August 14, 2020 One-Asia Morning Focus

Today’s reports NCsoft (036570 KS/Buy/TP: W1,260,000) Lower TP – Growth momentum from upcoming titles Hanwha Corp. (000880 KS/Buy/TP: W33,000) Raise TP – Faster-than-expected earnings normalization KEPCO (015760 KS/Hold/TP: W23,000) Present TP – Electricity prices more important than earnings Pan Ocean (028670 KS/Buy/TP: W5,100) Raise TP – Characteristics of a value stock Healthcare (091990 KQ/Buy/TP: W140,000) Raise TP – Operating profit surprise Emart (139480 KS/Buy/TP: W190,000) – Retail sector is bottoming out Hyundai Department Store (069960 KS/Buy/TP: W90,000) – Strong downside support at current share prices D&C Media (263720 KQ/Buy/TP: W45,000) – Riding on Piccoma’s explosive growth

Global performance monitor: Two-day change (%) Asia xJPN World EM World DM Korea Japan China Taiwan HK India Indonesia Singapore Thailand Index 0.88 0.71 1.32 0.91 1.97 1.24 -0.01 3.58 0.00 1.34 2.26 1.45 Growth 0.74 0.41 0.57 0.68 2.18 1.53 -0.12 3.30 -0.15 0.85 2.18 0.72 Value 1.51 0.89 0.71 1.17 1.75 0.89 0.13 3.93 0.12 1.80 2.33 2.13 Semicon. & equip. -3.40 -3.40 0.88 -0.55 3.45 0.38 -0.31 -3.16 N/A N/A N/A N/A Tech hardware & equip. 0.91 0.86 0.72 0.91 2.40 -0.05 0.02 0.36 0.75 N/A 1.65 N/A Comm. & prof. services -1.42 -1.42 1.83 -0.23 2.94 -0.75 -0.04 N/A 1.02 2.04 N/A N/A Software & services -0.05 -0.12 0.07 2.36 1.80 -1.48 -0.85 -2.69 0.48 N/A -4.57 N/A Media & entertainment 2.55 2.46 0.39 1.37 2.70 0.17 0.02 1.94 -1.55 N/A N/A N/A Consumer goods 2.34 2.35 2.14 6.86 1.38 -0.63 -0.16 N/A 2.29 -0.28 N/A -0.67 Consumer services 3.69 2.54 2.10 2.15 2.01 -4.60 3.00 6.59 4.53 1.88 6.72 2.27 F&B & tobacco -0.28 0.14 1.46 0.48 2.21 -1.09 -0.35 -0.44 -0.11 -0.68 3.89 0.56 Food & staples retailing 1.16 1.35 0.35 0.83 1.08 -0.66 0.89 -3.44 3.43 N/A -2.65 -1.31 Retailing 1.69 1.72 1.35 5.76 1.69 -3.30 -0.93 2.90 0.19 -1.58 0.26 -2.80 HH & personal products 1.57 1.41 1.21 2.13 3.33 -3.33 0.20 N/A -0.52 0.87 N/A N/A Pharma & life sciences -2.27 -2.27 1.37 -0.80 1.08 -5.38 1.76 1.83 -2.90 0.88 N/A N/A Autos & parts 0.07 0.13 5.14 -3.38 1.82 0.14 2.99 3.45 3.27 2.65 N/A N/A Transportation 2.87 1.95 1.92 -0.46 2.36 1.17 0.34 2.37 7.91 N/A 3.11 4.41 Capital goods 0.96 0.88 2.07 3.34 2.34 -1.28 1.66 2.29 2.33 N/A 0.61 -0.82 Materials -0.45 -0.57 0.63 -1.56 1.36 -1.91 0.00 N/A 0.70 0.53 N/A 1.29 Real estate 2.41 1.30 0.66 0.18 0.47 1.37 1.89 5.02 0.73 N/A 1.70 3.53 Energy 0.83 1.49 2.09 -1.65 2.19 0.34 0.23 N/A -0.52 -4.39 0.59 2.00 Banks 2.53 2.12 2.85 4.06 2.15 -0.02 0.40 6.07 -0.50 2.09 2.54 6.62 Diversified financials -1.22 -0.81 1.32 0.44 1.87 -0.07 3.02 -1.13 -0.29 N/A 0.51 -0.26 Telecom services 0.64 1.31 0.41 2.74 1.11 4.90 1.07 -0.39 -2.65 2.36 2.59 0.29 Utilities 2.31 0.93 0.58 2.92 2.57 0.87 -2.65 2.87 1.00 1.38 N/A -0.10 Key thematic ETFs: Change (%) Market movers Mkt cap US dollar total returns (%) Robotics & AI (Global X) Name Ctry Sector (US$mn) 1D 1M 3M 6M 1Y 3Y Cloud Computing (Global X) Top seven performers Lithium & Battery (Global X) Life Insurance KR Financials 12,152 21.2 59.7 63.8 5.7 13.3 -36.0 Internet of Things (Global X) InterGlobe Aviation IN Industrials 5,972 12.2 15.0 16.6 -23.3 -26.3 -17.1 Digitalisation (iShares) Kasikornbank TH Financials 7,050 7.3 2.7 10.8 -32.9 -41.8 -44.7 FinTech (Global X) Chailease Holding TW Financials 6,223 6.9 5.7 24.6 15.7 26.5 100.2 Genomics & Biotech (Global X) ASUSTek Computer TW Information tech. 6,112 6.6 10.7 29.6 20.3 36.4 16.3 Health & Wellness (Global X) Hanon Systems KR Consumer disc. 5,752 6.4 34.0 47.9 16.1 16.4 24.5 Ageing Population (iShares) Siam Commercial Bank TH Financials 8,234 6.4 5.6 14.2 -20.5 -37.4 -34.6 EM Consum Growth (iShares) Bottom seven performers Clean Energy (iShares) Bharti Airtel IN Commun. services 39,044 -2.4 -7.9 -2.5 -5.1 45.8 23.6 Water Resources (Invesco) KR Healthcare 45,851 -2.6 14.0 37.7 54.7 196.7 200.2 Agribusiness (iShares) Gulf Energy Develop. TH Utilities 12,371 -3.0 -11.9 -11.2 -12.9 40.5 NA Global Infrastructure (iShares) COWAY KR Consumer disc. 5,320 -3.7 21.8 42.3 -5.5 5.0 -9.5 ESG US Leaders (iShares) Catcher Technology TW Information tech. 5,514 -3.9 -10.3 -10.7 -11.3 9.7 -34.4 2D 10D Home Product Center TH Consumer disc. 6,393 -4.4 -3.4 11.3 6.8 -10.0 78.4 (6)(3)03691215

Aurobindo Pharma IN Healthcare 6,899 -5.7 9.4 31.4 59.9 40.3 8.6

This publication contains summaries of reports prepared by Mirae Asset Daewoo Co., Ltd. and/or its non-US affiliates (“Mirae Asset Daewoo”). Please review the compliance notices contained in the original reports. 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.

August 14, 2020 One-Asia Morning Focus

MSCI valuations (DM, EM, Asia ex-JP)

17 12M forward P/E (x) 22 2.0 12M trailing P/B (x) 2.8 21 16 20 2.6 1.8 15 19 2.4 14 18 1.6 17 13 2.2 16 1.4 12 15 2.0 11 14 1.2 13 1.8 10 12 9 11 1.0 1.6 Aug-19 Nov-19 Feb-20 May-20 Aug-19 Nov-19 Feb-20 May-20 MSCI Asia ex-JP (L) MSCI World EM (L) MSCI World DM (R) MSCI Asia ex-JP (L) MSCI World EM (L) MSCI World DM (R)

MSCI 12M forward P/E (x) Currencies (vs. USD) Value Change(%) Korea Vietnam 1D 3M YTD

13 19 KRW 1,183.3 -0.16 -3.31 2.32 CNY 6.9 -0.02 -2.11 -0.31 11 16 JPY 106.9 -0.01 -0.21 -1.65 IDR 14,775.0 0.10 -0.74 6.43 9 13 HKD 7.8 -0.01 0.00 -0.53 TWD 29.4 -0.01 -1.56 -1.89 7 10 Aug-19 Nov-19 Feb-20 May-20 Aug-19 Nov-19 Feb-20 May-20 SGD 1.4 -0.02 -3.31 1.98 THB 31.1 0.00 -3.13 3.70 Indonesia India 19 24 INR 74.8 0.02 -0.82 4.86 22 PHP 48.9 -0.15 -2.79 -3.53 17 20 MYR 4.2 -0.05 -3.17 2.44 15 18 VND 23,174.5 -0.01 -0.74 0.01 13 16 Commodities 11 14 Latest Change (%) 9 12 Aug-19 Nov-19 Feb-20 May-20 Aug-19 Nov-19 Feb-20 May-20 close 1D 3M YTD Crude oil (US$/bbl) 45.4 1.9 86.5 -33.0

Hong Kong China Thermal coal (US$/tonne) 51.6 0.0 -22.7 -23.0 17 16 Iron ore (US$/tonne) 120.2 0.8 45.9 31.3 15 Copper (US$/tonne) 6,379.0 0.4 31.2 3.6 15 14 Nickel (US$/tonne) 14,167.0 0.1 26.6 1.2 13 Tin (US$/tonne) 17,719.0 0.1 22.5 5.2 13 12 Gold (US$/ozt) 1,934.9 0.1 18.4 27.3 11 Palm oil (INR/tonne) 805.0 0.0 11.5 -7.5

11 10 Soybean oil (c/lb) 31.0 0.0 18.2 -9.5 Aug-19 Nov-19 Feb-20 May-20 Aug-19 Nov-19 Feb-20 May-20 Corn (US$/bu) 3.2 1.0 -1.5 -20.8 Wheat (US$/bu) 4.9 -0.8 -10.6 -12.1 Source: FactSet, Mirae Asset Daewoo Research (updated on 8/13/20 at 23:00 KST)

[Korea] Game

NCsoft Buy (036570 KS) (Maintain)

Growth momentum from upcoming titles TP: W1,260,000 ▼ Upside: 40.5%

Mirae Asset Daewoo Co., Ltd. Chang-kwean Kim [email protected] HeeSeok Lim [email protected]

2Q20 review Both revenue and OP missed our estimates  For 2Q20, NCsoft reported revenue of W538.6bn (+31% YoY) and operating profit of W209bn (+61% YoY), falling short of our estimates (W597bn and W213bn, respectively).  In 2Q20, daily average revenue slipped to W2.17bn for Lineage 2M and W1.76bn for Lineage M.  We expect user metrics and revenue for Lineage M and Lineage 2M to pick up in 3Q20.

New release momentum to Blade & Soul 2, Trickster M, and Pangya M are are scheduled for release materialize  A key variable for 4Q20 earnings is the much-anticipated release of Blade & Soul 2.  Trickster M (mobile adaptation of the classic PC MMORPG Trickster Online), Pangya M (mobile version of the golf-themed PC game Pangya), and Pro Baseball H3 are scheduled for release in 2H20.  NCsoft is set to conduct a large-scale internal beta test for Project TL (a new PC/console title) in 2H20 and launch the PC version in 2021.  NCsoft plans to directly service Lineage 2M in Taiwan in 2H20 and other markets in 2021.  For 3Q20, we forecast revenue of W550bn (+38% YoY) and operating profit of W216bn (+68% YoY).

Positive expectations for the Maintain Buy, but lower TP to W1,260,000 gaming sector in 2021  We cut our target price on NCsoft to W1,260,000 (from W1,310,000), as we adjusted down our 2020 operating profit and net profit estimates by 15.0% and 3.5%, respectively.  Our price target implies a P/E of 33.8x, the level at which the stock traded ahead of the release of Lineage 2M in 2019.  We believe expectations for the gaming sector in 2021 are building, given: 1) the upcoming release of next-generation consoles (Sony PlayStation 5 and Microsoft Xbox Series X) for the first time in eight years; 2) the proliferation of 5G services; and 3) the rollout of cloud gaming services by big techs (e.g., Microsoft and Amazon).  With global (US and China) peers trading at an average 2020F P/E of 30x, the stock looks undervalued.

Key data Current price (8/13/20, W) 897,000 Market cap (Wbn) 19,693 210 NCsoft KOSPI OP (20F, Wbn) 905 Shares outstanding (mn) 22 160 Consensus OP (20F, Wbn) 1,051 Free float (%) 81.9 EPS growth (20F, %) 129.9 Foreign ownership (%) 50.1 110 P/E (20F, x) 23.9 Beta (12M) 0.57

60 Market P/E (20F, x) 17.2 52-week low (W) 485,000 8.19 12.19 4.20 8.20 KOSPI 2,437.53 52-week high (W) 995,000

Share performance Earnings and valuation metrics (%) 1M 6M 12M (Dec.) 2017 2018 2019 2020F 2021F 2022F Absolute -7.0 42.6 71.8 Revenue (Wbn) 1,759 1,715 1,701 2,647 2,994 3,234 Relative -16.6 30.6 35.8 OP (Wbn) 585 615 479 905 1,309 1,502 OP margin (%) 33.3 35.9 28.2 34.2 43.7 46.4 NP (Wbn) 441 418 358 824 939 1,145 EPS (W) 20,104 19,061 16,320 37,518 42,773 52,147 ROE (%) 19.1 16.4 14.7 28.8 25.9 25.1 P/E (x) 22.3 24.5 33.1 23.9 21.0 17.2 P/B (x) 3.4 3.7 4.1 5.4 4.4 3.6 Dividend yield (%) 1.6 1.3 1.0 0.6 0.6 0.6 Notes: Under consolidated K-IFRS; NP is attributable to owners of the parent 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 US. PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES AND DISCLAIMERS IN APPENDIX 1 AT THE END OF REPORT. [Korea] Conglomerates

Hanwha Corp. Buy (000880 KS) (Maintain)

Faster-than-expected earnings normalization TP: W33,000 ▲ Upside: 27.7%

Mirae Asset Daewoo Co., Ltd. Dae-ro Jeong [email protected]

2Q20 review NP attributable to owners of the parent of W116.6bn (+146.2% YoY), above consensus  For 2Q20, Hanwha Corp. reported revenue of W11tr (-14% YoY) and operating profit of W501.3bn (+37.9% YoY).  Operating profit beat the consensus, aided by earnings improvements at (lower raw material prices) and Hanwha Life (reversal of variable policy guarantee reserves).  Hanwha E&C (non-consolidated): Revenue declined 12.9% to W852bn, but operating profit grew 18% YoY to W88.6bn. Some domestic projects were completed, supporting earnings, but the Iraqi housing project faced inevitable delays due to COVID-19.  In-house businesses reported solid revenue of W1.1tr (+5.0% YoY) and operating profit of W58.5bn (+21.6% YoY), helped by the normalization of the defense business and a narrower loss in the trading division (due to favorable oil prices).  Hanwha Corp. on Jul. 30 announced a plan to spin off the high-dispersion ammunition business from the defense division. On Aug. 13, it announced that it will take over the collaborative robot business from Hanwha Precision Machinery.

2H20-2021 outlook Faster-than-expected normalization; earnings improvements to continue through 2021  Hanwha Corp. demonstrated a resilient recovery in 2Q20. For 2021, we expect net profit attributable to owners of the parent to expand to W462.3bn (+15.4% YoY).  For Hanwha Solutions, we anticipate improvements in earnings and enterprise value driven by the solar PV business.  The government’s Green New Deal initiative should benefit Hanwha Corp.’s hydrogen energy business.

Recommendation and valuation Retain Buy and lift TP to W33,000  We lift our target price on Hanwha Corp. to W33,000 (from W28,000) due to subsidiary earnings improvements and the increased value of stakes in subsidiaries (e.g., Hanwha Solutions).  Currently trading at a 56% discount to NAV, the stock looks undervalued.  We think Hanwha Corp. shares are likely to be re-rated higher given the likely normalization of in-house business/subsidiary earnings in 2021. Key data Current price (8/13/20, W) 25,850 Market cap (Wbn) 1,938 140 Hanwha Corp. KOSPI OP (20F, Wbn) 1,496 Shares outstanding (mn) 98 120

100 Consensus OP (20F, Wbn) 1,347 Free float (%) 53.8

80 EPS growth (20F, %) 345.3 Foreign ownership (%) 19.1

60 P/E (20F, x) 6.3 Beta (12M) 1.20

40 Market P/E (20F, x) 17.2 52-week low (W) 12,050 8.19 12.19 4.20 8.20 KOSPI 2,437.53 52-week high (W) 28,950

Share performance Earnings and valuation metrics (%) 1M 6M 12M (Dec.) 2017 2018 2019 2020F 2021F 2022F Absolute 10.7 11.7 18.0 Revenue (Wbn) 50,404 48,740 50,412 51,232 52,117 52,827 Relative -0.7 2.3 -6.7 OP (Wbn) 2,159 1,806 1,126 1,496 1,719 1,728 OP margin (%) 4.3 3.7 2.2 2.9 3.3 3.3 NP (Wbn) 405 468 90 401 462 469 EPS (W) 4,140 4,784 919 4,092 4,722 4,791 ROE (%) 9.1 10.7 2.1 8.9 9.8 9.1 P/E (x) 10.0 6.6 27.2 6.3 5.5 5.4 P/B (x) 0.9 0.7 0.6 0.6 0.5 0.5 Dividend yield (%) 1.4 2.2 2.8 2.7 2.7 2.7 Notes: Under consolidated K-IFRS; NP is attributable to owners of the parent 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 US. PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES AND DISCLAIMERS IN APPENDIX 1 AT THE END OF REPORT. [Korea] Utility

KEPCO Hold (015760 KS) (Maintain)

Electricity prices more important than earnings TP: W23,000 Upside: 6.7%

Mirae Asset Daewoo Co., Ltd. Jay JH Ryu [email protected]

2Q20 review OP of W389.8bn; larger-than-expected rise in ASP and one-off decline in costs  For 2Q20, KEPCO reported revenue of W13.07tr (flattish YoY). - A 4% YoY decline in electricity sales volume was offset by a 3% YoY rise in ASP. - COVID-19 impact: The residential segment benefited from the progressive pricing system amid an increase in electricity use, but the industrial segment saw weak demand for low-priced night- time electricity.  Operating profit was W389.8bn, far better than the consensus (operating loss of W107.7bn). - An increase in ASP and declines in fuel costs (-12.8% YoY) and power purchasing costs (-11.7% YoY) supported earnings. - One-off factors included a W120.5bn reduction in fees (e.g., outsourcing) and the reversal of emission trading system (ETS) costs (W45bn).

Earnings momentum to slow Despite healthy 2Q20 results, discussions on price hikes are needed  Looking to 2H20, we see no additional drivers of earnings momentum beyond seasonality.  We expect the power generation mix to deteriorate, with nuclear reactor utilization recently falling to 70%.  In 3Q20, we expect the prolonged rainy season and moderate weather to limit the positive effects of seasonality.

Conditions for electricity price Price hikes unlikely in the near term, despite growing need hikes  The adoption of a cost pass-through system is needed due to increasing structural costs, such as Renewable Portfolio Standard (RPS) quotas and ETS costs.  Given KEPCO’s exposure to external variables and the resulting earnings volatility, a valuation discount is inevitable.  In order for the introduction of a cost pass-through system to be considered, KEPCO’s ROE should improve to the guaranteed rate of return level (approximately 4%).  Considering KEPCO’s net profit position, a one-time price increase is unlikely.

Maintain Hold Maintain Hold and present TP of W23,000  Our target price implies a P/B of 0.22x. Given its low ROE (below 2%), KEPCO is unlikely to be re- rated higher.

Key data Current price (8/13/20, W) 21,550 Market cap (Wbn) 13,834 130 KEPCO KOSPI OP (20F, Wbn) 3,008 Shares outstanding (mn) 642 110 Consensus OP (20F, Wbn) 3,323 Free float (%) 44.8 90 EPS growth (20F, %) - Foreign ownership (%) 17.8

70 P/E (20F, x) 12.8 Beta (12M) 0.78

50 Market P/E (20F, x) 17.2 52-week low (W) 16,250 8.19 12.19 4.20 8.20 KOSPI 2,437.53 52-week high (W) 29,250

Share performance Earnings and valuation metrics (%) 1M 6M 12M (Dec.) 2017 2018 2019 2020F 2021F 2022F Absolute 7.8 -16.1 -13.6 Revenue (Wbn) 59,815 60,628 59,173 58,275 58,870 60,551 Relative -3.4 -23.2 -31.8 OP (Wbn) 4,953 -208 -1,277 3,008 3,175 3,379 OP margin (%) 8.3 -0.3 -2.2 5.2 5.4 5.6 NP (Wbn) 1,299 -1,315 -2,346 1,081 1,204 1,310 EPS (W) 2,023 -2,048 -3,654 1,683 1,875 2,041 ROE (%) 1.8 -1.9 -3.4 1.6 1.7 1.9 P/E (x) 18.9 - - 12.8 11.5 10.6 P/B (x) 0.3 0.3 0.3 0.2 0.2 0.2 Dividend yield (%) 2.1 0.0 0.0 2.3 2.3 2.3 Notes: Under consolidated K-IFRS; NP is attributable to owners of the parent 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 US. PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES AND DISCLAIMERS IN APPENDIX 1 AT THE END OF REPORT. [Korea] Shipping

Pan Ocean Buy (028670 KS) (Maintain)

Characteristics of a value stock TP: W5,100 ▲ Upside: 33.5%

Mirae Asset Daewoo Co., Ltd. Jay JH Ryu [email protected]

2Q20 review OP of W64.2bn; earnings surprise

 For 2Q20, Pan Ocean reported revenue of W683.4bn (+8.1% YoY). - Revenue declined 7.3% YoY for bulk shipping, but grew 18.0% YoY for non-bulk shipping and 40.3% YoY for grain trading.  Operating profit came in at W64.2bn (+27.3% YoY), well above the consensus (W48.3bn). - Despite a market downturn, bulk carrier operating profit was resilient, at W44bn (-4.7% YoY). - Container (W8.2bn) and tanker (W10.1bn) operating profit showed strong growth (+W14.2bn YoY combined). - The container division benefited from low oil prices, while the tanker division was supported by increased storage demand.

Three conditions for a value play Pan Ocean fits the definition of a value stock  Stability: Pan Ocean has enhanced its earnings stability by proactively responding to market developments with changes in strategy.  Dividends: We expect Pan Ocean to use its distributable reserves to maximize shareholder value (e.g., dividend payouts).  Valuation: Currently trading at a P/B of 0.6x, the stock is undervalued relative to its net asset value.

Lift TP; recommend aggressively Maintain Buy and lift TP to W5,100 accumulating the stock  We maintain our Buy rating on Pan Ocean and lift our target price to W5,100 (from W4,600).  Our target price is based on an EV/EBITDA of 8.2x (unchanged), the stock’s average low following the company’s exit from court receivership.  We recommend aggressively accumulating the stock in light of anticipated market improvements in 2H20.

Key data Current price (8/13/20, W) 3,820 Market cap (Wbn) 2,042 140 Pan Ocean KOSPI OP (20F, Wbn) 223 Shares outstanding (mn) 535 120 Consensus OP (20F, Wbn) 205 Free float (%) 45.1 100

80 EPS growth (20F, %) -8.2 Foreign ownership (%) 11.1

60 P/E (20F, x) 14.6 Beta (12M) 1.03

40 Market P/E (20F, x) 17.2 52-week low (W) 2,085 8.19 12.19 4.20 8.20 KOSPI 2,437.53 52-week high (W) 4,935

Share performance Earnings and valuation metrics (%) 1M 6M 12M (Dec.) 2017 2018 2019 2020F 2021F 2022F Absolute 2.8 -5.0 -12.4 Revenue (Wbn) 2,336 2,668 2,468 2,483 2,811 3,110 Relative -7.8 -13.0 -30.8 OP (Wbn) 195 204 210 223 260 289 OP margin (%) 8.3 7.6 8.5 9.0 9.2 9.3 NP (Wbn) 143 152 152 139 220 249 EPS (W) 268 285 284 261 411 465 ROE (%) 5.8 6.1 5.5 4.6 6.7 7.0 P/E (x) 19.7 15.6 16.0 14.6 9.3 8.2 P/B (x) 1.2 0.9 0.8 0.6 0.6 0.6 Dividend yield (%) 0.0 0.0 0.0 0.0 0.0 0.0 Notes: Under consolidated K-IFRS; NP is attributable to owners of the parent 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 US. PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES AND DISCLAIMERS IN APPENDIX 1 AT THE END OF REPORT. [Korea] Healthcare

Celltrion Healthcare Buy (091990 KQ) (Maintain)

Operating profit surprise TP: W140,000 ▲ Upside: 29.4%

Mirae Asset Daewoo Co., Ltd. Taehee Kim [email protected]

2Q20 review Operating profit surprise  For 2Q20, Celltrion Healthcare reported revenue of W420.3bn (+47.6% YoY) and operating profit of W86.8bn (+833.3% YoY).  Revenue was in line with the consensus, and operating profit beat the consensus by 33%.  Revenue mix: 36% from Remsima, 49% from Truxima, 13% from Herzuma, and 2% from Remsima SC  OP margin reached 20.7% (the highest level since 4Q16), supported by an increasing mix of high-margin products.

Status check by product Across-the-board growth  Remsima (US brand name Inflectra): While Remsima’s European market share has declined slightly to 57%, we see no cause for concern, as the decline is attributable to selective (profit- oriented) bidding. Meanwhile, Remsima’s US market share continues to increase steadily.  Truxima: Truxima’s European market share now stands at 40%, outgrowing its original reference drug. Truxima is rapidly penetrating the US market (16.4% market share).  Herzuma: Compared to Remsima and Truxima, Herzuma’s market share gains are slow in the US and Europe due to fierce competition. However, Herzuma’s market share in Japan surged from 2% in 2Q19 to 35% in 2Q20.

Still one of our top picks Maintain Buy and lift TP to W140,000  Celltrion Healthcare remains one of our biotech/healthcare top picks (along with Celltrion).  We lift our target price to W140,000 (from W125,000), as we revised up our EPS estimates reflecting margin improvements.  It is also encouraging that selling prices have stabilized in Europe and the US.  We expect Remsima SC (which recently gained an additional indication as a treatment for inflammatory bowel disease) to drive growth in 2H20. In 2021, a high-concentration Humira biosimilar should provide earnings momentum.

Key data Current price (8/13/20, W) 108,200 Market cap (Wbn) 16,420 310 Celltrion Healthcare KOSDAQ OP (20F, Wbn) 348 Shares outstanding (mn) 152 260 Consensus OP (20F, Wbn) 287 Free float (%) 60.7 210

160 EPS growth (20F, %) 320.9 Foreign ownership (%) 17.6

110 P/E (20F, x) 59.7 Beta (12M) 0.52

60 Market P/E (20F, x) 17.2 52-week low (W) 35,924 8.19 12.19 4.20 8.20 KOSDAQ 854.77 52-week high (W) 114,700

Share performance Earnings and valuation metrics (%) 1M 6M 12M (Dec.) 2017 2018 2019 2020F 2021F 2022F Absolute 1.5 69.9 181.1 Revenue (Wbn) 921 713 1,101 1,881 2,394 3,033 Relative -7.2 36.6 94.3 OP (Wbn) 154 -25 83 348 482 656 OP margin (%) 16.7 -3.5 7.5 18.5 20.1 21.6 NP (Wbn) 157 11 65 275 347 517 EPS (W) 1,172 76 431 1,813 2,181 3,102 ROE (%) 13.9 0.7 3.9 15.2 16.4 20.3 P/E (x) 86.6 947.1 123.0 59.7 49.6 34.9 P/B (x) 8.9 6.2 4.5 8.0 7.5 6.5 Dividend yield (%) 0.0 0.0 0.0 0.0 0.0 0.0 Notes: Under consolidated K-IFRS; NP is attributable to owners of the parent 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 US. PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES AND DISCLAIMERS IN APPENDIX 1 AT THE END OF REPORT. August 14, 2020 Celltrion Healthcare

Table 1. 2Q20 review (Wbn, %) Mirae Asset 2Q19 1Q20 2Q20 YoY QoQ Consensus Daewoo Revenue 284.8 356.9 420.3 47.6 17.8 432.5 431.7 Operating profit 9.3 55.8 86.8 833.3 55.6 68.9 65.2 OP margin (%) 3.2 15.6 20.7 15.9 15.1 Net profit 8.5 76.2 46.4 445.9 -39.1 63.4 61.2 Source: Company data, Mirae Asset Daewoo Research estimates

Table 2. Earnings forecast revisions (Wbn, W, %, %p) Previous Revised Change 2020F 2021F 2020F 2021F 2020F 2021F Revenue 1,840.4 2,338.8 1,880.5 2,393.9 2.2 2.4 Operating profit 296.0 394.9 347.7 482.1 17.5 22.1 Net profit 252.4 277.5 274.6 346.7 8.8 24.9 EPS 1,668 1,749 1,813 2,181 8.8 24.7 BPS 13,423 13,906 13,538 14,416 0.9 3.7 OP margin 16.1 16.9 18.5 20.1 2.4 3.3 Net margin 13.7 11.8 14.6 14.5 0.9 2.6 Source: Mirae Asset Daewoo Research estimates

Mirae Asset Daewoo Research [Korea] Retail

Emart Buy (139480 KS) (Maintain)

Retail sector is bottoming out TP: W190,000 Upside: 55.1%

Mirae Asset Daewoo Co., Ltd. Myoungjoo Kim [email protected] Minjeong Kyeong [email protected]

2Q20 review Operating loss due to COVID-19 and weak seasonality  For 2Q20, Emart posted consolidated revenue of W5.19tr (+13.2% YoY) and an operating loss of W47.4bn. The operating loss was worse than our forecast and the consensus.  The disappointing earnings were due to: 1) weak top-line growth at hypermarkets/subsidiaries amid COVID-19; and 2) margin erosion in hypermarkets resulting from sales mix deterioration.  On a positive note, SG&A expenses were efficiently managed (flat YoY; vs. +3% YoY in 1Q20).  SSG.com reduced its operating loss to W13.7bn, supported by 1) operating leverage effects from revenue growth and 2) cost reductions.

Opportunities await in 2021 Increasing utilization of offline assets  In 2021, Emart is set to make better use of its offline assets.  Emart’s increasing utilization of offline stores (e.g., the Cheonggyecheon branch) should enhance its delivery service capabilities and efficiency, while improving company-wide EPS.  We expect Emart to convert some of its less profitable stores into core fulfillment centers and incorporate picking and packing (PP) functions into existing stores.

Recommendation and valuation Maintain Buy and TP of W190,000  Emart shares are currently trading at a 3Q20-2Q21F P/E of 14x and a 2021F P/E of 11.6x. These are higher than the levels seen in 2015, a period marked by offline business weakness and low expectations for the online business.  In the near term, the stock’s upside should be limited given the relatively demanding valuation and low expectations for EPS improvement.  That said, we see strong downside support due to a pickup in the hypermarket sector and Emart’s steady market share gains in the hypermarket/online grocery segments.  Despite short-term weakness, we maintain our Buy call on Emart, as the aggressive utilization of offline stores in 2021 should justify its valuation and drive EPS improvements.

Key data Current price (8/13/20, W) 122,500 Market cap (Wbn) 3,415 140 Emart KOSPI OP (20F, Wbn) 161 Shares outstanding (mn) 28 120 Consensus OP (20F, Wbn) 194 Free float (%) 68.2 100 EPS growth (20F, %) 119.1 Foreign ownership (%) 30.0 80 P/E (20F, x) 6.7 Beta (12M) 0.54

60 Market P/E (20F, x) 17.2 52-week low (W) 97,900 8.19 12.19 4.20 8.20 KOSPI 2,437.53 52-week high (W) 134,500

Share performance Earnings and valuation metrics (%) 1M 6M 12M (Dec.) 2016 2017 2018 2019 2020F 2021F Absolute 7.9 8.9 8.9 Revenue (Wbn) 14,615 15,515 17,049 19,063 21,458 22,965 Relative -3.2 -0.2 -14.0 OP (Wbn) 569 585 463 151 161 303 OP margin (%) 3.9 3.8 2.7 0.8 0.8 1.3 NP (Wbn) 376 616 450 234 512 295 EPS (W) 13,497 22,101 16,150 8,391 18,381 10,588 ROE (%) 5.1 7.7 5.5 2.8 5.8 3.3 P/E (x) 13.6 12.3 11.3 15.2 6.7 11.6 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 Notes: Under consolidated K-IFRS; NP is attributable to owners of the parent 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 US. PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES AND DISCLAIMERS IN APPENDIX 1 AT THE END OF REPORT. [Korea] Retail

Hyundai Department Store Buy (069960 KS) (Maintain)

Strong downside support at current share prices TP: W90,000 Upside: 43.5%

Mirae Asset Daewoo Co., Ltd. Myoungjoo Kim [email protected] Minjeong Kyeong [email protected]

2Q20 review Continued weakness due to COVID-19  For 2Q20, Hyundai Department Store (HDS) reported consolidated revenue of W516.6bn (-3.1% YoY) and operating profit of W8.1bn (-84.0% YoY).  The duty-free division posted revenue of W117.2bn (+37.3% YoY) and an operating loss of W18.1bn, missing our estimates and the consensus due to the impact of COVID-19.  The department store division’s gross margin declined due to product mix deterioration (increased sales of luxury goods/home appliances). The fall in operating profit (-62.5% YoY) was sharper than the fall in revenue (-10.3% YoY).  Despite further worsening of market conditions, the duty-free division reduced its operating loss QoQ, supported by: 1) steady growth in large daigou sales; and 2) economies of scale following the addition of the Dongdaemun store (which opened on Feb. 20).

Additional negatives to be 2Q20 marked a bottom limited  The pandemic weighed on HDS’s earnings throughout 1H20.  That said, we believe additional negatives are limited.  Department stores’ monthly same-store sales growth has picked up slightly. We expect HDS to see meaningful top-line growth in 2021, driven by: 1) the rollout of the Parc 1 store; and 2) the growing contribution of outlet sales.  Duty-free stores have been seeing a steady recovery in daily sales.

Recommendation and valuation Maintain Buy and TP of W90,000  Currently trading at a 2020F P/E of 12.7x and 2021F P/E of 6.4x, the stock’s valuation looks undemanding.  We see strong downside support at current share prices, given the near absence of additional negatives other than COVID-19.  All in all, we believe HDS’s stock is more leveraged to tailwinds than headwinds.  Share catalysts: 1) Easing of pandemic concerns and 2) top-line recovery of department stores

Key data Current price (8/13/20, W) 62,700 Market cap (Wbn) 1,467 140 Hyundai Department Store KOSPI OP (20F, Wbn) 155 Shares outstanding (mn) 23 120 Consensus OP (20F, Wbn) 207 Free float (%) 58.3 100 EPS growth (20F, %) -40.6 Foreign ownership (%) 21.8 80 P/E (20F, x) 12.7 Beta (12M) 0.59

60 Market P/E (20F, x) 17.2 52-week low (W) 53,000 8.19 12.19 4.20 8.20 KOSPI 2,437.53 52-week high (W) 90,000

Share performance Earnings and valuation metrics (%) 1M 6M 12M (Dec.) 2016 2017 2018 2019 2020F 2021F Absolute 5.4 -22.7 -11.1 Revenue (Wbn) 1,832 1,848 1,862 2,199 2,245 3,036 Relative -5.5 -29.2 -29.7 OP (Wbn) 383 394 357 292 155 339 OP margin (%) 20.9 21.3 19.2 13.3 6.9 11.2 NP (Wbn) 276 254 239 194 115 231 EPS (W) 11,784 10,841 10,211 8,296 4,926 9,869 ROE (%) 7.7 6.6 5.9 4.6 2.7 5.2 P/E (x) 9.2 9.6 8.9 10.0 12.7 6.4 P/B (x) 0.7 0.6 0.5 0.4 0.3 0.3 Dividend yield (%) 0.6 0.8 1.0 1.2 1.6 1.6 Notes: Under consolidated K-IFRS; NP is attributable to owners of the parent 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 US. PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES AND DISCLAIMERS IN APPENDIX 1 AT THE END OF REPORT. [Korea] Entertainment

D&C Media Buy (263720 KQ) (Maintain)

Riding on Piccoma’s explosive growth TP: W45,000 Upside: 24.8%

Mirae Asset Daewoo Co., Ltd. Jeong-yeob Park [email protected]

2Q20 review Revenue of W14bn (+30.0% YoY) and OP of W3.2bn (+96.9% YoY), surpassing our estimates  For 2Q20, D&C Media posted operating profit of W3.2bn (+96.9% YoY, +18.5% QoQ), driven by robust overseas webtoon revenue.  Overseas webtoon revenue expanded to W4.2bn (+328.8% YoY, +116.7% QoQ), supported by Piccoma’s rapid traffic growth.  OP margin rose to 22.8% (+7.8%p YoY, +1.5%p QoQ) on the back of operating leverage effects from transaction volume growth.

Beneficiary of the rapid growth Piccoma’s robust user traffic and new seasons for key titles  Enhanced earnings power of Japan’s webtoon market  Piccoma and LINE Manga now rank among Japan’s top five grossing apps, having witnessed simultaneous increases in the number of users and ARPU.  In 2Q20, Piccoma‘s revenue (estimated based on ’s results, adjusted for the retroactive reflection of K-IFRS accounting changes) and downloads expanded 211.8% and 118.2% YoY, respectively.  We believe Japan’s webtoon market will continue to expand, spurred by the overhaul of rival service LINE Manga and promotions by Piccoma.  Korean webtoons make up less than 5% of Piccoma’s content but generate 40% of transaction volume, underscoring their far-reaching power.  Season two of Solo Leveling was published on Aug. 1. Given the time lag, season two will be published in Japan without a break.  Meanwhile, the resumption of another popular series (Daughter of the Emperor) in August and the release of a number of new titles should also contribute to earnings in 2H20.

Enhanced earnings power Maintain Buy and TP of W45,000  Our target price is based on a P/E of 35x and our 12-month forward net profit estimate of W15.6bn. For reference, China Literature, China’s top web novel platform/content provider, has traded at a P/E of 40-70x since service monetization.  We expect the rapid expansion of Japan’s webtoon market to enhance D&C Media’s earnings power. Meanwhile, IPO expectations for e-book platform operators (KakaoPage/Kakao Japan, Webtoon Entertainment, Ridibooks, etc.) should help drive a re-rating in D&C Media’s shares.  Additional growth drivers: 1) Kakao’s global expansion (China, Taiwan, Thailand, and the US); and 2) increased utilization of story IP (dramas, games, etc.)

Key data Current price (8/13/20, W) 36,050 Market cap (Wbn) 443 310 D&C Media KOSDAQ OP (20F, Wbn) 14 Shares outstanding (mn) 12 260

210 Consensus OP (20F, Wbn) 13 Free float (%) 46.6

160 EPS growth (20F, %) 137.8 Foreign ownership (%) 4.5

110 P/E (20F, x) 37.7 Beta (12M) 0.83

60 Market P/E (20F, x) 17.2 52-week low (W) 12,850 8.19 12.19 4.20 8.20 KOSDAQ 854.77 52-week high (W) 38,150

Share performance Earnings and valuation metrics (%) 1M 6M 12M (Dec.) 2016 2017 2018 2019 2020F 2021F Absolute 7.3 56.1 162.2 Revenue (Wbn) 0 27 32 42 61 93 Relative -1.9 25.5 81.2 OP (Wbn) 0 5 6 8 14 24 OP margin (%) - 18.5 18.8 19.0 23.0 25.8 NP (Wbn) 0 5 5 5 12 20 EPS (W) 0 442 408 403 957 1,609 ROE (%) 0.0 14.2 14.4 12.4 24.8 31.4 P/E (x) - 16.0 34.6 48.3 37.7 22.4 P/B (x) - 2.6 4.6 5.6 8.2 6.0 Dividend yield (%) - 0.0 0.0 0.0 0.0 0.0 Notes: Under consolidated K-IFRS; NP is attributable to owners of the parent 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 US. PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES AND DISCLAIMERS IN APPENDIX 1 AT THE END OF REPORT.