(006280 KS) Improving visibility on overseas expansion Healthcare Event Summary November 23, 2015 (Maintain) Buy Target Price (12M, W) 252,000 Share Price (11/20/15, W) 194,500 Expected Return 30% OP (15F, Wbn) 107 Consensus OP (15F, Wbn) 105 EPS Growth (15F, %) 20.5 Market EPS Growth (15F, %) 21.0 P/E (15F, x) 22.5 Market P/E (15F, x) 11.5 KOSPI 1,989.86 Market Cap (Wbn) 2,273 Shares Outstanding (mn) 12 Free Float (%) 45.1 Foreign Ownership (%) 26.3 Beta (12M) 1.50 52-Week Low 127,500 52-Week High 270,000 (%) 1M 6M 12M Absolute 7.2-6.5 40.4 Relative 9.8 0.5 38.2 200 KOSPI 180 160 140 120 100 80 11.14 3.15 7.15 11.15 Hong Kong NDR feedback: Improving visibility on overseas expansion We joined on a non-deal roadshow (NDR) in Hong Kong on November 18 th - 19 th, meeting with 10 institutional investors. Key issues of interest were 1) the company s overseas expansion strategy for blood derivatives and vaccines, 2) domestic flu vaccine market trends, and 3) pipeline developments. Management shared with investors 1) its vision for the company s entry into the US blood product market, 2) its outlook for blood product revenue in China, 3) its flu vaccine strategy for the domestic and overseas markets, and 4) current pipeline developments. In relation to the company s move into the US market, management provided an update on ongoing facility investments in Canada and the development status of its immunoglobulin (IG) product. Regarding China, management believes that blood product revenue will expand on the back of increasing utilization. As for flu vaccines, the company sees competition intensifying both domestically and overseas, but believes its move from trivalent to quadrivalent vaccines makes it well positioned to maintain its market leadership. Among its pipeline drugs, the company is seeking to increase exports of its Hunter syndrome treatment Hunterase and develop it into a global blockbuster. We came away from the recent NDR with much better visibility on the company s advance into the global blood product market. We also believe the company s switch to quadrivalent vaccines will help it fend off rivals. At the group level, expansion into China and the development of cell therapies are proceeding smoothly, which bodes well for the group s mid- and long-term growth. Watch for progress in US commercialization of IVIG-SN is expected to file the US FDA biologic license application (BLA) for IVIG-SN (acute infection treatment) before the end of the year. Following the conclusion of the treatment s phase 3 trial in 2014, the company has spent a significant amount of time preparing for commercialization. We expect final approval to come in 2016. The company is currently receiving consulting services regarding IVIG-SN s US commercialization (sales channel, pricing, etc.). We expect to gain more clarity on the company s US strategy once the BLA is submitted and on the company s potential US marketing deals once FDA approval is obtained. Maintain Buy and TP of W252,000 We reiterate our Buy rating on with a target price of W252,000. We expect earnings to improve on the back of growing exports of vaccines to South America, as well as blood products to both South America and China. Furthermore, we believe the potential value of IVIG-SN will draw increasing attention, as commercial progress emerges in the US. Daewoo Securities Co., Ltd. [Healthcare] Hyun-tae Kim +822-768-3251 hyuntae.kim@dwsec.com Seung-min Kim +822-768-4157 sm.kim@dwsec.com FY (Dec.) 12/12 12/13 12/14 12/15F 12/16F 12/17F Revenue (Wbn) 812 888 975 1,044 1,219 1,284 OP (Wbn) 74 79 97 107 117 131 OP margin (%) 9.1 8.9 9.9 10.2 9.6 10.2 NP (Wbn) 54 70 84 101 81 82 EPS (W) 4,916 6,177 7,183 8,653 6,962 7,042 ROE (%) 8.3 9.4 9.8 10.8 8.0 7.6 P/E (x) 26.4 20.2 19.1 22.5 27.9 27.6 P/B (x) 2.1 1.7 1.8 2.3 2.1 2.0 Notes: All figures are based on consolidated K-IFRS; NP refers to net profit attributable to controlling interests Source: Company data, estimates Analysts who prepared this report are registered as research analysts in Korea but not in any other jurisdiction, including the t U.S. PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES & DISCLAIMERS IN APPENDIX 1 AT THE END OF REPORT.
Hong Kong NDR feedback We joined on an NDR in Hong Kong on November 18 th -19 th, meeting with 10 institutional investors. Management provided an overview of its business and future plans, and fielded a variety of questions from investors. We summarize the key highlights below. Q: Blood product overseas expansion strategy and current status A: We are making a big push overseas, as we see limited growth in the domestic blood product market, where we hold an 80% share. Our overseas strategy focuses on exporting albumin products to China and IG products to the US. There is strong demand for albumin in China and for IG in the US, and prices there are almost four times higher than in Korea. We are currently exporting albumin to our affiliate GC China, which is structured under Green Cross Holdings. Established in 1995, GC China has an annual capacity of 300,000 liters and seven blood collection centers in China. Currently, there are 25 local blood product manufacturers in China, and all final blood products, except for albumin, are banned from importation. GC China is the only foreign blood product manufacturer operating in China and produces albumin, IG, fibrinogen, factor VIII, and antithrombin. In China, demand for plasma derivatives is continuing to grow. The biggest challenge is securing sufficient plasma supply. GC China is seeking to obtain two more collection centers. Suppliers must be able to produce factor VIII in order to obtain government approval for a blood collection center. While it can be more challenging for a foreign company to expand collection centers, GC China already has six in the Anhui Province and one in the Hunan Province and looks likely to add two more in the Fujian Province and the Inner Mongolia region. GC China is the second-largest factor VIII supplier in China. GC China is expected to generate revenue of US$100mn and net profit of US$12.5mn in 2017 on the back of rising plant utilization. As such, we are planning to list Green Gross HK Holdings, which controls GC China, in the Hong Kong market. As for our entry into the US market, we completed the US phase 3 trial of IVIG-SN in 2014 and plan to file a BLA with the FDA as early as November. We expect a factory inspection to take place in 1H16, followed by potential approval in 4Q16. Once we obtain approval, we believe marketing deals will take shape. To prepare for our US entry, we are expanding capacity at our Ochang plant and building a new plant in Canada. We are spending W80bn to add another 500,000 liters to the Ochang plant s capacity (currently 650,000 liters), with operation expected in 2017. We are also investing W200bn in a Canadian plant, which will be able to produce 1.5mn liters potentially from 2019. We plan to finance our capex through borrowing. We intend to secure the plasma needed for the operation of the Canadian plant from Canada and the US. We plan to source around 350,000 liters from Hema-Quebec (HQ) and Canadian Blood Services (CBS) and the rest from America Plasma (GCAM). The finished products made in Canada will be sold in Canada and the US. Residual products, albumin in particular, could be exported to China. Once IVIG-SN is approved by the FDA, we expect US sales to begin full swing from 2017. Products manufactured at the Ochang plant will be supplied to our Canadian subsidiary Biotherapeutics (GCBT), which will sell the products in the US market. GCBT is currently held by and Holdings, but ownership is likely to be transferred to. 2
Figure 1. s ownership structure Source: Company data, Figure 2. Sales breakdown Notes: Based on consolidated revenue (W975bn) in 2014 Source: Company data, Figure 3.. GC China s s earnings trend (US$mn) 120 Revenue Net profit 90 60 30 0 2012 2013 2014 2017F Source: Company data, 3
Figure 4. s s blood centers Source: Company data, Figure 5. Investment structure of Canadian subsidiary Biotherapeutics (GCBT) Source: Company data, Q: Vaccine strategy and market developments A: We are focusing on standard vaccines, rather than premium vaccines. In particular, flu vaccines are our cash cow. For years, we were the only domestic supplier of flu vaccines, but Ilyang Pharmaceutical and SK Chemicals have recently entered the market. Most flu vaccines are trivalent, protecting against two influenza A viruses and one B virus. However, we plan to roll out quadrivalent flu vaccines in 2016, which protect against two A viruses and two B viruses. We believe quadrivalent flu vaccines will help lift ASP and profits. Given our solid reputation among distributors and doctors, we expect revenue to hold steady at current levels despite the entry of new competition. In 2016, the quadrivalent flu vaccine market is likely to be a battleground between GSK, SK Chemical, and us. On the overseas front, we are concentrating on flu vaccines to the Pan American Health Organization (PAHO). By focusing on domestic supply in 1H and Latin America (PAHO) in 2H, we have been able to operate our vaccine plant more efficiently. We currently account for around 35% of PAHO s flu vaccine demand. A Chinese firm recently obtained WHO prequalification and thus looks likely to participate in PAHO tenders. Looking forward, we think the PAHO market will be determined by the level of demand for quadrivalent vaccines. To prepare for such demand, we are planning to conduct overseas clinical trials and obtain prequalification. 4
Q: Pipeline developments A: Regarding our pipeline, overseas commercialization efforts are focused on our blood product project. Aside from that, we are also looking forward to Hunterase. At the group level, we believe cell therapies will become an important part of our overseas portfolio. Hunterase is the world s second Hunter syndrome treatment to be developed after Shire s Elaprase. Clinical trials are required to bring the drug to major developed markets like the US, but some countries allow imports or registration without clinical trial results. We are aiming to export the treatment to these countries and develop it into a blockbuster over the medium and long term. As for cell therapies, subsidiaries Cell and Lab Cell are likely to take the development initiative. Earlier this year, we signed a memorandum of understanding with the Guizhou provincial government to expand our cell therapy business in China. Figure 6. Drug pipelinep Source: Company data, 5
Earnings forecasts and valuation Table 1.. Quarterly and annual earnings (Wbn, %, W) 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15F 2014 2015F Revenue 199.3 235.7 282.4 258.0 214.3 268.4 295.0 266.6 975.3 1,044.4 1,218.9 2016F YoY 11.3 14.2 8.5 6.4 7.6 13.9 4.5 3.3 9.8 7.1 16.7 Blood derivatives 62.7 64.7 66.8 57.7 69.7 64.8 71.5 77.8 251.9 283.8 309.4 Health/wellness 4.3 5.4 6.0 5.2 5.5 6.8 6.8 6.9 20.9 26.0 29.2 ETC 35.7 36.7 38.9 37.2 39.6 40.2 43.6 44.1 148.5 167.4 251.6 Vaccines 19.3 25.9 79.1 34.7 28.2 27.0 77.0 38.3 159.0 170.5 172.0 OTC 14.5 16.9 16.6 15.0 14.5 19.3 18.2 16.7 63.0 68.6 75.7 Other 0.9 0.8 0.8 0.7 0.3 0.2 1.0 0.5 3.1 2.0 2.4 Overseas 37.2 55.2 43.3 77.9 25.3 77.2 45.9 53.2 213.6 201.6 249.7 GC MS 16.3 21.8 21.9 21.4 20.2 22.9 23.5 24.0 81.3 90.7 101.5 GC H&P 2.2 2.9 2.6 2.2 2.1 2.3 2.3 2.4 9.9 9.1 10.5 GC Lab Cell 6.9 7.6 8.2 8.3 8.2 8.5 8.7 8.8 31.0 34.2 36.9 Other subsidiaries 7.7 13.5 6.3 12.5 10.9 12.1 8.1 8.5 40.0 39.5 37.6 Operating profit 13.9 19.5 51.6 12.0 12.7 30.2 48.2 15.6 97.0 106.7 117.4 OP margin 7.0 8.3 18.3 4.7 5.9 11.3 16.3 5.8 9.9 10.2 9.6 YoY 17.2 14.0 16.1 119.8-8.5 55.3-6.6 29.3 23.0 10.0 10.0 Pretax profit 34.8 16.9 59.5 5.4 16.1 39.8 74.7 9.0 116.7 139.6 112.3 YoY 37.2-20.4 37.6 363.2-53.6 134.8 25.5 66.0 28.1 19.6-19.5 Net profit 28.1 12.3 44.9-1.4 12.4 28.3 56.4 4.0 83.9 101.1 81.4 YoY 47.3-22.4 33.7 TTR -55.9 130.8 25.5 TTB 19.8 20.5-19.5 Adjusted net profit attributable to controlling interests 8.1 12.3 41.3-1.0 12.4 23.1 17.7 3.7 60.7 56.9 81.4 YoY 3.1 10.9 22.9 TTB 52.4 88.5-57.1 TTB 12.5-6.2 43.0 EPS 7,183.0 8,652.6 6,962.5 YoY 16.3 20.5-19.5 Adjusted EPS 5,192.4 4,869.0 6,962.2 YoY 9.2-6.2 43.0 Notes: TTB and TTR refer to turning to black and turning to red, respectively. Source: Company data, Figure 7. 12-month forward P/E band Figure 8. 12-month forward P/B band (W) 300,000 (W) 300,000 2.9x 240,000 180,000 120,000 32.9x 27.2x 21.5x 15.9x 240,000 180,000 120,000 2.6x 2.2x 1.8x 1.4x 60,000 10.2x 60,000 0 10 11 12 13 14 15 16 17 0 10 11 12 13 14 15 16 17 Source: Source: 6
Table 2. Target price calculation Value per Notes share Operating value (a) 208,874 30x 2016F EPS Value of IVIG-SN (b) Target price Source: 42,857 Estimated cumulative profits for 10 years after launch 251,731 (a) + (b) Table 3.. Valuation and earnings metrics of global peers (blood product and vaccine makers) Ticker Green Cross 006280 KS SK Chemical 006120 KS Baxter BAX US CSL CSL AU Grifols GRF SM China Biologic Products CBPO US Hualan 002007 CH 600161 CH 300294 CH 1349 HK Beijing Fudan- Jianxi Boya Tiantan Zhangjiang Lee s Pharma- ceutical 950 HK Price (US$) 168.4 61.9 38.3 71.0 45.4 119.8 6.6 4.9 6.4 1.0 1.2 1.3 Market cap (US$mn) 1,970.3 1,506.2 20,956.2 33,082. 1 3SBio 1530 HK 14,165.0 3,179.4 3,823.1 2,545.4 1,454.6 882.5 689.5 3,193.6 Revenue 2014A 926.7 6,920.2 16,671.0 5,612.4 4,457.6 243.3 200.4 294.5 70.4 76.4 123.2 183.5 (US$mn) 2015F 911.8 4,543.4 9,911.4 6,235.3 4,094.3 293.2 243.5 - - 95.7 140.4 263.0 2016F 991.1 5,274.6 10,021.1 6,838.1 4,267.3 349.8 301.3 - - 126.3 178.0 359.0 Operating 2014A 92.1 142.1 2,707.0 1,758.0 1,139.4 111.2 82.5 64.7 20.0 19.9 32.0 57.9 profit 2015F 92.4 97.0 833.8 1,758.9 1,033.5 132.0 111.4 - - 25.6 37.3 96.9 (US$mn) 2016F 101.9 132.9 1,034.1 1,986.4 1,090.8 159.0 138.9 - - 34.7 39.4 133.8 OP margin 2014A 9.9 2.1 16.2 31.3 25.6 45.7 41.2 22.0 28.4 26.0 25.9 31.6 (%) 2015F 10.1 2.1 8.4 28.2 25.2 45.0 45.7 - - 26.7 26.6 36.8 2016F 10.3 2.5 10.3 29.0 25.6 45.5 46.1 - - 27.5 22.1 37.3 Net profit 2014A 79.8-23.8 2,497.0 1,379.0 624.7 70.9 87.4 20.8 16.9 19.2 24.9 47.4 (US$mn) 2015F 93.4 35.4 692.7 1,383.4 664.7 97.5 102.4 - - 22.1 30.3 90.3 2016F 74.2 31.6 770.6 1,575.8 711.7 122.3 123.3 - - 29.2 33.7 123.3 EPS 2014A 6.9-1.4 4.6 2.9 1.8 2.9 0.2 0.0 0.1 0.0 0.0 - (US$) 2015F 8.0 1.7 1.3 3.0 2.0 3.5 0.2 0.1 0.1 0.0 0.1 0.0 EPS growth (%) 2016F 6.3 2.1 1.4 3.4 2.1 4.4 0.2 0.2 0.1 0.0 0.1 0.0 2015F 15.5-218.2-72.7 1.3 7.5 24.0 18.4 262.3 33.6 15.4 17.9-2016F -20.6 25.3 12.6 15.8 7.5 24.2 19.7 5.4 33.3 29.2 18.5 28.9 ROE 2014A 10.4-1.7 21.1 46.7 18.6 30.5 16.9-4.3 12.6 20.0 18.3 29.1 (%) 2015F 11.3 2.1 8.1 49.2 22.0 29.5 16.6 - - 19.6 23.8 17.0 2016F 8.3 3.8 8.1 49.9 22.4 22.7 17.7 - - 21.1 24.3 14.4 P/E 2014A 24.4-44.0 8.3 24.3 25.0 42.0 43.7 121.6 86.2 46.0 25.7 - (x) 2015F 21.1 37.2 30.5 24.0 23.2 33.9 36.9 33.6 64.6 39.8 21.8 33.4 2016F 26.6 29.7 27.0 20.7 21.6 27.3 30.9 31.8 48.4 30.8 18.4 25.9 P/B 2014A 2.4 1.0 2.7 12.0 3.0 8.6 6.9 8.2 10.5 8.5 3.7 - (x) 2015F 2.3 1.3 1.5 11.3 4.7 8.2 6.1 - - 7.1 4.5 3.7 2016F 2.1 1.2 1.5 9.1 4.4 6.3 5.3 - - 5.8 3.7 3.5 EV/ 2014A 17.2 6.8 5.6 17.1 10.2 26.7 37.8 30.7 59.4 36.7 19.3 50.3 EBITDA 2015F 16.9 7.8 13.3 16.8 11.6 22.5 30.6 - - 29.6 16.2 30.9 (x) 2016F 15.3 6.1 11.7 14.7 10.9 18.2 26.0 - - 22.2 15.3 22.4 Notes: All figures are based on Bloomberg consensus Source: Bloomberg, 7
(006280 KS/Buy/TP: W252,000) Comprehensive Income Statement (Summarized) Statement of Financial Condition (Summarized) (Wbn) 12/14 12/15F 12/16F 12/17F (Wbn) 12/14 12/15F 12/16F 12/17F Revenue 975 1,044 1,219 1,284 Current Assets 663 714 771 815 Cost of Sales 665 703 834 871 Cash and Cash Equivalents 32 66 28 37 Gross Profit 310 341 385 413 AR & Other Receivables 247 269 314 331 SG&A Expenses 214 234 268 282 Inventories 298 294 343 361 Operating Profit (Adj) 97 107 117 131 Other Current Assets 86 85 86 86 Operating Profit 97 107 117 131 Non-Current Assets 667 703 738 773 Non-Operating Profit 20 33-5 -17 Investments in Associates 118 118 118 118 Net Financial Income -4-6 -6-6 Property, Plant and Equipment 409 447 484 521 Net Gain from Inv in Associates 26 2 4 4 Intangible Assets 55 52 50 48 Pretax Profit 117 140 112 114 Total Assets 1,330 1,417 1,509 1,587 Income Tax 30 36 29 29 Current Liabilities 334 332 354 363 Profit from Continuing Operations 87 104 84 85 AP & Other Payables 138 135 158 166 Profit from Discontinued Operations 0 0 0 0 Short-Term Financial Liabilities 122 122 122 122 Net Profit 87 104 84 85 Other Current Liabilities 74 75 74 75 Controlling Interests 84 101 81 82 Non-Current Liabilities 75 75 75 75 Non-Controlling Interests 3 3 2 2 Long-Term Financial Liabilities 38 38 38 38 Total Comprehensive Profit 84 104 84 85 Other Non-Current Liabilities 37 37 37 37 Controlling Interests 81 100 81 82 Total Liabilities 410 407 430 438 Non-Controlling Interests 3 3 3 3 Controlling Interests 893 979 1,046 1,114 EBITDA 120 131 142 157 Capital Stock 58 58 58 58 FCF (Free Cash Flow) -2-2 -25 33 Capital Surplus 317 317 317 317 EBITDA Margin (%) 12.3 12.5 11.6 12.2 Retained Earnings 513 600 667 735 Operating Profit Margin (%) 9.9 10.2 9.6 10.2 Non-Controlling Interests 28 31 33 35 Net Profit Margin (%) 8.6 9.7 6.6 6.4 Stockholders' Equity 921 1,010 1,079 1,149 Cash Flows (Summarized) Forecasts/Valuations (Summarized) (Wbn) 12/14 12/15F 12/16F 12/17F 12/14 12/15F 12/16F 12/17F Cash Flows from Op Activities 57 58 35 93 P/E (x) 19.1 22.5 27.9 27.6 Net Profit 87 104 84 85 P/CF (x) 12.4 19.2 16.2 14.7 Non-Cash Income and Expense 43 15 57 70 P/B (x) 1.8 2.3 2.1 2.0 Depreciation 21 22 23 23 EV/EBITDA (x) 14.1 17.9 16.7 15.1 Amortization 3 2 2 2 EPS (W) 7,183 8,653 6,962 7,042 Others 19-9 32 45 CFPS (W) 11,089 10,133 12,014 13,224 Chg in Working Capital -50-20 -71-27 BPS (W) 77,574 84,990 90,716 96,521 Chg in AR & Other Receivables 1-21 -44-17 DPS (W) 1,250 1,250 1,250 1,250 Chg in Inventories -48 5-49 -18 Payout ratio (%) 16.7 13.9 17.3 17.1 Chg in AP & Other Payables 21-2 20 7 Dividend Yield (%) 0.9 0.6 0.6 0.6 Income Tax Paid -20-36 -29-29 Revenue Growth (%) 9.8 7.1 16.8 5.3 Cash Flows from Inv Activities -163-53 -58-70 EBITDA Growth (%) 23.7 9.2 8.4 10.6 Chg in PP&E -58-60 -60-60 Operating Profit Growth (%) 22.8 10.3 9.3 12.0 Chg in Intangible Assets -12 0 0 0 EPS Growth (%) 16.3 20.5-19.5 1.1 Chg in Financial Assets -5 0 0 0 Accounts Receivable Turnover (x) 3.9 4.1 4.2 4.0 Others -88 7 2-10 Inventory Turnover (x) 3.6 3.5 3.8 3.6 Cash Flows from Fin Activities 109-14 -14-14 Accounts Payable Turnover (x) 6.0 5.9 6.5 6.2 Chg in Financial Liabilities 112 0 0 0 ROA (%) 7.1 7.6 5.7 5.5 Chg in Equity 3 0 0 0 ROE (%) 9.8 10.8 8.0 7.6 Dividends Paid -15-14 -14-14 ROIC (%) 9.0 9.1 9.2 9.4 Others 9 0 0 0 Liability to Equity Ratio (%) 44.5 40.3 39.8 38.1 Increase (Decrease) in Cash 4 34-37 9 Current Ratio (%) 198.2 215.2 217.5 224.6 Beginning Balance 28 32 66 28 Net Debt to Equity Ratio (%) 7.4 3.4 6.7 5.5 Ending Balance 32 66 28 37 Interest Coverage Ratio (x) 20.9 15.0 16.5 18.4 Source: Company data, estimates 8
APPENDIX 1 Important Disclosures & Disclaimers 2-Year Rating and Target Price History Company (Code) Date Rating Target Price (006280) 10/28/2015 Buy 252,000 07/29/2015 Buy 292,000 05/03/2015 Trading Buy 193,000 11/05/2014 Buy 167,000 07/23/2014 Buy 149,000 03/12/2014 Buy 156,000 11/08/2013 Buy 159,000 (W) 400,000 300,000 200,000 100,000 0 Nov 13 Nov 14 Nov 15 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 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. Equity Ratings Distribution Buy Trading Buy 72.77% 13.86% 13.37% 0.00% * Based on recommendations in the last 12-months (as of September 30, 2015) Disclosures As of the publication date, Daewoo Securities 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 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, Hold Sell 9
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. 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(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (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 15a-6(b)(4) under the U.S. Securities Exchange Act of 1934. 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