research

5| 2018 Outlook [Holding Companies - IT Services/Software] Mirae Asset Daewoo Research I. SK Group

M&A-driven growth • Steady top-line growth via aggressive M&As and investments (SK Materials (036490 KQ/Buy/TP: W220,000/CP: W185,800) , SK Magic, Dow Chemical’s EAA business, SK Siltron, Toshiba’s semiconductor business, etc.) • SK Holdings (034730 KS/Buy/TP: W390,000/CP: W291,000) is transforming itself into an investment-specialized holding company as it endeavors to identify new growth drivers. • SK Holdings has a two-track strategy: direct investments in new potential growth drivers and financial investments.

SK Group’s major M&As

Year Acquirer Details Counterparty Value

Feb. 2016 SK Holdings Acquired a 49.1% stake in OCI Materials OCI W470.3bn

Nov. 2016 SK Networks Acquired a 100% stake in Tongyang Magic Magic Holdings W610bn

Nov. 2016 SK Holdings Acquired a stake in SM Core SM Core W39.2bn

Jan. 2017 SK Holdings Acquired a 51% stake in LG Siltron LG Corp. W620bn SK Global Feb. 2017 Acquired a 100% stake in Dow Chemical’s EAA business Dow Chemical US$3.53mn Chemical May 2017 SK Holdings Invested in a carpooling service provider Poolus W8mn

Jul. 2017 SK Biotek Acquired a factory in Ireland BMS W170bn

Jul. 2017 SK Holdings Acquired a 11.77% stake in ESR Cayman to enter the Chinese logistics market ESR Cayman W372bn

Sep. 2017 SK Holdings Invested in the leading US P2P car sharing service provider TURO TURO W100bn (joint investment)

Sep. 2017 SK Holdings Invested in Eureka Midstream Eureka Midstream W114bn SK Global Oct. 2017 Signed a contract to acquire Dow Chemical’s PVDC business Dow Chemical US$100mn Chemical Oct. 2017 SK Hynix Acquired a stake in Toshiba’s semiconductor business Toshiba W4tr

Source: Media reports, Mirae Asset Daewoo Research

6| 2018 Outlook [Holding Companies - IT Services/Software] Mirae Asset Daewoo Research I. SK Group

• SK E&S is often the first choice among LNG power producers, as it enjoys cost competitiveness thanks to its direct New growth drivers sourcing of LNG; the company is likely to start LNG trading in China. • SK Biopharmaceuticals boasts a solid pipeline for central nervous system-related diseases, including epilepsy (YKP3089) and sleep-wake disorders (SKL-N05). • SK Biotek recently completed the construction of a new plant in Sejong, and acquired Bristol-Myers Squibb's API plant, with the company’s total capacity expected to reach 800,000 liters in 2020.

SK E&S’s power generation capacity and direct LNG sourcing SK Biopharmaceuticals’ major pipeline and SK Biotek’s OP

(MW) Indications (new drugs) Current stage Details 4,744 Epilepsy 5,000 Gwangyang Phase 3 FDA approval likely in 2017 (YKP3089) Narae 3,744 1,000 4,000 Sleep-wake disorders Signed out-licensing deal with Jazz Paju 3,294 Phase 3 Wirye 450 450 (SKL-N05) Pharmaceuticals (US); to go on sale in 2018 3,000 Yeoju Chronic constipation/ 1,820 1,820 1,820 irritable bowel syndrome Phase 2b Signed out-licensing deal in 2016 2,000 1,474 (YKP10811 1,074 Acute seizures NDA 400 400 400 400 Signed out-licensing in 2010 1,000 (Plumiaz) application Dementia/cognitive 1,074 1,074 1,074 1,074 1,074 Conducting phase 2a clinical trials impairment Phase 2a independently 0 (SKL 15508) 2006- 10/15- 2/17- 4/17-present 2021-

(MW) (Wbn) (Wbn) 400 100 500 LNG demand Revenue (L) OP (R) Directly-sourced LNG 80 400 300

300 60 200 200 40 100 100 20

0 0 0 2006- 10/15- 2/17- 4/17- 2019 -2021 2023- -2025 2015 2016 2017F 2018F

Source: Mirae Asset Daewoo Research Source: Mirae Asset Daewoo Research

7| 2018 Outlook [Holding Companies - IT Services/Software] Mirae Asset Daewoo Research II. LG Group

• LG Group boasts a well-established business portfolio encompassing electronics, chemicals, telecom, services and trading; Established stable thanks to this diversification, the firm has been enjoying steady revenue; notably, improved earnings at the chemical division have helped offset earnings volatility at the electronics division. business portfolio • Electronics: LG Electronics (LGE; 066570 KS/Buy/TP: W113,000/CP: W92,000) has achieved vertical integration with its affiliated component suppliers, such as LG Display (LGD; 034220 KS/Buy/TP: W42,000/CP: W29,650) and LG Innotek (011070 KS/Buy/TP: W232,000/CP: W173,000). • Chemicals: This business (cash cow) has recently been making a greater contribution to group-wide operating profit. • Telecom: Despite its recent stagnation in top line, LG Uplus has recently been displaying an uptrend in profitability.

LG Group’s revenue by division LG Group’s market cap (Wtr) (Wtr) 200 Electronics Chemicals Telecom 120 LG Corp. LGE LG Chem Services Trading LG H&H LG Uplus LGD LG Innotek LG International LG Hausys 100 Sillicon Works GIIR

150

100 60

0 0 2011 2012 2013 2014 2015 2016 2011 2012 2013 2014 2015 2016 2017

Source: Mirae Asset Daewoo Research Source: Mirae Asset Daewoo Research

8| 2018 Outlook [Holding Companies - IT Services/Software] Mirae Asset Daewoo Research II. LG Group

Group structure

Koo Bon-moo and affiliates

47.6%

LG Corp. [003550 KS]

33.5% 33.3% 34.0% 33.7% 36.0% 85% 27.6% LG Hausys LG Chem LG H&H LGE LG Uplus LG International LG CNS [108670 KS] [051910 KS] [051900 KS] [066570 KS] [032640 KS] [001120 LS]

100% 51.0% 37.9% LG Sports LGD Pantos [034220 KS] 100% 35.0% 33.1% ServeOne 40.8% LG Innotek GIIR Silicon Works [035000 KS] [108320 KQ] 68.0% [011070 KS] Lusem

50.0% LG MMA

100% LG Management Development Institute

Source: Mirae Asset Daewoo Research

9| 2018 Outlook [Holding Companies - IT Services/Software] Mirae Asset Daewoo Research II. LG Group

Seeking to expand • LG Group has completed vertical integration across the supply chain, with infotainment parts by LGE , sensors and LEDs by LG Innotek, and batteries by LG Chem (051910 KS/Buy/TP: W530,000/CP: W414,000). vehicle components • LGE’s vehicle component division (launched in 2013) has been making aggressive investments (more than W300bn per year); business the division’s 2017 revenue is estimated at W3.5tr; the division plans to generate quarterly revenue of W1tr from 2H18 onwards. • LGE currently supplies 11 key components for GM’s next-generation EV Bolt and has signed a deal with Qualcomm to jointly develop next-generation connected car solutions. The firm is also seeking to acquire ZKW (Austria; annual revenue of roughly EUR750mn), which supplies its products to major global automakers (e.g., BMW). LG Group’s EV business ecosystem EV component supplier ZKW’s annual revenue

(EURmn) 1,400 LGE Connectivity devices LGD Car displays LG Chem 1,200 EV batteries LGE Infotainment 1,000 LG Innotek LED lighting 800

600

400 LG Innotek Battery management systems 200 LG Innotek LG Innotek Motors Electric motors 0 2011 2012 2013 2014 2015 2016 2017F

Source: Media reports, Mirae Asset Daewoo Research Source: Mirae Asset Daewoo Research

10| 2018 Outlook [Holding Companies - IT Services/Software] Mirae Asset Daewoo Research III. Hanwha Group

M&A-driven top-line • Hanwha Group has established a diverse portfolio of businesses encompassing chemical/defense, construction, retail/entertainment, energy, and finance. growth • Following its acquisition of stakes in four Samsung Group affiliates, including Samsung General Chemicals, in November 2014, Hanwha has been expanding its top line. • With regard to the solar power business, the firm has completed vertical integration with affiliated suppliers of polysilicon and PV panels/modules/system since 2010. • The construction business turned to a profit in 2016, after posting massive losses in its overseas plant businesses in 2014-15.

Hanwha Group’s revenue (ex-financial) trend Hanwha Group’s market cap

(Wtr) (Wtr) Hanwha Corp. Hanwha Life 35 Chemicals/defense Construction 20 Hanwha General Insurance Hanwha Securities Retail/leisure Energy Hanwha Chemical Hanwha Techwin Other Hanwha Galleria Timeworld 30

15 25

20 10 15

10 5

0 0 2011 2012 2013 2014 2015 2016 2011 2012 2013 2014 2015 2016 2017

Source: Mirae Asset Daewoo Research Source: Mirae Asset Daewoo Research

11| 2018 Outlook [Holding Companies - IT Services/Software] Mirae Asset Daewoo Research III. Hanwha Group

Group structure

100% Kim Seung-youn Hanwha S&C

33.8% 2.2% 100%

Hanwha Corp. Hanwha Energy (000880 KS)

21.7% 100% 36.8% 50.6% 100% 41.0% 32.4%

1.8% Hanwha Life 24.9% Hanwha Chemical 48.7% Hanwha Hanwha TechM Hanwha Hanwha Techwin Hanwha E&C (088350 KS) (009830 KS) Hotels & Resorts (investment unit) Q Cells Korea 20.0% (012450 KS)

39.0%

100%50.0% 100% 100% 36.0%

Hanwha Yeochun Hanwha Solar Hanwha Hanwha Advanced Materials NCC Holdings Galleria General Chemical 7.3% 39.2% 50.0% 50.0% 100% 34.3% 5.3% 16.0% 36.1% Hanwha Hanwha Thales Hanwha Hanwha General Hanwha Securities Hanwha Total Petrochemical Asset Management (000370 KS) (003530 KS) Savings Bank 93.6% 69.5% 5.0% Hanwha Q Hanwha Galleria Cells Timeworld (027390 KS)

Source: Mirae Asset Daewoo Research

12| 2018 Outlook [Holding Companies - IT Services/Software] Mirae Asset Daewoo Research III. Hanwha Group

• In 2015, Hanwha bolstered its chemical and defense businesses through the acquisition of Hanwha General Chemical, Hanwha Total, Hanwha Growth led by vertical Techwin, and Hanwha Systems. • Solar power: An integrated value chain has been created: Hanwha S&C  Hanwha Energy  Hanwha General Chemical  Hanwha Q Cells integration In 2016, Hanwha Q Cells Korea merged with Hanwha Q Cells’ module division, while Hanwha General Chemical purchased additional shares issued by Hanwha Q-Cells Korea. • Defense: In May 2016, Hanwha Techwin acquired a 100% stake in Hanwha Defense Systems (Doosan DST previously) for W695bn. • In July 2017, the firm split off three divisions into wholly-owned subsidiaries, Hanwha Land Systems, Hanwha Power Systems, and Hanwha Precision Machinery.

Hanwha’s solar power revenue trend Hanwha’s defense business overview

(Wtr) (%) 5 Revenue (L) 10 OP margin (R)

4 0

3 -10

2 -20

1 -30

0 -40 2011 2012 2013 2014 2015 2016

Source: Mirae Asset Daewoo Research Source: Mirae Asset Daewoo Research

13| 2018 Outlook [Holding Companies - IT Services/Software] Mirae Asset Daewoo Research IV. Doosan Group

• Doosan Group’s businesses are largely broken down into Doosan Corp.’s (000150 KS/Buy/TP: W185,000/CP: W136,000) in-house businesses, heavy industries, and construction. Top-line is on a steady • Doosan Heavy I&C (DHIC; 034020 KS/Hold/CP: W17,250), Doosan Infracore (042670 KS/Trading Buy/TP: decline W11,000/CP: W9,440), Doosan Engine, Doosan E&C, and Doosan Cuvex operate in the heavy industries/construction space. • Heavy industries revenue has been on the decline for recent several years due to sluggishness in downstream industries and the disposals of some businesses. • Despite the revenue downtrend, margins improved in 2016 thanks to to cost reductions resulting from restructuring and greater demand for construction equipment. Doosan Group’s revenue trend Doosan Group’s market cap trend

(Wtr) (Wtr) 16 30 Doosan Corp. DHIC Doosan Infracore Doosan Corp. DHIC Doosan Engine Doosan E&C Doosan Infracore Doosan Engine Doosan E&C Oricom 25 Doosan Bobcat

15 8

0 0 2011 2012 2013 2014 2015 2016 2011 2012 2013 2014 2015 2016 2017

Source: Mirae Asset Daewoo Research Source: Mirae Asset Daewoo Research

14| 2018 Outlook [Holding Companies - IT Services/Software] Mirae Asset Daewoo Research IV. Doosan Group

Group structure

Park Yong-gon

44.1%

Doosan Corp. (000150 KS)

64.7% 36.8% 100%100% 100% 100% Oricom DHIC Doosan Feed & DIP Holdings (010470 KQ) (034020 KS) Doosan Tower Livestock Doosan Bears

100%

Hancom

100% 42.7% 36.4% 78.3% Doosan Engine Doosan Infracore Doosan E&C Doosan AMC (082740 KS) (042670 KS) (011160 KS)

59.3% 22.2% Doosan Bobcat Doosan Cuvex (241560 KS)

42.9% NeoTrans

Source: Mirae Asset Daewoo Research

15| 2018 Outlook [Holding Companies - IT Services/Software] Mirae Asset Daewoo Research IV. Doosan Group

• Doosan Corp. entered the fuel cell business in 2014 by acquiring the US company ClearEdge Power and merging Growth potential of with the Korean company Fuel Cell Power. Doosan Corp.’s in-house • Renewable portfolio standard (RPS) targets were raised from 4% for 2017 to 5% for 2018.  Fuel cell orders are expected to grow. businesses • Fuel cells have a renewable energy certificate (REC) weight of 2.0, which means that they are recognized as an effective environmentally-friendly energy source. • Given that 40% of order backlogs are recognized as revenue within one year, we have little doubt Doosan Corp.’s fuel cell earnings will improve in 2018. Current RPS targets and expected upward revisions Doosan Corp.’s fuel cell revenue and OP margin

(%) (Wbn) (%) 30 Current RPS 28.0 800 Revenue (L) 14 Forecasts OP margin (R)

25 10 600

15 400

2 10 10.0 9.0 6.0 200 5.0 8.0 7.0 -2 5 3.5 4.0 2.5 3.0 3.0 2.0

0 0 -6 ‘12년12 ‘14 년 14 ‘16 년 16 ‘18 년 18 ‘20 년 20 ‘22 년 22 ‘24 년 24 ‘26 년 26 ‘28 년 28 ‘30 년 2015 2016 2017F 2018F 2019F Source: 30 Mirae Asset Daewoo Research Source: Company data, Mirae Asset Daewoo Research

16| 2018 Outlook [Holding Companies - IT Services/Software] Mirae Asset Daewoo Research V. Regulatory changes

Moon administration’s • President Moon Jae-in’s campaign pledges and five-year plan indicate that his administration will pursue greater five-year plan economic democratization. • For key economic democratization policies, discussions on related bills have been underway since the 20th National Assembly opened in 2016. • The major goals of the administration’s announced policies are to strengthen the rights of minority shareholders, secure the independence of the board of directors, and prevent controlling families from abusing their power.

Moon administration’s economic democratization policies (based on five-year plan)

No. Goal Plans Expected impact

Introduction of multiple derivative suits and electronic voting; adoption of either a cumulative 1 Preventing controlling families voting system or separate election of audit committee members (-2018) from abusing their power ▶ Stricter enforcement of laws governing economic crimes and more rigorous pardon review process

Stronger minority shareholder rights and Stronger legal requirements for holding companies (2017-18) greater independence for board of directors Preventing controlling families Ban on the allotment of new subsidiary shares (post-spin-off) based on treasury stock 2 from amassing control via illegal Introduction of measures to gradually unwind existing circular shareholdings Prevention of abuse of power by controlling means ▶ Disclosure of investments in domestic subsidiaries via overseas subsidiaries families

Prevention of the amassing of control via illegal means

Rooting out controlling families’ Expansion of the scope of regulations on controlling families’ pursuit of private interests via Prevention of unfair transfer of wealth and 3 pursuit of private interests via illegal means (-2018) promotion of fair competition illegal means ▶ Continuous monitoring of controlling families’ pursuit of private interests via illegal means

4 Stricter separation of financial Tighter regulations on voting rights of financial/insurance affiliates (-2018) and non-financial capital ▶ Introduction of a comprehensive supervisory system for financial groups (2018-)

Source: Mirae Asset Daewoo Research

17| 2018 Outlook [Holding Companies - IT Services/Software] Mirae Asset Daewoo Research V. Tax benefits for holding company conversion

Benefits for companies • Currently, companies adopting holding structures enjoy tax benefits. adopting holding 1) Under the Restriction of Special Taxation Act, shareholders that receive shares in a holding company in return for their shares in a subsidiary are not subjected to capital gains/income taxes until such time as they dispose structures to decrease of the holding company shares . 2) This tax deferral is a sunset provision designed to encourage groups to switch to holding structures. • If the tax deferral provision is not extended, large shareholders will face significant tax burdens during a holding company conversion.

Major shareholder eligibility requirements and capital gains Extension of tax deferral? taxes on stock trading

KOSPI KOSDAQ Restriction of Special Taxation Act 38-2: Tax benefits for companies adopting holding structures Ownership 2% or higher 4% or higher Introduced in 2000 (-Dec. 2003) Market cap W5bn or higher W4bn or higher 1st extension (-Dec. 2006)

Category Tax rate 2nd extension (-Dec. 2009) Stock issued by small businesses 10% Major Listed Held for at least 1 rd share- Stocks issued 20% 3 extension (-Dec. 2012) stocks on year holder by large KOSPI or Held for less than 1 corporations 30% KOSDAQ year 4th extension (-Dec. 2015) Minority shareholders (trading on exchanges) Tax-free

Stocks issued by small businesses 10% 5th extension (-Dec. 2015) Held for at least 1 year Unlisted (minority/large 20% stocks Stocks issued by th large shareholders) 6 extension (-Dec. 2018) corporations Held for less than 1 year 30% (large shareholders) Source: Mirae Asset Daewoo Research

Source: Mirae Asset Daewoo Research 18| 2018 Outlook [Holding Companies - IT Services/Software] Mirae Asset Daewoo Research V. Holding companies to increase dividend payouts

Holding companies are• Starting in 2018, the top five executives by compensation and those with annual compensation greater than or equal to W500mn will be required to disclose their compensation. likely to increase - As such, it appears likely that controlling families of conglomerates will have to disclose their compensation levels. dividend payouts - If the disclosed compensation levels do not appear reasonable, conglomerates might face criticism. • Tougher regulations on related-party transactions will make it harder for group owners to amass wealth through affiliate deals. - In light of strengthening regulations on related-party transactions, corporate groups need a legitimate way to acquire funds to pay inheritance and gift taxes. - As such, we expect the dividend payouts of holding companies or de-facto holding companies to increase gradually. Expansion of executive compensation disclosure Regulations on related-party transactions

Law Details Proposed bill Details

-Unify the stake threshold at 20% regardless of listing Revision to status MRFTA -Inclusion of indirect stakes (August 5, Companies that are required to submit financial 2016) -Toughen criteria for exemptions related to reports shall include the following information in the improvements in efficiency, security, etc. reports and attach documents as mandated by nd 2 clause presidential decree: Strengthened of Article 1. Purpose, name, and business details of a company regulations on 159 of the 2. Executive compensation (including stock options) related-party Revision to transactions -Lower the stake threshold from 30% to 20% FSCMA 3. Compensation of each executive with annual MRFTA (July 7, (including indirect stakes) compensation greater than or equal to W500mn and 2016) detailed calculation methodology (top five executives or employees by compensation) -Lower the stake threshold to 10% of issued shares Revision to -Ensure that business opportunities provided to MRFTA (June affiliates are in accordance with the Commercial Act 7, 2016) provision stipulating a ban on the usurpation of corporate opportunities

Source: Mirae Asset Daewoo Research Source: Mirae Asset Daewoo Research

19| 2018 Outlook [Holding Companies - IT Services/Software] Mirae Asset Daewoo Research SK Holdings (034730 KS)

Value of unlisted subsidiaries to be re-rated in 2018

Retain Buy and TP of W390,000; Differentiated growth portfolio (Maintain) Buy • We project the value of stakes in unlisted subsidiaries to be re-rated to W13.1tr (+34.8% YoY) in 2018. • SK E&S enjoys cost competitiveness thanks to its direct sourcing of LNG; the revision to the Electric Utility Act Target Price (12M, W) 390,000 should create additional opportunities for the company. • SK Siltron: We expect the semiconductor up cycle to drive the company’s earnings and enterprise value higher. Share Price (11/3/17, W) 291,000 • SK Biotek: The company recently completed the construction of a new plant (160,000 liters) in Sejong, and plans to acquire Bristol-Myers Squibb's API plant (81,000 liters). Expected Return 34% • SK Biopharmaceuticals: For the antiepileptic drug YKP3089 (currently in phase 3 trials), a new drug application is expected to be filed in 1H18, followed by FDA approval in 2H18. OP (17F, W bn) 5,881 • Other investment assets: Stakes in logistics firm ESR (W372bn) and gas gathering & processing company Consensus OP (17F, W bn) - Eureka (W117.2bn).

EPS Growth (17F, %) 160.5 Market EPS Growth (17F, %) 46.4 Risk factors P/E (17F, x) 10.3 • Earnings volatility could increase depending on oil prices and semiconductor market trends. Market P/E (17F, x) 10.5

KOSPI 2,557.97

140 Market Cap (W bn) 20,475 SK Holdings FY (Dec.) 12/13 12/14 12/15 12/16 12/17F 12/18F Shares O utstanding 71 KOSPI Revenue (W bn) 2,302 2,426 39,300 83,617 90,966 96,673 (m n) 130 Free Float (%) 48.4 OP (W bn) 225 272 1,407 5,298 5,881 6,446

Foreign Ownership (%) 23.9 120 OP margin (%) 9.8 11.2 3.6 6.3 6.5 6.7

Beta (12M) 0.88 NP (W bn) 202 127 5,346 766 1,994 2,239 110 52-W eek Low 212,000 EPS (W ) 4,045 2,546 93,713 10,794 28,121 31,568 52-W eek High 307,000 100 ROE (%) 8.5 5.0 70.6 6.0 14.5 14.5

(%) 1M 6M 12M90 P/E (x) 33.4 83.9 2.6 21.3 10.3 9.2 Absolute 1.0 18.8 30.2 P/B (x) 2.2 3.3 1.3 1.2 1.3 1.2 80 Relative -5.4 3.1 1.016.10 17.2 17.6 17.10 Div.Yield (%) 1.1 0.9 1.4 1.6 1.3 1.3 Note: All figures are based on consolidated K-IFRS; NP refers to net profit attributable to controlling interests Source: SK Holdings, Mirae Asset Daew oo Research estimates

20| 2018 Outlook [Holding Companies - IT Services/Software] Mirae Asset Daewoo Research SK Holdings (034730 KS)

Value of unlisted subsidiaries to be re-rated in 2018

SK E&S’s direct LNG sourcing SK Siltron’s revenue and EBITDA

(MW) (Wtr) (Wbn) 500 LNG demand 1.2 Revenue 400 Directly-sourced LNG EBITDA 400 300 0.8 300 200 200 0.4 100 100

0 0.0 0 06~ 15.10~ 17.2~ 17.4~ 19 ~21 23~ ~25 2014 2015 2016 2017F 2018F Source: Mirae Asset Daewoo Research Source: Mirae Asset Daewoo Research

SK Biopharmaceuticals’ pipeline SK Biotek’s revenue and OP

Indications (new drugs) Current stage Notes (Wbn) (Wbn) Epilepsy 400 Revenue (L) 100 Phase 3 FDA approval likely in 2017 (YKP3089) OP (R) Signed out-licensing deal with Jazz 80 Sleep-wake disorders Phase 3 Pharmaceuticals (US); likely to go on sale in 300 (SKL-N05) 2018 60 Chronic constipation/ 200 irritable bowel syndrome Phase 2b Signed out-licensing deal in 2016 (YKP10811 40 Acute seizures NDA Signed out-licensing in 2010 100 (PLUMIAZ application 20 Dementia/cognitive Conducting phase 2a clinical trials impairment Phase 2a independently 0 0 (SKL 15508) 2015 2016 2017F 2018F Source: Company data, Mirae Asset Daewoo Research Source: Mirae Asset Daewoo Research

21| 2018 Outlook [Holding Companies - IT Services/Software] Mirae Asset Daewoo Research SK Holdings (034730 KS)

Comprehensive Income Statement (Summarized) Statement of Financial Condition (Summarized) Forecasts/Valuations (Summarized)

(Wbn) 12/15 12/16 12/17F 12/18F (Wbn) 12/15 12/16 12/17F 12/18F 12/15 12/16 12/17F 12/18F

Revenue 39,300 83,617 90,966 96,673 Current Assets 29,765 32,450 33,609 37,802 P/E (x) 2.6 21.3 10.3 9.2

Cost of Sales 35,383 73,770 81,095 86,555 Cash and Cash Equivalen 6,995 7,087 11,522 14,117 P/CF (x) 3.5 1.5 1.8 1.7

Gross Profit 3,917 9,847 9,871 10,118 AR & Other Receivables 11,833 12,227 13,209 14,164 P/B (x) 1.3 1.2 1.3 1.2

SG&A Expenses 2,510 4,550 3,990 3,671 Inventories 5,643 6,019 6,502 6,972 EV/EBITDA (x) 18.3 6.2 6.4 5.9

Operating Profit (Adj) 1,407 5,298 5,881 6,446 Other Current Assets 5,294 7,117 2,376 2,549 EPS (W) 93,713 10,794 28,121 31,568

Operating Profit 1,407 5,298 5,881 6,446 Non-Current Assets 66,869 70,597 66,864 62,346 CFPS (W) 68,519 154,633 165,597 173,425

Non-Operating Profit 4,881 -922 1,414 1,693 Investments in Associates 11,158 11,560 11,560 11,560 BPS (W) 189,929 197,625 216,749 245,375

Net Financial Income -273 -597 -332 0 Property, Plant and Equipm 39,445 41,033 38,053 34,465 DPS (W) 3,400 3,700 3,700 3,700

N et Gain from Inv in As s ociat 665 719 2,326 2,567 Intangible Assets 9,749 11,772 11,104 10,000 Payout ratio (%) 3.4 7.3 3.7 3.3

Pretax Profit 6,288 4,376 7,295 8,139 Total Assets 96,634 103,047 100,474 100,148 Dividend Yield (%) 1.4 1.6 1.3 1.3

Income Tax 582 1,354 1,746 1,945 Current Liabilities 25,919 28,717 22,031 23,032 Revenue Growth (%) 1,520.0 112.8 8.8 6.3

Profit from Continuing Opera 5,706 3,022 5,549 6,194 AP & Other Payables 9,823 12,139 13,113 14,061 EBITDA Growth (%) 996.4 191.4 6.6 -0.6

Profit from Discontinued Ope -157 -199 -16 0 Short-Term Financial Liab 8,324 8,502 8,464 8,484 Operating Profit Growth (%) 417.3 276.5 11.0 9.6

Net Profit 5,549 2,822 5,533 6,194 Other Current Liabilities 7,772 8,076 454 487 EPS Growth (%) 3,580.8 -88.5 160.5 12.3

Controlling Interests 5,346 766 1,994 2,239 Non-Current Liabilities 30,637 32,004 32,282 24,970 Accounts Receivable Turno 7.4 8.1 8.4 8.3

Non-Controlling Interests 203 2,057 3,539 3,955 Long-Term Financial Liab 23,650 23,196 22,768 14,768 Inventory Turnover (x) 13.6 14.3 14.5 14.3

Total Comprehensive Profit 5,453 2,867 5,263 6,194 Other Non-Current Liabilit 6,987 8,808 9,514 10,202 Accounts Payable Turnover 9.3 9.0 8.8 8.7

Controlling Interests 5,363 766 1,917 2,309 Total Liabilities 56,557 60,721 54,314 48,003 ROA (%) 10.9 2.8 5.4 6.2

Non-Controlling Interests 90 2,101 3,347 3,885 Controlling Interests 12,566 13,113 14,469 16,499 ROE (%) 70.6 6.0 14.5 14.5

EBITDA 3,607 10,511 11,206 11,138 Capital Stock 15 15 15 15 ROIC (%) 4.7 6.7 7.7 8.8

FCF (Free Cash Flow) 2,351 4,175 802 10,958 Capital Surplus 5,678 5,646 5,541 5,541 Liability to Equity Ratio (%) 141.1 143.5 117.7 92.1

EBITDA Margin (%) 9.2 12.6 12.3 11.5 Retained Earnings 7,802 8,368 9,941 11,971 Current Ratio (%) 114.8 113.0 152.6 164.1

Operating Profit Margin (%) 3.6 6.3 6.5 6.7 Non-Controlling Interests 27,511 29,214 31,691 35,646 Net Debt to Equity Ratio (%) 53.6 46.5 42.7 17.5

Net Profit Margin (%) 13.6 0.9 2.2 2.3 Stockholders' Equity 40,077 42,327 46,160 52,145 Interest Coverage Ratio (x) 4.0 6.6 13.3 0.0 Source: SK Holdings, M irae Asset Daewoo Research estim ates

22| 2018 Outlook [Holding Companies - IT Services/Software] Mirae Asset Daewoo Research [IT Services/Software] Key ICT issues for 2018

Intelligent/digital/mesh • For 2018, Gartner has designated intelligent/digital/mesh as three of the top 10 strategic technology trends (i.e., technologies with substantial disruptive potential on the verge of a breakout characterized by increased impact and use). • Intelligent: Based on AI/machine learning • Digital: IoT, conversational platforms, VR, and AR are changing the way that people interact with the digital world. • Mesh: Provides a foundation for innovation and allows for risk management based on security infrastructure

Gartner’s top 10 strategic technology trends

No. 2016 2017 2018

AI and advanced machine 1 Device mesh AI foundation learning Intelligent Continuous and Intelligent apps and 2 Intelligent apps ambient UX analytics

3 3D printing materials Intelligent things Intelligent things

Information of 4 AR and VR Digital twin everything Digital Advanced machine 5 Digital twin Cloud to the edge learning Autonomous agents Blockchain/distributed Conversational 6 and things ledgers platforms Adaptive security Immersive 7 Conversational systems architecture experience Advanced systems Mesh app and service 8 Blockchain Mesh architecture architecture Mesh app and service Digital technology 9 Event-driven model architecture platforms Continuous IoT architecture and Adaptive security 10 adaptive risk and platforms architecture trust

Source: Gartner, Mirae Asset Daewoo Research

23| 2018 Outlook [Holding Companies - IT Services/Software] Mirae Asset Daewoo Research I. Cloud services

Technologies supportive • Cloud services enable ubiquitous access to shared pools of configurable system resources. to future growth • Service models: Software as a Service, Platform as a Service, Infrastructure as Service • Notably, the global cloud infrastructure service market is growing by over 40% every year. • According to Synergy Research Group, in 3Q, the value of the global cloud infrastructure service market (in revenue terms) reached nearly US$12bn (W13.6tr). • In 3Q, Amazon Web Services (AWS) garnered a market share of over 35%, exceeding the combined market share of the no. 2 to no. 6 players. Competitive positioning in global cloud infrastructure service Cloud service market outlook market (US$bn) Global public cloud services market 200 PaaS SaaS IaaS 150

100

0 2016 2017F 2018F 2019F 2020F

(Wbn) Public cloud services market in Korea 2,000 PaaS SaaS 1,500 IaaS

1,000

500

0 2016 2017F 2018F 2019F 2020F

Source: Gartner, Mirae Asset Daewoo Research Source: Synergy Research Group, Mirae Asset Daewoo Research

24| 2018 Outlook [Holding Companies - IT Services/Software] Mirae Asset Daewoo Research II. Blockchain

• A blockchain is a digital ledger where transaction data are encrypted and shared between network participants. New paradigm for • In a blockchain, the ledger is replicated and distributed to all network participants, and members of the network transactions confirm every transaction that occurs. Due to the incorruptibility of the ledger, blockchain technology is considered secure, and provides easy access to transaction data. • Blockchain is a new paradigm for transactions that can be applied to logistics, retail, public services, and financial services; the distributed ledger system could reduce expenses related to security, supervision, and regulations.  Facilitation of smart contracts

Blockchain overview Development of blockchain

The transaction The block is Blockchain 1.0 Blockchain 2.0 Blockchain 3.0 Blockchain 4.0 is represented broadcast to every online as a “block” party in the network A wants to send money to B Introduction Expansion Proliferation Stabilization

2009-13 2013-16 2017-22 2022-30

-Individual (corporate) Convergence chains with other Fully- Those in the The block then can be Open -Smart industries decentralized network approve added to the chain, blockchain which provides an contracts infrastructure the transaction is Transaction indelible and completed valid transparent record of transactions SCM, energy, Ethereum etc. Budget control, elections, Bitcoin OTC trading of public services, non-NASDAQ Hyperledgers etc. stocks

Source: Thomson Reuters, Mirae Asset Daewoo Research Source: SPRI, Mirae Asset Daewoo Research

25| 2018 Outlook [Holding Companies - IT Services/Software] Mirae Asset Daewoo Research Samsung SDS (018260 KS)

IT services have entered a structural growth phase

(Maintain) Buy Buy and TP of W240,000 • IT services earnings are expected to remain on an upward path through 2018.  IT investments are now being considered strategically important for improving corporate competitiveness. Target Price (12M, W) 240,000 • Revenue from the profitable outsourcing segment is expected to increase sharply on the back of the expansion of cloud services. Share Price (11/3/17, W) 210,500 • Samsung SDS’s growth targets by business: ① Solution/analytics (proprietary solutions): 2017 revenue forecast of W600bn; 2020 revenue target of W1.5tr Expected Return 14% ② Smart factories (manufacturing sector): 2017 revenue forecast of W400bn; 2020 revenue target of W1tr ③ Cloud services (cloud service brokerage): 2017 revenue forecast of W400bn; 2020 revenue target of W1tr OP (17F, W bn) 741 • The company introduced Nexledger, a blockchain platform, to provide infrastructure for a wide range of Consensus OP (17F, W bn) 732 businesses (e.g., financial, electronics, manufacturing, and logistics). EPS Growth (17F, %) 13.7 Risk factors Market EPS Growth (17F, %) 46.4 • Samsung SDS could be hit by strengthening regulations on related-party transactions due to its high P/E (17F, x) 30.9 proportion of revenue from group affiliates. Market P/E (17F, x) 10.5

KOSPI 2,557.97

170 Market Cap (W bn) 16,288 Samsung SDS FY (Dec.) 12/13 12/14 12/15 12/16 12/17F 12/18F Shares O utstanding 77 160 Revenue (W bn) 7,047 7,898 7,853 8,180 9,341 10,133 (m n) KOSPI Free Float (%) 42.5 150 OP (W bn) 506 593 588 627 741 816

Foreign Ownership (%) 9.9 140 OP margin (%) 7.2 7.5 7.5 7.7 7.9 8.1

Beta (12M) 1.71 130 NP (W bn) 312 413 439 464 527 591

52-W eek Low 125,000 120 EPS (W ) 4,312 5,336 5,674 5,995 6,815 7,641 52-W eek High 210,500 110 ROE (%) 8.9 10.4 10.1 9.5 9.9 10.2

(%) 1M 6M 12M100 P/E (x) - 55.0 44.8 23.3 30.9 27.5 90 Absolute 24.9 50.9 38.9 P/B (x) - 5.5 4.3 2.1 2.9 2.7 80 Relative 16.9 30.9 7.816.10 17.2 17.6 17.10 Div.Yield (%) - 0.2 0.2 0.5 0.4 0.4 Note: All figures are based on consolidated K-IFRS; NP refers to net profit attributable to controlling interests Source: Samsung SDS, Mirae Asset Daew oo Research estimates

26| 2018 Outlook [Holding Companies - IT Services/Software] Mirae Asset Daewoo Research Samsung SDS (018260 KS)

IT services have entered a structural growth phase

SEC’s revenue vs. Samsung SDS’ IT services revenue from SEC

(Wtr) (Wtr) 300 2.5 SEC revenue (L) IT service revenue from SEC (R) 250 2.0 200 1.5 150 1.0 100

50 0.5

0 0.0 2009 2010 2011 2012 2013 2014 2015 2016 2017F 2018F Source: Mirae Asset Daewoo Research Contribution of new businesses in Samsung SDS’s IT services revenue Samsung SDS’s IT services revenue and OP margin (Wtr) (%) (Wtr) Outsourcing (L) (%) 8 Samsung SDS IT services revenue (L) 80 8 Consulting/SI (L) 14 Revenue from new businesses (solutions, smart factory, cloud, etc. (L) IT services OP margin (R) Contribution of new businesses (R) 6 60 6 12

4 40 4 10

2 20 2 8

0 0 0 6 2016 2017F 2018F 2019F 2020F 2016 2017F 2018F 2019F 2020F Source: Mirae Asset Daewoo Research Source: Mirae Asset Daewoo Research

27| 2018 Outlook [Holding Companies - IT Services/Software] Mirae Asset Daewoo Research Samsung SDS (018260 KS)

Comprehensive Income Statement (Summarized) Statement of Financial Condition (Summarized) Forecasts/Valuations (Summarized)

(Wbn) 12/15 12/16 12/17F 12/18F (Wbn) 12/15 12/16 12/17F 12/18F 12/15 12/16 12/17F 12/18F

Revenue 7,853 8,180 9,341 10,133 Current Assets 3,845 4,548 5,455 6,553 P/E (x) 44.8 23.3 30.9 27.5

Cost of Sales 6,561 6,762 7,801 8,435 Cash and Cash Equivalen 857 1,190 1,919 2,633 P/CF (x) 17.2 9.5 15.0 13.7

Gross Profit 1,292 1,418 1,540 1,698 AR & Other Receivables 1,704 1,874 1,974 2,188 P/B (x) 4.3 2.1 2.9 2.7

SG&A Expenses 704 791 799 882 Inventories 17 16 17 19 EV/EBITDA (x) 18.3 8.6 12.1 10.5

Operating Profit (Adj) 588 627 741 816 Other Current Assets 1,267 1,468 1,545 1,713 EPS (W) 5,674 5,995 6,815 7,641

Operating Profit 588 627 741 816 Non-Current Assets 2,486 2,294 1,876 1,519 CFPS (W) 14,746 14,631 14,031 15,310

Non-Operating Profit 61 125 60 82 Investments in Associates 38 41 43 48 BPS (W) 59,324 66,457 71,473 78,365

Net Financial Income 28 30 37 41 Property, Plant and Equipm 1,229 1,052 907 671 DPS (W) 500 750 750 750

N et Gain from Inv in As s ociat 2 4 4 4 Intangible Assets 1,101 1,041 919 792 Payout ratio (%) 8.2 11.3 10.5 9.3

Pretax Profit 649 752 801 898 Total Assets 6,332 6,842 7,332 8,073 Dividend Yield (%) 0.2 0.5 0.4 0.4

Income Tax 179 238 246 276 Current Liabilities 1,390 1,347 1,414 1,568 Revenue Growth (%) -0.6 4.2 14.2 8.5

Profit from Continuing Opera 470 514 555 622 AP & Other Payables 461 491 517 573 EBITDA Growth (%) -1.3 1.5 9.9 8.1

Profit from Discontinued Ope 0 0 0 0 Short-Term Financial Liab 8 5 1 1 Operating Profit Growth (%) -0.8 6.6 18.2 10.1

Net Profit 470 514 555 622 Other Current Liabilities 921 851 896 994 EPS Growth (%) 6.3 5.7 13.7 12.1

Controlling Interests 439 464 527 591 Non-Current Liabilities 165 203 213 236 Accounts Receivable Turno 8.6 8.3 8.7 8.7

Non-Controlling Interests 31 50 28 31 Long-Term Financial Liab 2 2 0 0 Inventory Turnover (x) 299.4 496.3 560.8 562.5

Total Comprehensive Profit 542 554 512 622 Other Non-Current Liabilit 163 201 213 236 Accounts Payable Turnover 17.4 17.3 19.5 19.5

Controlling Interests 510 500 501 608 Total Liabilities 1,555 1,551 1,627 1,804 ROA (%) 7.9 7.8 7.8 8.1

Non-Controlling Interests 33 54 11 14 Controlling Interests 4,589 5,141 5,529 6,062 ROE (%) 10.1 9.5 9.9 10.2

EBITDA 977 992 1,090 1,178 Capital Stock 39 39 39 39 ROIC (%) 14.8 14.4 18.3 23.4

FCF (Free Cash Flow) 503 433 756 894 Capital Surplus 1,297 1,297 1,297 1,297 Liability to Equity Ratio (%) 32.5 29.3 28.5 28.8

EBITDA Margin (%) 12.4 12.1 11.7 11.6 Retained Earnings 3,450 3,875 4,305 4,839 Current Ratio (%) 276.7 337.6 385.7 417.9

Operating Profit Margin (%) 7.5 7.7 7.9 8.1 Non-Controlling Interests 188 150 176 207 Net Debt to Equity Ratio (%) -40.6 -46.3 -57.0 -65.5

Net Profit Margin (%) 5.6 5.7 5.6 5.8 Stockholders' Equity 4,777 5,291 5,705 6,269 Interest Coverage Ratio (x) 308.1 463.7 468.8 556.2 Source: Samsung SDS, Mirae Asset Daewoo Research estimates

28| 2018 Outlook [Holding Companies - IT Services/Software] Mirae Asset Daewoo Research Coverage overview

Target Price Current Price Company Ticker Rating (12M, W) (11/3/17, W)

Doosan Corp. 000150 KS Buy 185,000 136,000

SK Holdings 034730 KS Buy 390,000 291,000

LG Corp. 003550 KS Buy 115,000 87,700

Hanwha Corp. 000880 KS Hold - 45,900

Samsung SDS 018260 KS Buy 240,000 210,500

S1 012750 KS Buy 130,000 95,800

Source: Company data, Mirae Asset Daewoo Research

29| 2018 Outlook [Holding Companies - IT Services/Software] Mirae Asset Daewoo Research APPENDIX 1

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

Company (Code) Date Rating Target Price Company (Code) Date Rating Target Price SK Holdings(034730) 10/31/2017 Buy 390,000 01/24/2017 Buy 200,000 08/15/2017 Buy 350,000 04/29/2016 Buy 270,000 Samsung SDS(018260) 07/19/2017 Buy 240,000 05/03/2015 Buy 390,000

(W) SK Holdings (W) Samsung SDS

500,000 500,000 400,000 400,000 300,000 300,000

200,000 200,000

100,000 100,000

0 0 Nov 15 Nov 16Nov Nov 15 17 Nov 16 Nov 17

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 74.52% 12.50% 12.98% 0.00% Investment Banking Services 70.73% 19.51% 9.76% 0.00% * Based on recommendations in the last 12-months (as of September 30, 2017)

30| 2018 Outlook [Holding Companies - IT Services/Software] Mirae Asset Daewoo Research APPENDIX 1

Disclosures As of the publication date, Mirae Asset Daewoo Co., Ltd. and/or its affiliates do not have any special interest with the subject company and do not own 1% or more of the subject company's shares outstanding.

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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31| 2018 Outlook [Holding Companies - IT Services/Software] Mirae Asset Daewoo Research APPENDIX 1

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32| 2018 Outlook [Holding Companies - IT Services/Software] Mirae Asset Daewoo Research Mirae Asset Daewoo International Network

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33| 2018 Outlook [Holding Companies - IT Services/Software] Mirae Asset Daewoo Research