August 22, 2012 KOREA Morning Company News & Analysis Major Indices Close Chg Chg (%) KOSPI 1,943.22 -3.09 -0.16 Sungwoo Hitech (Buy/TP: W19,300) KOSPI 200 257.50 -0.53 -0.21 Turning into a major player KOSDAQ 491.72 1.59 0.32 Turnover ('000 shares, Wbn) Volume Value KOSPI 402,268 3,724 KOSPI 200 66,056 2,880 KOSDAQ 568,727 2,012 Market Cap (Wbn) Value KOSPI 1,119,966 KOSDAQ 107,273 KOSPI Turnover (Wbn) Buy Sell Net Foreign 904 660 244 Institutional 987 1,038 -51 Retail 1,813 1,999 -185 KOSDAQ Turnover (Wbn) Buy Sell Net Foreign 59 58 0 Institutional 85 96 -11 Retail 1,869 1,856 13 Program Buy / Sell (Wbn) Buy Sell Net KOSPI 904 387 517 KOSDAQ 12 10 2 Advances & Declines Advances Declines Unchanged KOSPI 374 450 77 KOSDAQ 446 461 94 KOSPI Top 5 Most Active Stocks by Value (Wbn) Price (W) Chg (W) Value Samsung Electronics 1,282,000 -1,000 396 KODEX LEVERAGE 12,500 -45 268 Hynix 23,100 550 211 KODEX INVERSE 7,555 15 130 SunnyElec 9,400 750 96 KOSDAQ Top 5 Most Active Stocks by Value (Wbn) Price (W) Chg (W) Value Medipost 113,400 7,100 78 Agabang 13,800 100 44 Barunson 4,965 565 34 KOREA COMPUTER 2,610 155 29 INC ASIA TECHNOLOGY 3,645 50 29 Note: As of August 21, 2012 This document is a summary of a report prepared by Daewoo Securities Co., Ltd. („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. 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. 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. Company August 22, 2012 Auto parts Sungwoo Hitech (015750 KQ) Daewoo Securities Co., Ltd. Michael Yun Turning into a major player +822-768-4169 [email protected] Maintain Buy rating with TP of W19,300 Young-ho Park +822-768-3033 We maintain our Buy rating on Sungwoo Hitech with a 12-month target price of [email protected] W19,300. We have raised our 2012 and 2013 EPS estimates (including equity- method gains but excluding one-off items) by 5.8% and 1.8%, respectively, to reflect our adjustments to our F/X assumptions. However, although we revised up our EPS forecasts, we are not raising our target Buy (Maintain) price. Indeed, we applied an additional discount to our valuation in light of the Target Price (12M, W) 19,300 continuing rise of the companyÊs consolidated net debt (from W443bn in 2010 to Share Price (08/21/12, W) 13,800 W630bn in 2011; rising further in 2012) owing to increasing investments and an Expected Return (%) 39.9 M&A deal. EPS Growth (12F, %) 28.3 Market EPS Growth (12F, %) 13.6 2Q Review: Adjusted NP missed our estimate due to FX-related losses P/E (12F, x) 10.5 Market P/E (12F, x) 10.2 Sungwoo HitechÊs 2Q non-consolidated revenues and operating profit came in at KOSDAQ 491.72 W257bn and W6.6bn, respectively. If we strip away non-operating F/X-related Market Cap (Wbn) 690 losses, the companyÊs operating profit would have reached W10.6bn on an OP Shares Outstanding (mn) 50 margin of around 4% (up 0.8%p QoQ). In addition, Sungwoo HitechÊs dividends Avg Trading Volume (60D, '000) 400 from overseas operations, which were worth about W30bn, will be recognized in Avg Trading Value (60D, Wbn) 5 3Q12, rather than in 2Q12. It should be noted that, last year, dividends from Dividend Yield (12F, %) 1.8 Sungwoo HitechÊs overseas operations were recognized in 2Q. Free Float (%) 54.1 52-Week Low (W) 11,300 Meanwhile, Sungwoo HitechÊs equity-method gains came in at W42.4bn in 2Q, 52-Week High (W) 22,850 including a one-time gain of W29.9bn from its acquisition of the German auto parts Beta (12M, Daily Rate of Return) 1.25 maker WMU (during the M&A process, WMUÊs debt write-off was realized as a Price Return Volatility (12M Daily, %, SD) 3.3 Foreign Ownership (%) 17.2 one-time gain). However, if we exclude this one-off factor, Sungwoo HitechÊs Major Shareholder(s) adjusted net profit would have come in slightly below our estimate due to F/X- Lee Myung Keun et al. (45.95%) related losses at the Czech and Russian plants. NORGES BANK(5.13%) 2012 Adjusted NP to increase by 131% to W118bn Price Performance We forecast Sungwoo HitechÊs 2012 adjusted net profit (excluding one-time gains) (%) 1M 6M 12M Absolute 8.7 -3.2 1.4 to increase by 131% YoY to W118bn. We forecast that Sungwoo HitechÊs Czech Relative 2.1 0.8 -10.0 plantÊs operations will recover as F/X volatility becomes less pronounced. Also, Key Business WMU will expand its product lineup to include modules and diversify its customer - Manufactures automobile body parts base to include additional global OEMs. In the long term, these factors will become - Supplies components to HMC and Kia growth momentum drivers for Sungwoo Hitech. Share price FY Revenues OP OP Margin NP EPS EBITDA FCF ROE P/E P/B EV/EBITDA 140 KOSDAQ (Wbn) (Wbn) (%) (Wbn) (Won) (Wbn) (Wbn) (%) (X) (X) (X) 120 12/10 770 31 4.0 66 1,316 62 -76 16.4 8.3 1.2 12.3 12/11 932 18 2.0 51 1,022 56 -184 10.8 13.6 1.4 20.0 100 12/12F 1,046 29 2.8 66 1,311 76 17 12.4 10.5 1.2 14.8 80 12/13F 1,087 28 2.6 70 1,403 73 -23 12.0 9.8 1.1 15.8 60 12/14F 1,179 28 2.3 75 1,503 75 12 11.6 9.2 1.0 15.5 8/11 12/11 4/12 8/12 Notes: 2009~2010 figures are based on K-GAAP; 2011~2013F figures are based on non-consolidated K-IFRS Source: Company data, KDB Daewoo Securities Research estimates This document is a summary of a report prepared by Daewoo Securities Co., Ltd. („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. 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. 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. Market Data August 22, 2012 ※All data as of close August 21, 2012, unless otherwise noted. Other Major Indices Economic Indicators Close Net Chg 1D (%) YTD (%) Close 1D ago 1M ago 1Y ago MSCI Korea* 393.48 -1.04 -0.26 9.85 USD/KRW 1,135.50 1,133.30 1,138.60 1,072.30 KOSPI 1,943.22 -3.09 -0.16 6.40 JPY100/KRW 1,430.10 1,425.18 1,446.30 1,398.77 KOSDAQ 491.72 1.59 0.32 -2.97 EUR/KRW 1,402.80 1,398.21 1,397.80 1,534.68 Dow Jones* 13,271.64 -3.56 -0.03 8.63 3Y Treasury 2.90 2.95 2.88 3.49 S&P 500* 1,418.13 -0.03 0.00 11.05 3Y Corporate 3.47 3.54 3.47 4.22 NASDAQ* 3,076.21 -0.38 -0.01 16.14 DDR2 1Gb* 1.21 1.21 1.24 1.03 Philadelphia Semicon* 402.29 -2.85 -0.70 9.14 NAND 16Gb* 1.82 1.82 1.90 2.76 FTSE 100* 5,824.37 -28.05 -0.48 2.18 Oil (Dubai)*(08.17) 110.67 111.29 100.86 104.95 Nikkei 225 9,156.92 -14.24 -0.16 6.97 Gold* 1,620.10 1,616.30 1,582.80 1,848.90 Hang Seng* 20,104.27 -11.80 -0.06 6.50 Customer deposits (Wbn)* 18,373 18,262 16,106 20,992 Taiwan (Weighted) 7,506.81 74.90 1.01 7.98 Equity type BC (Wbn)(Aug. 17) 99,566 99,678 99,388 101,981 Note: * as of August 20, 2012 Source: KSDA, FnGuide, DRAMeXchange, MSCI KOSPI Top 10 Foreign Net Buy / Net Sell (Wbn) KOSPI Top 10 Institutional Net Buy / Net Sell (Wbn) Net Buy Net Sell Net Buy Net Sell Samsung Electronics 26.43 Orion 9.23 Hynix 19.95 Honam Petrochemical 21.85 Kia Motors 23.81 Glovis 7.58 NHN 12.31 LG Chem 21.69 Hyundai Heavy Industries 22.76 KODEX INVERSE 3.80 Orion 12.09 SK Energy 16.18 SK Energy 19.80 emart 3.52 KT 10.14 LG Display 15.88 Hyundai Motor 16.98 Samsung Corp.