December 9, 2019 Korea Morning Focus

Company News & Analysis Major Indices Close Chg Chg (%) KB Financial Group (105560/Buy/TP: W63,000) Raise TP KOSPI 2,081.85 21.11 1.02 Taking a step toward better shareholder returns KOSPI 200 276.56 3.26 1.19 KOSDAQ 628.10 10.50 1.70

Sector News & Analysis Turnover ('000 shares, Wbn) Airlines (Neutral) Volume Value November IIA data: Cargo appears to be bottoming out KOSPI 433,334 4,215 KOSPI 200 68,147 2,653 KOSDAQ 714,344 4,098

Market Cap (Wbn) Value KOSPI 1,398,778 KOSDAQ 225,210

KOSPI Turnover (Wbn) Buy Sell Net Foreign 1,413 1,370 43 Institutional 1,004 844 160 Retail 1,753 1,973 -220

KOSDAQ Turnover (Wbn) Buy Sell Net Foreign 571 371 200 Institutional 174 145 30 Retail 3,334 3,555 -221

Program Buy / Sell (Wbn) Buy Sell Net KOSPI 1,091 969 121 KOSDAQ 559 350 209

Advances & Declines Advances Declines Unchanged KOSPI 596 240 69 KOSDAQ 980 265 94

KOSPI Top 5 Most Active Stocks by Value (Wbn) Price (W) Chg (W) Value 50,400 900 549 Hynix 80,600 1,800 200 KODEX Leverage 12,480 260 170 Samsung Pharm. 4,810 225 166 KODEX Kosdaq150 7,415 265 160 Leverage

KOSDAQ Top 5 Most Active Stocks by Value (Wbn) Price (W) Chg (W) Value GemVax 41,000 9,450 580 Cheil Bio 9,150 1,550 307 HLB 98,500 500 178 Feelingk 1,400 205 93 KMW 52,100 1,300 84 Note: As of December 06, 2019

This document is a summary of a report prepared by Mirae Asset Daewoo Co., Ltd. (“Mirae Asset Daewoo”) and published on our website. Please review the compliance notices contained in the original report. Information and opinions contained herein have been compiled in good faith from sources deemed to be reliable. However, the information has not been independently verified. Mirae Asset Daewoo makes no guarantee, representation or warranty, express or implied, as to the fairness, accuracy or completeness of the information and opinions contained in this document. Mirae Asset Daewoo accepts no responsibility or liability whatsoever for any loss arising from the use of this document or its contents or otherwise arising in connection therewith. Information and opinions contained herein are subject to change without notice. This document is for informational purposes only. It is not and should not be construed as an offer or solicitation of an offer to purchase or sell any securities or other financial instruments. This document may not be reproduced, further distributed or published in whole or in part for any purpose.

KB Financial Group (105560 KS) Taking a step toward better shareholder returns

Banks Cancellation of 2.3mn shares announced Company Report KB Financial Group (KBFG) announced that it would cancel 2,303,617 treasury shares th December 9, 2019 (0.55% of total shares issued) worth around W100bn on December 12 . The shares being canceled account for a portion of the 28,480,000 the group has held after buying back a total of W1.4tr worth of shares since 2016 (four rounds of repurchases). Because treasury shares are deducted from shareholders’ equity, the cancellation will not have any impact on KBFG’s capital ratios. However, the move will decrease the (Maintain) Buy group’s share count, leading to 0.55% increases in BPS and EPS. KBFG said that it believed more aggressive shareholder returns were needed, given mounting worries ▲ Target Price (12M, W) 63,000 about growth limitations and margins in the current low interest rate, low growth environment. Share Price (12/06/19, W) 47,000 Share cancellations could help lift sector out of undervaluation Expected Return 34% The latest move is the first share retirement by a bank holding company. Regardless of its scale, we view the cancellation as a first step in the right direction. The measure not

only shows that KBFG is carrying out aggressive capital returns to enhance NP (19F, Wbn) 3,446 shareholder value, but also has positive implications in terms of overall direction, as it Consensus NP (19F, Wbn) 3,313 suggests that, if there is sufficient capital, shareholder value can be gradually increased through the implementation of efficient capital policies. Looking forward, we EPS Growth (19F, %) 12.6 expect investor sentiment on bank holding companies to improve as more progressive Market EPS Growth (19F, %) -33.2 policies are introduced, helping to lift the sector out of its current extreme P/E (19F, x) 5.7 undervaluation. Market P/E (19F, x) 14.2 KOSPI 2,081.85 KBFG maintains the strongest capital position in the domestic financial sector, with BIS, Tier 1, and CET1 ratios of 15.29%, 14.68%, and 14.39%, respectively, as of end- Market Cap (Wbn) 19,651 3Q19. Backed by such strong capital, we believe the group has the ability to buffer Shares Outstanding (mn) 416 itself against future risks (such as economic downturns), seize M&A opportunities that Free Float (%) 76.7 can be accretive to earnings and shareholder value, and carry out efficient capital Foreign Ownership (%) 66.7 policies (such as higher dividend payout and share retirements). KBFG previously Beta (12M) 0.97 raised its dividend payout ratio from 23.2% in 2016-17 to 24.8% in 2018. We forecast 52-Week Low 38,250 the ratio to rise further to 25.4% in 2019, 27.0% in 2020, and 28.4% in 2021, implying 52-Week High 48,950 attractive dividend yields of 4.8%, 5.1%, and 5.5%, respectively, based on the current (%) 1M 6M 12M share price. Absolute 8.7 5.7 -1.6 Raise TP to W63,000; Maintain as our top pick Relative 11.9 5.1 -2.2 We maintain Buy on KBFG and continue to recommend the stock as our top pick, given 110 KB Financial Group KOSPI the group’s earnings stability driven by a well-diversified business portfolio, robust

100 capital position, and ability to enhance shareholder value. In addition to share repurchases, we are encouraged by the group’s share cancellation and potential for 90 increased dividend appeal through dividend payout hikes. As such, we raise our target 80 price from W61,500 to W63,000 (target P/B of 0.67x).

70 12.18 4.19 8.19 12.19

Mirae Asset Daewoo Co., Ltd. Fiscal year-end 12/16 12/17 12/18 12/19F 12/20F 12/21F Net interest inc. (Wbn) 6,403 7,853 8,905 9,201 9,398 9,692 [ Banks/Credit Cards] Net non-interest inc. (Wbn) 1,042 2,339 1,955 2,266 2,419 2,531 Operating Profit (Wbn) 1,677 4,016 4,267 4,663 4,769 4,908 Heather Kang +822-3774-1903 Net Profit (Wbn) 2,144 3,312 3,061 3,446 3,462 3,563 [email protected] EPS (W) 5,520 8,036 7,321 8,244 8,318 8,570

EPS growth (%) 25.6 45.6 -8.9 12.6 0.9 3.0 P/E (x) 8.5 5.8 6.4 5.7 5.7 5.5 P/PPOP (x) 8.9 4.3 4.0 3.7 3.5 3.3

P/B (x) 0.63 0.58 0.55 0.50 0.46 0.43 ROE (%) 7.2 10.2 8.8 9.2 8.5 8.1 Dividend Yield (%) 2.7 4.1 4.1 4.8 5.1 5.5 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.

Airlines November IIA data: Cargo appears to be bottoming out

Neutral (Maintain) November IIA data: Passenger remains subdued, but cargo appears to be bottoming out Industry Report 1) Passenger: According to Incheon International Airport (IIA) data, international December 9, 2019 passenger traffic growth slowed to 0.6% YoY in November (vs. +1.3% YoY in October; all growth figures are YoY unless denoted otherwise). Traffic growth remained depressed on Japan routes (-39.5% vs. -38.9% in October) and slightly declined on Southeast Asia (+13.1% vs. +17.0% in October) and China (+4.2% vs. +5.7% in October) Mirae Asset Daewoo Co., Ltd. routes. That said, traffic grew strongly on US routes (+16.0% vs. +7.6% in October; +4.1% based on the contiguous US) due to a favorable comparison (caused by the 2018 [Transport/Energy] Saipan typhoons) and also remained robust on Europe routes (+8.6% vs. +8.3% in

Jay JH Ryu October). The load factor indicator continued to slide (-0.3%p vs. -0.2%p October). +822-3774-1738 [email protected] 2) Cargo: In November, international cargo traffic fell at a slower pace for the second straight month, dipping 3.4% (vs. -5.6% in October). Traffic declined more slowly on US

routes (-5.4% vs. -7.8% in October) and returned to positive growth on China routes

(+2.6% vs. -0.2% in October). The rate of decline stabilized on Japan routes (-22.5% vs. -26.3% in October). Traffic on Europe routes (-0.4% vs. -0.3% in October) remained at a standstill. The load factor indicator (+1.0%p vs. -3.2%p in October) rose for the first

time in 19 months.

3) Traffic by carrier: In November, international passenger traffic growth recovered to 1.2% (vs. +0.4% in October) at Korean Air and to 5.9% (vs. +3.7% in October) at . Cargo traffic also continued to fall more moderately than in the previous month at both Korean Air (-3.6% vs. -8.5% in October) and Asiana Airlines (-4.3% vs. -5.0% in October).

4) Regional airports: In November, international passenger traffic growth at regional airports (airports excluding IIA and Gimpo International Airport) worsened for the second straight month (-5.1% vs. -2.8% in October). Despite further flight reductions (-2.6% vs. -2.2% in October), the load factor indicator continued to decline (-2.6%p vs. -0.5%p in October).

LCCs: International market share continues to fall despite traffic growth In November, low-cost carrier (LCC) traffic grew for the second consecutive month (+3.7% vs. +4.8% in October). However, this was largely driven by domestic routes (+13.3% vs. +12.8% in October). Traffic on international routes actually declined at a faster pace (-7.7% vs. -5.0% in October). Similarly, LCC market share continued to expand in the domestic segment (59.8% vs. 58% in October), but dipped again in the short-haul international segment (39.2% vs. 39.6% in October). By carrier, Jeju Air (9.8% vs. 10.8% in October; traffic growth of -4.1%) saw its market share fall below 10%, while second-tier LCCs T’way Air (6.1% vs. 5.8% in October) and Jin Air (5.4% vs. 5.2% in October) slightly gained share. Air Busan (3.5% vs. 3.6% in October) also marginally lost share.

Japan traffic review: Load factor is worsening again The rate of decline in weekly traffic on Japan routes at major airports (Incheon, Gimpo, Cheongju, Gimhae, and Jeju) has remained at roughly -40% since mid-October. The load factor indicator, meanwhile, is worsening again. The rate of traffic decline widened further at Jeju Air (-50.4% vs. -41.5% in October), but slowed, albeit moderately, at Korean Air (-33.4% vs. -34.7% in October) and Asiana Airlines (-15.8% vs. -20.9% in October).

Watch for signs of further recovery in cargo We maintain our Neutral opinion on the airlines sector. The lack of recovery in the passenger market could reignite worries about 4Q19 earnings. That said, the cargo sector is showing signs of a pickup following a long period of decline and thus bears watching. If a cargo recovery is confirmed in the seasonally strong fourth quarter, this could drive expectations on earnings improvements at full-service carriers (FSCs).

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 December 9, 2019

※All data as of close December 05, 2019, 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 Samsung Electronics 300,877 50,400 2.8 -54.3 40.3 -47.7 35.9 16.0 11.8 1.3 1.2 8.6 10.8 000660 SK Hynix 58,677 80,600 1.9 -85.8 150.5 -85.5 140.0 26.0 10.8 1.2 1.1 4.7 10.7 035420 NAVER 28,678 174,000 0.2 -16.6 76.2 -46.2 130.5 82.2 35.7 4.2 3.8 6.5 13.6 005380 Hyundai Motor 25,320 118,500 3.4 49.6 41.9 118.5 48.0 10.1 6.8 0.5 0.4 4.7 6.6 012330 23,493 246,500 2.0 17.9 16.4 24.3 17.1 10.2 8.7 0.7 0.7 7.3 7.9 068270 Celltrion 21,817 170,000 - - - - 0.0 0.0 051910 LG Chem 20,789 294,500 1.4 -50.6 64.2 -67.0 139.4 47.5 19.8 1.3 1.2 2.8 6.6 055550 20,746 43,750 12.3 3.9 10.0 -0.2 6.0 6.0 0.5 0.5 9.1 8.4 005490 POSCO 20,097 230,500 4.8 -23.9 -9.2 37.8 -0.3 8.6 8.7 0.4 0.4 5.3 5.1 051900 LG H&H 19,788 1,267,000 0.9 12.8 9.7 16.5 10.7 24.9 22.5 5.4 4.6 20.3 19.1 105560 KB Financial Group 19,651 47,000 9.3 2.3 12.6 0.9 5.7 5.7 0.5 0.5 9.2 8.5 017670 SK Telecom 19,258 238,500 4.2 7.3 -3.5 -60.6 68.2 15.6 9.3 0.8 0.7 5.4 8.8 028260 Samsung C&T 19,159 101,000 2.0 -27.7 39.8 -42.8 17.9 19.7 16.7 0.6 0.6 4.0 3.9 015760 KEPCO 18,521 28,850 - - - - - 151.1 0.3 0.3 - 0.2 034730 SK Holdings 18,083 257,000 1.9 -2.8 21.5 -36.6 11.0 12.8 11.5 0.9 0.9 8.2 8.3 000270 Motors 17,755 43,800 2.1 70.4 29.1 79.8 24.5 8.5 6.9 0.6 0.6 7.4 8.5 006400 Samsung SDI 15,506 225,500 0.4 -33.0 108.9 -38.3 99.8 36.7 18.4 1.2 1.2 3.5 6.7 018260 Samsung SDS 14,857 192,000 1.3 10.4 12.3 10.3 11.8 21.4 19.1 2.3 2.1 11.1 11.3 032830 Samsung Life 14,460 72,300 - - - - 0.0 0.0 035720 13,213 153,500 0.1 184.6 138.3 226.0 114.7 76.8 35.8 2.5 2.3 3.2 6.7 096770 SK Innovation 13,084 141,500 5.7 -37.5 28.9 -60.6 85.6 20.4 11.0 0.7 0.7 3.6 6.5 033780 KT&G 13,070 95,200 4.4 12.8 5.6 17.5 5.1 12.3 11.7 1.5 1.4 12.7 12.6 003550 LG Corp. 12,510 72,500 3.4 -28.0 45.0 -18.4 16.8 8.4 7.2 0.7 0.6 8.1 8.9 036570 NCsoft 11,833 539,000 1.1 6.0 76.9 33.5 52.9 21.2 13.9 3.7 3.0 21.6 27.0 066570 LG Electronics 11,488 70,200 1.1 -4.2 15.6 -39.2 107.1 16.8 8.1 0.8 0.8 5.1 9.9 000810 Samsung F&M 11,109 234,500 - - - - 0.0 0.0 090430 AmorePacific 11,019 188,500 0.6 -15.7 30.9 -9.8 31.4 36.8 28.0 2.8 2.6 6.6 8.1 086790 Hana Financial Group 10,749 35,800 4.6 2.7 14.8 -6.2 4.2 4.4 0.4 0.3 9.2 8.1 010950 S-Oil 9,952 88,400 1.5 18.3 161.1 0.4 471.9 39.8 7.0 1.5 1.3 3.9 20.1 009150 Samsung Electro-Mechanics 8,627 115,500 1.0 -32.8 17.4 -5.4 -2.9 14.4 14.9 1.6 1.5 12.1 10.5 009540 KSOE 8,599 121,500 - 88.1 - -39.1 35.0 57.5 0.7 0.7 2.1 1.3 010130 Korea Zinc 7,680 407,000 2.7 12.2 15.7 25.4 9.3 11.6 10.6 1.1 1.0 10.2 10.3 251270 7,537 87,900 1.8 57.7 14.5 36.9 34.5 25.2 1.6 1.5 4.9 6.3 011170 Lotte Chemical 7,249 211,500 5.0 -35.3 21.0 -39.4 30.8 7.6 5.8 0.5 0.5 7.3 9.0 030200 KT 7,011 26,850 4.1 -2.4 -1.1 -7.8 21.0 11.0 9.1 0.5 0.5 4.7 5.5 024110 6,868 11,900 0.6 -0.8 -1.0 -2.3 4.5 4.6 0.3 0.3 8.0 7.3 091990 Celltrion Healthcare 6,772 47,050 - 144.5 435.7 165.0 110.5 41.7 3.8 3.6 3.7 9.3 032640 LG Uplus 6,047 13,850 4.7 -11.8 10.9 -16.7 15.0 15.1 13.1 0.9 0.8 5.8 6.4 018880 Hanon Systems 5,872 11,000 - - - - 0.0 0.0 267250 5,603 344,000 5.4 -1.6 92.1 74.3 199.2 12.0 4.0 0.7 0.6 6.0 16.5 Holdings 086280 5,456 145,500 2.3 22.7 2.0 3.3 34.0 12.1 9.0 1.2 1.1 10.1 12.2 034220 LG Display 5,260 14,700 ------0.4 0.4 - - 000720 Hyundai E&C 4,532 40,700 1.2 12.4 10.9 42.6 -6.7 8.3 8.9 0.7 0.6 8.3 7.3 010140 4,366 6,930 - - - - - 44.2 0.7 0.6 - 1.7 029780 Samsung Card 4,322 37,300 11.7 -28.6 1.7 6.8 12.3 11.5 0.6 0.6 1.5 1.6 271560 Orion 4,171 105,500 0.6 14.2 7.7 56.5 9.1 19.1 17.5 2.5 2.3 14.4 13.7 004020 4,063 30,450 2.5 -45.2 39.1 -75.8 289.4 42.2 10.8 0.2 0.2 0.6 2.1 005830 DB Insurance 3,958 55,900 - - - - 0.0 0.0 071050 Korea Investment Holdings 3,767 67,600 - - - - 0.0 0.0 128940 3,762 324,000 0.2 8.5 0.6 83.4 -22.3 82.4 106.1 4.9 4.7 6.3 4.7 Source: Mirae Asset Daewoo Research

Mirae Asset Daewoo Research Market Data December 9, 2019

※All data as of close December 06, 2019, unless otherwise noted.

Other Major Indices Economic Indicators Close Net Chg 1D (%) YTD (%) Close 1D ago 1M ago 1Y ago MSCI Korea* 426.22 -0.02 -0.01 -0.63 USD/KRW 1,190.20 1,193.70 1,160.10 1,113.60 KOSPI 2,081.85 21.11 1.02 3.57 JPY100/KRW 1,094.49 1,096.60 1,062.70 984.40 KOSDAQ 628.10 10.50 1.70 -6.17 EUR/KRW 1,321.78 1,322.62 1,284.64 1,263.77 Dow Jones* 27,677.79 28.01 0.10 18.65 3Y Treasury 1.43 1.42 1.53 1.84 S&P 500* 3,117.43 4.67 0.15 24.20 3Y Corporate 1.97 1.96 2.03 2.32 NASDAQ* 8,570.70 4.03 0.05 28.57 DDR4 8Gb* 2.73 2.73 2.87 6.56 Philadelphia Semicon* 1,697.66 6.21 0.37 45.68 NAND MLC 64G* 2.36 2.35 2.31 2.88 FTSE 100* 7,137.85 -50.65 -0.70 5.99 Oil (Dubai)* 62.73 61.11 61.34 59.81 Nikkei 225 23,354.40 54.31 0.23 19.39 Gold* 1,476.90 1,474.00 1,483.70 1,237.10 Hang Seng* 26,217.04 154.48 0.59 4.32 Customer deposits (Wbn)* 24,813 25,258 24,609 23,465 Taiwan (Weighted) 11,609.64 14.99 0.13 -99.82 Equity type BC (Wbn)(Dec. 4) 81,065 81,263 80,753 83,501 Note: * as of December 05, 2019 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 NC Soft 30.83 KODEX MSCI Korea TR 29.47 Samsung Electronics 65.04 Meritz Securities 10.82 Samsung Electronics (P) 17.45 Samsung Electronics 28.91 KODEX MSCI Korea TR 29.48 KODEX KOSDAQ 150 10.72 Hynix 14.93 KODEX 200 23.95 KODEX Leverage 28.53 KODEX 200 Futures Inverse 2X 10.66 KODEX KOSDAQ 150 11.45 KT&G 20.35 KODEX 200 27.21 Samsung Electronics (P) 9.25 Kakao 7.60 Hyundai Motor 11.27 Hynix 26.27 SK C&C 7.80 NAVER 7.37 Hyundai Mobis 9.86 NC Soft 13.23 Korea Investment Holdings 5.50 Dongbu Hannong Chemical 7.20 TIGER200 9.63 KODEX Kosdaq150 Leverage 12.00 LG Chem 5.14 KAL 7.09 LG Display 6.67 TIGER200 9.70 Hana Financial Group 4.12 SEMCO 7.07 SK Telecom 6.65 Kakao 9.37 Woori Investment Securities 4.03 Celltrion 5.02 5.16 LG Innotek 7.59 Meritz Fire&Marine Insurance 3.53 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 MC Nex 22.39 ViroMed 4.47 GemVax 9.18 REMED 5.48 HLB 19.73 KH Vatec 3.56 Energy Solutions 4.99 KH Vatec 3.02 Partrion 15.38 CJ ENM 2.99 HLB 3.91 Se Gyung Hi Tech 2.47 RFHIC 6.54 SFA Semicon 2.42 Celltrion Healthcare 3.86 INNOX Advanced Materials 2.45 Dongjin Semichem 4.73 Hugel 2.05 Suprema 3.35 MC Nex 2.30 KMW 4.67 Celltrion Healthcare 1.35 AP Systems 2.82 Wing Yip Food 1.89 Energy Solutions 4.02 Mezzion Pharma 1.34 AfteecaTV 2.51 CJ ENM 1.48 Hyundai IT 3.75 Derkwoo Electronics 1.18 RFHIC 2.49 P&T 1.30 Nepes 3.53 AfteecaTV 1.14 Amotech 2.02 Aptabio 1.28 Soulbrain 3.39 Sam Chun Dang Pharm. 1.12 BH,LTD. 1.86 SFA Semicon 1.18 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 50,400 900 300,877 Celltrion Healthcare 47,050 900 6,772 Hynix 80,600 1,800 58,677 HLB 98,500 500 4,210 Samsung Electronics (P) 41,750 850 34,356 CJ ENM 151,900 -2,600 3,331 NAVER 174,000 3,500 28,678 PearlAbyss 194,000 2,300 2,526 395,000 -1,000 26,135 77,500 0 2,177 Hyundai Motor 118,500 500 25,320 KMW 52,100 1,300 2,074 Hyundai Mobis 246,500 1,500 23,493 Hugel 368,600 -6,400 1,887 Celltrion 170,000 1,500 21,817 SK Materials 168,800 1,100 1,780 LG Chem 294,500 1,000 20,789 Medy-tox 297,300 5,900 1,729 Shinhan Financial Group 43,750 350 20,746 ViroMed 80,600 -800 1,726 Source: