(13 KS) Fashion business undergoing growing pains Technology Results Comment July 31, 213 (Maintain) Buy Target Price (12M, W) 12, Share Price (7/3/13, W) 87,1 Expected Return 38% OP (13F, Wbn) 33 Consensus OP (13F, Wbn) 378 EPS Growth (13F, %) 21. Market EPS Growth (13F, %) 17.7 P/E (13F, x) 18.1 Market P/E (13F, x) 9.4 KOSPI 1,917. Market Cap (Wbn) 4,67 Shares Outstanding (mn) 2 Free Float (%) 86.7 Foreign Ownership (%) 23.1 Beta (12M).7 2-Week Low (W) 82,1 2-Week High (W) 18, (%) 1M 6M 12M Absolute -2.8-2.1-9.4 Relative -.7.3-13.3 12 11 1 9 8 7 Share price KOSPI 7/12 11/12 3/13 7/13 What s new: 2Q results disappoint, hurt by weakness in fashion For 2Q, revenue and operating profit came in at W1.6tr (+8% YoY) and W72.7bn (-34% YoY), respectively. Operating profit widely missed the market consensus (W92bn), primarily due to sluggishness in the fashion unit. Despite new brand launches driving a 7% YoY growth in revenue, the fashion unit posted an operating loss, as a result of: 1) increased discount sales amid weak consumer spending, and 2) higher expenses from more store openings. That said, losses from the firm s brand 8Seconds seem to be narrowing, and inventory levels (a major drag on fashion earnings) are also declining. Electronic materials and chemicals earnings were largely in line with expectations. At the electronic materials unit, operating profit jumped 1% QoQ, and OP margin recovered to double-digit levels (12.4%), aided by a swing to profit in polarizers and increased revenue from semiconductor materials. The chemicals division saw a QoQ margin increase, as the releases of new models by the firm s customers drove stronger shipments and an improved product mix. Catalysts: should normalize in 214 We see two positive catalysts in 2H: 1) continued polarizer margin gains, and 2) progress in OLED materials. We believe polarizer OP margin stood at 3.% in 2Q, exceeding our original estimate of 2.2% thanks to higher utilization (from increased shipments for TVs) and yen depreciation. In 2H, we expect revenue growth in both TV- and tablet-use polarizers to improve margins further. Cheil is also likely to broaden its OLED portfolio in 2H beyond ETL. We believe there is a significant chance that Samsung, at the group level, will acquire the German OLED materials supplier Novaled, a move that should facilitate the group s vertical integration of OLED materials. In 214, we expect earnings to improve on the continued growth of electronic materials and the normalization of chemicals and fashion earnings. For the electronic materials unit, revenue from high-margin semiconductor patterning materials should expand after stalling this year, as we expect demand will be boosted by Samsung Electronics operation of a new NAND fab in China and Line 17 in Hwaseong. The chemicals and fashion units, which are likely to post negative operating profit growth this year, should also get back on track in 214. Both units are offsetting the current robust growth of electronic materials. This suggests their normalization alone will substantially contribute to the firm s overall earnings growth. We expect chemicals earnings to gain from capacity expansion and a better product mix. The fashion unit will likely be supported by leaner inventories and the turnaround of new brands. Valuation: 12-month forward P/E near bottom; Retain TP of W12, We maintain our Buy call on with a target price of W12,. The firm s lagging fashion business is indeed weakening the earnings outlook, but the unit is likely to normalize once the economy picks up. Currently, the stock is trading at a 12-month forward P/E of 14x, which is at the lower end of its five-year historical band. We recommend a bullish stance on the stock, given the structural growth of the electronic materials business and subsequent margin gains. Daewoo Securities Co., Ltd. Electronic materials Will Cho +822-768-436 will.cho@dwsec.com FY (Dec.) 12/1 12/11 12/12 12/13F 12/14F 12/1F Revenue (Wbn),113,81 6,1 6,744 7,94 8,87 OP (Wbn) 33 223 322 33 48 66 OP Margin (%) 6. 4..4 4.9 6. 6.4 NP (Wbn) 279 29 29 23 377 432 EPS (W),73,79 3,979 4,816 7,189 8,231 ROE (%) 11.8 8.7 6. 8. 12.7 14.9 P/E (x) 19.9 19.9 23.7 18.1 12.1 1.6 P/B (x) 2. 1.9 1.7 1.8 1.9 1.9 Notes: All figures are based on consolidated K-IFRS; NP refers to net profit attributable to controlling interests Source: Company data, estimates PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES & DISCLAIMERS BEGINNING ON PAGE 8.
July 31, 213 Table 1. 2Q13P results (Wbn, %) 2Q12 1Q13 2Q13P Growth Preliminary KDB Daewoo Consensus YoY QoQ Revenues 1,13. 1,23. 1,628.1 1,61.8 1,648. 7.6 6.9 Operating profit 11. 72.1 72.7 87.3 92.1-33.9.9 OP margin 7.3 4.7 4..4.6 - - Pretax profit 8.9 93.7 66.1 8.1 8. -23.1-29. Net profit 68.4 67.4 2.9 64.1 63. -22.7-21. Note: All figures are based on consolidated K-IFRS Source: Company data, estimates Table 2. Quarterly and annual earnings (Wbn, %) 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13P 3Q13F 4Q13F 212 213F 214F 21F Revenue 1,429 1,13 1,488 1,81 1,23 1,628 1,729 1,864 6,1 6,744 7,94 8,87 Chemicals 613 676 732 64 642 731 86 76 2,666 2,94 3,68 4,41 Electronic materials 376 47 38 41 387 434 493 493 1,69 1,87 2,17 2,391 Fashion 429 416 37 23 481 447 414 97 1,72 1,939 2,161 2,384 Other 1 14 14 12 13 16 16 13 8 9 9 Revenue contribution 1. 1. 1. 1. 1. 1. 1. 1. 1. 1. 1. 1. Chemicals 42.9 44.7 49.2 4.8 42.2 44.9 46.6 4.8 44.4 43.6 44.9 4. Electronic materials 26.3 26.9 2.9 2.3 2.4 26.7 28. 26.4 26.1 26.8 27.1 26.9 Fashion 3.1 27. 24. 33.1 31.6 27.4 24. 32.1 28.7 28.7 27.2 26.9 Other.7.9.9.7.9 1..9.7.8.9.7.7 Operating profit 72 11 64 7 72 73 87 98 322 33 48 66 Chemicals 19 3 31 13 23 3 14 89 79 126 16 Electronic materials 28 63 36 39 36 4 67 9 167 21 288 324 Fashion 26 12-3 31 22-6 -1 2 6 32 6 86 OP contribution 1. 1. 1. 1. 1. 1. 1. 1. 1. 1. 1. 1. Chemicals 2.8 31.6 48. 6.8 18.1 31. 34. 13.8 27.7 24. 26.2 27.6 Electronic materials 39. 7.2 6. 2.3 49.4 73.9 76.6 6.2 1.8 6.2 6.1 7.2 Fashion 3.2 1.9 -.1 41.1 3.1-7.6-11.1 2.9 2.2 9.7 13.6 1.2 OP margin.1 7.3 4.3 4.8 4.7 4...2.4 4.9 6. 6.4 Chemicals 3..1 4.2.8 2. 3.1 3.7 1.8 3.3 2.7 3. 3.9 Electronic materials 7. 1. 9.4 9.8 9.2 12.4 13. 12. 1.6 11.9 13.4 13. Fashion.9 2.9 -.9.9 4. -1.2-2.3 4.2 3.8 1.6 3. 3.6 Pretax profit 84 86 66 7 94 66 78 9 293 327 477 46 Net profit 64 68 4 36 67 3 62 7 29 22 377 432 Pretax margin.9.7 4. 3.6 6.2 4.1 4. 4.8 4.9 4.9 6. 6.2 Net margin 4. 4. 2.7 2.3 4.4 3.2 3.6 3.8 3. 3.7 4.7 4.9 Growth (QoQ/YoY) Revenue 3.3.9-1.7 6.3-3.7 6.9 6.2 7.8 7.7 12.2 17.8 11.7 Chemicals 11.3 1.2 8.3-11.8 -. 13.8 1.2 -.6 1.4 1.3 21.4 13.3 Electronic materials 3.9 8.4 -.4 4. -3.4 12.2 13.6 -.1 1.4 1.2 19.3 1.9 Fashion -.4-3.2-14.1 46. -8.1-7.1-7.2 44.1 13.4 12.4 11. 1.3 Other -39.9 37. -4.2-16.1 13.9 2.2-4.2-16.1-48.8 17..8.8 Operating profit 34.6 1.9-41.7 17.4-4.2.8 2.1 12.1 44.6 2. 4.4 18. Chemicals 663.3 86. -11. -83.4 1.3 72.9 33.6 -.1 7.7-11.2 8.8 24. Electronic materials -4.3 122.9-42.4 8. -9.4.6 24. -11.8 63.3 29. 34.1 12.2 Fashion 9. -2.9 TTR TTB -29.7 TTR RR TTB -2.2-1. 1.1 31.6 Pretax profit 171.1 2.7-22.8-13.6 63.8-29. 17.7 1.2 6.3 11.7 4.8 14. Net profit 9.2 6.2-4.8-11.9 89.1-21. 17.7 12.4-19.4 2.9 49.3 14. Note: All figures are based on consolidated K-IFRS; TTB stands for turn to black, TTR stands for turning to red and RR stands for remaining red Source: Company data, estimates; 2
July 31, 213 Table 3. Analysis of key earnings catalysts Semi. 1H13 2H13 214 Catalysts - SEC's DRAM capacity reduction - Limited capacity expansion by SEC - New capacity to come on stream - Acceleration of process migration EM Polarizer Catalysts - TV-use polarizers to begin to ship - Weak JPY - Sales growth of TV- and tablet-use polarizers OLED Catalysts - Approval of ETL/HTL from SDC - Start of ETL supply to SDC - Purchase of Novaled - Start of HTL supply to SDC - Expansion of product portfolio - SEC's OLED TV prod. to ramp up Chemical Catalysts - Product mix improvement - Decrease in feedstock prices - Rise in high-margin EP proportion - Application expansion to auto parts Fashion Catalysts - Weak apparel spending - Expenses related to store expansion - Weak apparel spending to continue - Weak seasonality - Reductions in marketing spend and inventories - Turnaround of newly-launched brands 3
July 31, 213 Figure 1. 2Q13P OP by division Figure 2. Apparel spending growth (Wbn) 1 Fashion Chemicals Electronic materials W87bn (%, YoY) 1 Department store Discount store 8 W72bn 1 6 4 4 2 23 9 KDB Daewoo estimates 23-6 Actual - 1Q9 1Q1 1Q11 1Q12 1Q13-2 -1 Source: Ministry of Trade, Industry & Energy, Figure 3. Quarterly polarizer OP Figure 4. Semiconductor materials OP and OP contribution (Wbn) 1 TV-use and tablet-use polarizers to kick in, utilization rate to rise, weak JPY (Wbn) (%) 6 Semiconductor OP (L) 6 Total OP (L) Semiconductor contribution (R) 4 4-1Q7 1Q8 1Q9 1Q1 1Q11 1Q12 1Q13 1Q14F 3 3-1 2 2-1 -2 Slowdown of LCD industries, strong W/JPY, delays to development of TV-use polarizers 1 7 9 11 13F 1F 1 Figure. OLED materials revenue; M/S within Samsung Display Figure 6. OLED materials revenue (Wbn) (%) 7 Cheil's OLED materials sales (L) 4 6 SDC's OLED materials purchases (L) 3 Cheil's M/S within SDC (R) 3 2 4 2 3 1 2 1 1 (Wbn) 2 2 1 1 EML ETL HTL 1 11 12 13F 14F 1F 1 11 12 13F 14F 1F 4
July 31, 213 Table 4. forecast revisions (Wbn, %) Previous Revised % chg. 213F 214F 21F 213F 214F 21F 213F 214F 21F Revenue 6,628 7,744 8,619 6,744 7,94 8,87 1.7 2.6 3. - Downward revision to profitability of the fashion div. Operating Profit 374 41 99 33 48 66-11.7-11.3 -. Pretax profit 37 34 77 327 477 46-12.7-1.6 -.3 Net profit 29 422 46 22 377 432-13. -1.6 -.3 EPS (W),38 8,42 8,692 4,816 7,189 8,231-13. -1.6 -.3 OP margin.6 7. 6.9 4.9 6. 6.4 - - - Net margin 4.4.4.3 3.7 4.7 4.9 - - - Note: All figures are based on consolidated K-IFRS estimates Notes Table. Calculation of target price (sum-of-the-parts methodology) (Wbn, %) 12M FWD EBITDA Target EV/EBITDA Fair value Notes Chemicals 29 6.8 1,416 - Average EV/EBITDA of peers Electronic materials 3 11.9 4,247-3% premium to average EV/EBITDA of peers Fashion 19 6.4 69-3% discount to average EV/EBITDA of peers Operating value (1) 6,38 Investment asset value (2) 68 - Value of stakes in affiliated companies Net debt (3) 1,12 - End-213 estimate Equity value (1) + (2) (3) 6,4 No. of shares ('),3 - Excluding treasury shares Fair price (W) 118,828 Target price (W) 12, Current price (W) 87,1 - Closing price as of July 3, 213 Upside potential (%) 37.8% estimates Table 6. Valuation comparison of global peers (Wbn, %, x) Mkt cap Revenue OP NP ROE P/E P/B EV/EBITDA 13F 14F 13F 14F 13F 14F 13F 14F 13F 14F 13F 14F 13F 14F 4,67 6,691 7,488 388 48 294 374 8.7 1. 1.4 12.1 1.4 1.2 9.1 7.7 LG Chem 19,119 23,892 2,442 1,988 2,336 1,48 1,822 13.8 14.3 13. 11.1 1.7 1. 7. 6.1 Lotte Chemical,827 16,29 16,41 13 686 47 2 6.7 8.2 14.2 1.4.9.8 7..9 Hanwha Chemical 2,63 7,4 8,43 16 283 126 217 2.2 4.2 21.4 12.1.6.6 14.6 11.8 BASF 91,22 19,98 1,962 1,679 11,797 6,718 7,327 19.1 18.9 12.2 11.2 2.3 2.2 7.3 6.8 Dow Chemical 47,217 63,836 66,34 6,21 6,747 3,62 3,7 13.8 1.2 14.8 12.1 2. 1.9 7.4 6.8 Chemicals avg. 11.1 12.1 1.1 11.4 1. 1.4 8.7 7. OCIM 392 2 294 4 6 29 38 8. 1.1 13.4 1.2 1.1 1. 4.6 4.3 Duksan Hi-Metal 711 161 28 4 8 47 9 22.4 22.6 14.9 11.8 3.1 2.4 12.6 9.8 Soulbrain 741 687 763 116 129 8 97 23.1 21.3 8.6 7.6 1.8 1..4 4.8 Iljin Materials 63 27 46 8 13 11 2.7 7.6 41. 24.9 2.2 2.1 22.4 19.2 Hansol Chemical 291 39 37 34 38 28 29 18.1 19.1 1.2 1. 1.8 1.8 8. 7.3 ENF Technology 14 23 329 1 27 11 21 11. 18.1 13. 6.9 1.3 1.1 7. 4.6 DuPont 9,261 4,139 42,847,86 6,4 3,791 4,329 31. 27.6 1.1 13.4 4. 3.4 9.1 8.3 UDC 1,11 132 197 29 8 27 62 8. 16.6 49.2 22.7 3.8 3.2 27.1 12. JSR 4,91 4,64 4,91 49 8 368 411 1.1 1.7 13.3 11.8 1.3 1.2.4 4.9 Furukawa 1,923 1,42 9,7 297 322 72 169 4.9 9.7 26.6 11.3 1..9 9.1 9.3 Shin-Etsu Chemical 3,33 12,68 13,326 2,231 2,479 1,7 1,667 8.1 8.7 19.7 17.8 1.6 1. 7.9 7.2 Sumitomo Chemical 6,27 2,91 26,41 1,9 1,16 32 6.6 9.7 18.7 11.1 1.1 1. 9. 8.4 Electronic materials avg. 13. 1.2 2.4 13.3 2. 1.8 1.7 8.4 LG Fashion 88 1,6 1,628 11 122 87 12 9. 1.2 9.3 7.9.8.8 4.4 3.9 Handsome 681 1 6 81 94 69 79 9.8 1.3 9.7 8.4.9.8.8. Gap 23,917 18,18 19,73 2,373 2,98 1,433 1,62 38. 36.7 16.8 1.1.8 4.8 8.1 7.4 Ralph Lauren 18,432 8,266 8,932 1,338 1,2 94 1,1 2.1 22.8 2. 17.9 4.2 3.9 1.6 9.4 Inditex 93,772 2,661 28,468 4,968,76 3,831 4,36 28.1 27.9 24.2 21.6 6.7.9 14. 12. H&M 68,31 22,28 24,426 3,778 4,268 2,971 3,32 38. 41.2 23.3 2.6 8.9 8.1 1. 13.3 Fashion avg. 24.1 24.8 17.3 1.3 4.6 4. 9.6 8.6 Source: Bloomberg, estimates
July 31, 213 Figure 7. 12-month forward P/E band (W) 2, 16, 26.x 22.x 18.x 12, 8, 4, 14.x 1.x 6.x 2 4 6 8 1 12 14F Figure 8. 12-month forward P/E trend (x) 3 3 Valuation premium on OLED materials to decrease 2 2 Five-year average: 17.7x 1 1 Currently trading at 14x 4 6 7 8 9 1 11 12 13 6
July 31, 213 (13 KS/Buy/TP: W12,) Comprehensive Income Statement (Summarized) Statement of Financial Condition (Summarized) (Wbn) 12/12 12/13F 12/14F 12/1F (Wbn) 12/12 12/13F 12/14F 12/1F Revenue 6,1 6,744 7,94 8,87 Current Assets 1,837 2,239 2,66 2,962 Cost of Sales 4,1 4,768,668 6,33 Cash and Cash Equivalents 114 16 174 23 Gross Profit 1,8 1,976 2,277 2,4 AR & Other Receivables 679 84 1,72 1,191 SG&A Expenses 1,33 1,648 1,797 1,98 Inventories 99 1,72 1,238 1,377 Operating Profit (Adj) 322 328 48 66 Other Current Assets 12 12 138 14 Operating Profit 322 33 48 66 Non-Current Assets 3,82 3,69 3,87 4,67 Non-Operating Profit -29-3 -3-2 Investments in Associates 99 97 9 93 Net Financial Income 33 37 47 47 Property, Plant and Equipment 1,696 1,947 2,78 2,227 Net Gain from Inv in Associates -1-2 -2-2 Intangible Assets 463 1 34 62 Pretax Profit 293 327 477 46 Total Assets,419,934 6,34 7,29 Income Tax 84 7 1-11 Current Liabilities 1,4 1,18 1,23 1,32 Profit from Continuing Operations 29 23 377 432 AP & Other Payables 2 613 78 787 Profit from Discontinued Operations Short-Term Financial Liabilities 38 424 374 324 Net Profit 29 23 377 432 Other Current Liabilities 126 149 172 191 Controlling Interests 29 23 377 432 Non-Current Liabilities 1,17 1,719 2,33 2,848 Non-Controlling Interests Long-Term Financial Liabilities 912 1,23 1,47 1,26 Total Comprehensive Profit 76-189 -6-1 Other Non-Current Liabilities 29 441 84 1,2 Controlling Interests 76-189 -6-1 Total Liabilities 2,161 2,94 3,67 4,1 Non-Controlling Interests Controlling Interests 3,24 3,27 2,924 2,876 EBITDA 3 8 769 887 Capital Stock 262 262 262 262 FCF (Free Cash Flow) -39-273 -93 8 Capital Surplus 72 72 72 72 EBITDA Margin (%) 8.8 8.7 9.7 1. Retained 1,38 1,73 2,92 2,48 Operating Profit Margin (%).4 4.9 6. 6.4 Non-Controlling Interests 3 3 3 3 Net Profit Margin (%) 3. 3.7 4.7 4.9 Stockholders' Equity 3,27 3,3 2,927 2,879 Cash Flows (Summarized) Forecasts/Valuations (Summarized) (Wbn) 12/12 12/13F 12/14F 12/1F 12/12 12/13F 12/14F 12/1F Cash Flows from Op Activities 139 24 37 94 P/E (x) 23.7 18.1 12.1 1.6 Net Profit 29 23 377 432 P/CF (x) 11.8 9. 6.9 6.1 Non-Cash Income and Expense 368 3 392 4 P/B (x) 1.7 1.8 1.9 1.9 Depreciation 199 242 269 297 EV/EBITDA (x) 11. 1.4 8.1 7.1 Amortization 9 1 2 24 EPS (W) 3,979 4,816 7,189 8,231 Others -77 8 6 39 CFPS (W) 7,98 9,78 12,698 14,32 Chg in Working Capital -392-31 -298-179 BPS (W) 4,17 49,12 46,14 4,1 Chg in AR & Other Receivables -162-23 -226-12 DPS (W) 7 7 7 7 Chg in Inventories -171-16 -166-139 Payout ratio (%) 18.2 1. 1.1 8.8 Chg in AP & Other Payables 3 113 9 79 Dividend Yield (%).8.9.9.9 Income Tax Paid -47-2 -1-11 Revenue Growth (%) 7.7 12.2 17.8 11.7 Cash Flows from Inv Activities -49-36 -443-484 EBITDA Growth (%) 38.1 1.2 31. 1.4 Chg in PP&E -48-48 -4-447 Operating Profit Growth (%) 44.6 2.6 4.4 18. Chg in Intangible Assets -37-2 -2-2 EPS Growth (%) -21.7 21.1 49.3 14. Chg in Financial Assets -34-7 Accounts Receivable Turnover (x) 1.8 9.6 8.9 8.4 Others 2 8 1 1 Inventory Turnover (x) 7.3 6.8 6.9 6.8 Cash Flows from Fin Activities 338 332 82-8 Accounts Payable Turnover (x) 11.9 11.9 12. 11.9 Chg in Financial Liabilities 42-138 -1-1 ROA (%) 4. 4. 6.1 6.4 Chg in Equity ROE (%) 6. 8. 12.7 14.9 Dividends Paid -38-38 -38-38 ROIC (%) 7.6 7.2 9.3 1. Others -4-49 -6-62 Liability to Equity Ratio (%) 66.3 9.8 123.2 144.1 Increase (Decrease) in Cash 17 2 9 29 Current Ratio (%) 183. 188.9 212.2 227.6 Beginning Balance 96 114 16 174 Net Debt to Equity Ratio (%) 34. 47.9.3.9 Ending Balance 114 16 174 23 Interest Coverage Ratio (x) 8.1 7.1 8. 9.1 Source: Company data, estimates 7
July 31, 213 Important Disclosures & Disclaimers Disclosures As of the publication date, Daewoo Securities Co., Ltd. has acted as a liquidity provider for equity-linked warrants backed by shares of as an underlying asset, and other than this, Daewoo Securities has no other special interests in the covered companies. As of the publication date, Daewoo Securities Co., Ltd. issued equity-linked warrants with as an underlying asset, and other than this, Daewoo Securities has no other special interests in the covered companies. (W) 2, 1, 1,, 8/11 1/12 7/12 1/13 7/13 Stock Ratings Industry Ratings Buy Relative performance of 2% or greater Overweight Fundamentals are favorable or improving Trading Buy Relative performance of 1% or greater, but with volatility Neutral Fundamentals are steady without any material changes Hold Relative performance of -1% and 1% Underweight Fundamentals are unfavorable or worsening Sell Relative performance of -1% * 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 Daewoo Securities, 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. 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 and regulations thereof. Opinions expressed in this publication about the subject securities and companies accurately reflect the personal views of the Analysts primarily responsible for this report. Daewoo Securities Co., Ltd. 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. No part of the compensation of the Analysts was, is, or will be directly or indirectly related to the specific recommendations or views contained in this report but, like all employees of Daewoo Securities, the Analysts receive compensation that is impacted 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 Daewoo Securities Co., Ltd. except as otherwise stated herein. Disclaimers This report is published by Daewoo Securities Co., Ltd. ( Daewoo ), a broker-dealer registered in the Republic of Korea and a member of the Korea Exchange. Information and opinions contained herein have been compiled from sources believed to be reliable and in good faith, but such information has not been independently verified and Daewoo makes no guarantee, representation or warranty, express or implied, as to the fairness, accuracy, completeness or correctness of the information and opinions contained herein or of any translation into English from the Korean language. If this report is an English translation of a report prepared in the Korean language, the original Korean language report may have been made available to investors in advance of this report. Daewoo, its affiliates and their directors, officers, employees and agents do not accept any liability for any loss arising from the use hereof. This report is for general information purposes only and it is not and should not be construed as an offer or a solicitation of an offer to effect transactions in any securities or other financial instruments. The intended recipients of this report are sophisticated institutional investors who have substantial knowledge of the local business environment, its common practices, laws and accounting principles and no person whose receipt or use of this report would violate any laws and regulations or subject Daewoo and its affiliates to registration or licensing requirements in any jurisdiction should receive or make any use hereof. Information and opinions contained herein are subject to change without notice and no part of this document may be copied or reproduced in any manner or form or redistributed or published, in whole or in part, without the prior written consent of Daewoo. Daewoo, its affiliates and their directors, officers, employees and agents may have long or short positions in any of the subject securities at any time and may make a purchase or sale, or offer to make a purchase or sale, of any such securities or other financial instruments from time to time in the open market or otherwise, in each case either as principals or agents. Daewoo and its affiliates may have had, or may be expecting to enter into, business relationships with the subject companies to provide investment banking, market-making or other financial services as are permitted under applicable laws and regulations. The price and value of the investments referred to in this report and the income from them may go down as well as up, and investors may realize losses on any investments. Past performance is not a guide to future performance. Future returns are not guaranteed, and a loss of original capital may occur. 8
July 31, 213 Distribution United Kingdom: This report is being distributed by Daewoo Securities (Europe) Ltd. in the United Kingdom only to (i) investment professionals falling within Article 19() of the Financial Services and Markets Act 2 (Financial Promotion) Order 2 (the Order ), and (ii) high net worth companies and other persons to whom it may lawfully be communicated, falling within Article 49(2)(A) to (E) of the Order (all such persons together being referred to as Relevant Persons ). This report is directed only at Relevant Persons. Any person who is not a Relevant Person should not act or rely on this report or any of its contents. United States: This report is distributed in the U.S. by Daewoo Securities (America) Inc., a member of FINRA/SIPC, and is only intended for major institutional investors as defined in Rule 1a-6(b)(4) under the U.S. Securities Exchange Act of 1934. All U.S. persons that receive this document by their acceptance thereof represent and warrant that they are a major institutional investor and have not received this report under any express or implied understanding that they will direct commission income to Daewoo or its affiliates. Any U.S. recipient of this document wishing to effect a transaction in any securities discussed herein should contact and place orders with Daewoo Securities (America) Inc., which accepts responsibility for the contents of this report in the U.S. The securities described in this report may not have been registered under the U.S. Securities Act of 1933, as amended, and, in such case, may not be offered or sold in the U.S. or to U.S. persons absent registration or an applicable exemption from the registration requirements. Hong Kong: This document has been approved for distribution in Hong Kong by Daewoo Securities (Hong Kong) Ltd., which is regulated by the Hong Kong Securities and Futures Commission. The contents of this report have not been reviewed by any regulatory authority in Hong Kong. This report is for distribution only to professional investors within the meaning of Part I of Schedule 1 to the Securities and Futures Ordinance of Hong Kong (Cap. 71, Laws of Hong Kong) and any rules made thereunder and may not be redistributed in whole or in part in Hong Kong to any person. All Other Jurisdictions: Customers in all other countries who wish to effect a transaction in any securities referenced in this report should contact Daewoo or its affiliates only if distribution to or use by such customer of this report would not violate applicable laws and regulations and not subject Daewoo and its affiliates to any registration or licensing requirement within such jurisdiction. KDB Daewoo Securities International Network Daewoo Securities Co. Ltd. (Seoul) Daewoo Securities (Hong Kong) Ltd. Daewoo Securities (America) Inc. Head Office 34-3 Yeouido-dong, Yeongdeungpo-gu Seoul 1-716 Korea Two International Finance Centre Suites 2-212 8 Finance Street, Central Hong Kong 32 Park Avenue, 31st Fl. New York, NY 122 United States Tel: 82-2-768-326 Tel: 8-2-214-134 Tel: 1-212-47-1 Daewoo Securities (Europe) Ltd. Daewoo Securities (Singapore) Pte. Ltd. Tokyo Representative Office Tower 42, Level 41 2 Old Broad Street London EC2N 1HQ United Kingdom 6 Battery Road, #11-1 Singapore, 4999 7th Floor, Yusen Building 2-3-2 Marunouchi, Chiyoda-ku Tokyo 1- Japan Tel: 44-2-7982-816 Tel: 6-6671-984 Tel: 81-3- 3211-11 Beijing Representative Office Shanghai Representative Office Ho Chi Minh Representative Office Suite 262, Twin Towers (East) B-12 Jianguomenwai Avenue Chaoyang District, Beijing 122 China Unit 13, 28 th Floor, Hang Seng Bank Tower 1 Lujiazui Ring Road Pudong New Area, Shanghai 212 China Centec Tower 72-74 Nguyen Thi Minh Khai Street Ward 6, District 3, Ho Chi Minh City Vietnam Tel: 86-1-667-9699 Tel: 86-21-13-6392 Tel: 84-8-391-6 9