February 8, 2013

Company Report

Hyundai Heavy Industries (009540 KS)

Needs to regain investors trust

Shipbuilding

Daewoo Securities Co., Ltd.

4Q12 review: Revenues of W1.4tr (-2.7% YoY), OP of W54.3bn (-93.9% YoY)

Hyundai Heavy Industries (HHI) reported 4Q12 revenues of W1.4tr (-2.7% YoY) and
operating profit of W54.3bn (-93.9% YoY), with pretax and net profits turning to losses.
These results were far shy of both our estimates and the market consensus. OP margin
came in at 0.4% (-5.7%p YoY; -4.1%p QoQ).
We attribute the fall in revenues to: 1) weaker productivity resulting from order backlog
contraction at the shipbuilding unit and 2) lower onshore plant and construction
equipment sales. Operating profit was also sluggish, as: 1) the shipbuilding unit swung
to negative due to large-scale provisioning against long-term receivables (an estimated
W350bn), and 2) the oil refining units performance missed our expectations owing to a
decline in oil prices QoQ and narrower refining margins. In addition, the green energy
unit also turned to red due to inventory valuation losses and price cuts. On the nonoperating side, impairment losses on financial assets (W556.3bn), including derivatives
losses and losses on its POSCO stake (W314.3bn), and equity-method losses of
W131.3bn overwhelmed financial gains of W236.1bn from interest income and F/X
gains.

Recovery of investors trust is prerequisite for share price increase

Investors have lost confidence in HHI due to its lackluster order performance compared
to peers and disappointing operating results. We believe HHI needs to regain investors
trust in order for its shares to rebound in 2013. However, its order performance year to
date bodes ill for full-year earnings (despite ambitious annual targets). The company
lagged behind peers in competition for orders from earlier this year, and some orders
appear to be delayed indefinitely. Thus, HHI has a long way to go in its efforts to regain
investors trust.

Lower TP to W260,000; Maintain Buy

We maintain our Buy recommendation on HHI but lower our target price by 7.1% to
W260,000 (target P/B of 1.2x). The company is unlikely to achieve half of its 2013 order
target in 1H, as weak orders should continue into 1Q. As such, we are lowering our
2013 earnings forecasts and target price for the company. However, we believe that the
companys earnings will not deteriorate further this year, given massive provisioning in
4Q12. We expect the company to post a stable OP margin of 4.3% during the year.
Shares of HHI are attractively valued, trading at a 2013F P/E of 10.9x and a P/B of 0.9x,
which are the lowest in the companys peer group. However, we think that shares will
not pick up markedly, unless HHI steadily wins massive orders. In our view, investors
should not consider buying the shares until 2Q, as the company is unlikely to receive
orders hefty enough to drive up its earnings reliability in the short term.

Ki-jong Sung
+822-768-3263
kijong.sung@dwsec.com
Ryan Kang
+822-768-3065
ryan.kang@dwsec.com

Buy (Maintain)
Target Price (12M, W)
Share Price (02/07/13, W)
Expected Return (%)
EPS Growth (13F, %)
Market EPS Growth (13F, %)
P/E (13F, x)
Market P/E (13F, x)
KOSPI
Market Cap (Wbn)
Shares Outstanding (mn)
Avg Trading Volume (60D, '000)
Avg Trading Value (60D, Wbn)
Dividend Yield (13F, %)
Free Float (%)
52-Week Low (W)
52-Week High (W)
Beta (12M, Daily Rate of Return)
Price Return Volatility (12M Daily, %, SD)
Foreign Ownership (%)
Major Shareholder(s)
Jung Mong-jun et al. (21.31%)
Treasury shares (19.36%)
National Pension Service (5.08%)
Price Performance
(%)
1M
6M
Absolute
-13.3
-15.0
Relative
-9.3
-17.4

Earnings & Valuation Metrics

FY

Revenues
(Wbn)
12/10
37,342
12/11
53,712
12/12P
54,973
12/13F
56,202
12/14F
59,398

OP OP Margin
(Wbn)
(%)
5,532
14.8
4,536
8.4
1,976
3.6
2,389
4.3
3,000
5.1

NP
(Wbn)
4,154
2,559
938
1,455
1,957

260,000
209,500
24.1
55.1
18.4
10.9
9.5
1,931.77
15,922
76
228
50
1.2
59.3
193,500
346,500
1.44
2.0
19.6

12M
-29.2
-26.7

Share price

EPS EBITDA FCF ROE

(Won) (Wbn) (Wbn) (%)
54,652
6,326
88 34.5
33,671
5,473 -504 16.7
12,347
2,960 -2,635
5.7
19,145
3,378 1,630
8.4
25,752
3,987 1,907 10.5

P/E
(x)
8.1
7.6
19.6
10.9
8.1

P/B EV/EBITDA
(x)
(x)
2.5
6.5
1.3
5.3
1.2
10.0
0.9
7.6
0.9
6.1

120

KOSPI

110
100
90
80
70
60
50
2/12

6/12

10/12

2/13

Notes: All figures are based on consolidated K-IFRS; NP refers to net profit attributable to controlling interests
Source: Company data, KDB Daewoo Securities Research estimates

Analysts who prepared this report are registered as research analysts in Korea but not in any other jurisdiction, including the U.S.

February 8, 2013

Hyundai Heavy Industries

4Q12 earnings breakdown by business

Despite overall
slowdown in revenues,
plant and electro electric
systems units displayed
margin growth

Shipbuilding: Revenues dropped 3.8% YoY to W4.65tr and operating profit turned to a loss
amid decreased recognition of high-margin orders and increased recognition of low-margin
orders. We attribute this deterioration (results also fell sharply QoQ) to the large-scale
provisioning of HHI and Hyundai Samho Heavy Industries (HHIs subsidiary). Based on 3Q12
results, we estimate these provisions at W350bn.
Offshore plants: Revenues came in at W1.3tr (-1.8% YoY; +27.8% QoQ). Margins slid QoQ
and YoY, despite an increase in work related to large projects, on the completion of highmargin projects. OP margin fell to around 6%.
Onshore plants: Revenues arrived at W494bn, decreasing 12.5% YoY in line with a decline
in orders, but improving 44.3% QoQ on a rise in progress rates for major projects. Margins
climbed sharply with OP margin being estimated at 14%.
Engines & machinery: Revenues shrank 7.2% YoY and 1.2% QoQ to W602.1bn due to
weaker demand for vessel engines and lower sales prices. Engine price declines depressed
margins. OP margin is projected at 11%.
Electro electric systems: Revenues came in at W760.8bn (-0.9% YoY; +6.3% QoQ). The unit
swung to positive territory QoQ on the back of the recovery of exports and growth in
domestic electric equipment sales.
Construction equipment: Revenues decreased 12.9% YoY and 19.5% QoQ to W707.5bn
owing to slower exports to the Middle East and Russia and sluggish sales in China. Margins
also contracted with OP margin being projected at 3%.
Green energy: Revenues jumped 31.3% YoY and 68.7% QoQ to W113.2bn on the back of
increased supply of solar modules and wind power generators. However, the unit remained
in the red due to inventory impairment losses and product price declines.
Oil refining: Revenues edged up 0.5% YoY and 0.7% QoQ to W5.3tr. However, margins
contracted amid a refining margin downtrend. OP margin dropped 1.7%p YoY and 3.2%p
QoQ to 1.5%.
Financial: Revenues fell 14.1% YoY and 10.8% QoQ to W149.7bn in line with stock and
bond market slumps amid the global economic slowdown. Margins also deteriorated with
OP estimated at 9%.
Table 1. 4Q 12P earnings review

Revenues
Operating profit
OP margin
Pretax profit
Net profit

(Wbn, %, %p)

4Q11

3Q12

14,522
884
6.1
128
-25

13,199
597
4.5
1,009
729

4Q12P
Actual KDB Daewoo
14,136
54
0.4
-529
-348

13,903
564
4.1
612
442

Consensus
13,993
492
3.5
422
356

Growth
YoY
-2.7
-93.9
-5.7
TTR
RR

QoQ
7.1
-90.9
-4.1
TTR
TTR

Note: Based on consolidated K-IFRS

Source: KDB Daewoo Securities Research estimates

KDB Daewoo Securities Research

February 8, 2013

Hyundai Heavy Industries

Table 2. Revisions to earnings forecasts

(Wbn, W, %)

Previous
Revised
12P
13F
14F
12P
13F
14F
Revenues
54,741
58,433
63,025
54,973
56,202
59,398
Operating profit
2,485
3,331
3,782
1,993
2,389
3,000
Pretax profit
2,595
2,882
3,444
1,454
2,060
2,725
Net profit
1,829
2,133
2,549
1,038
1,555
2,057
EPS
22,750
26,750
32,218
12,347
19,145
25,752
OP margin
4.5
5.7
6.0
3.6
4.3
5.1
Net profit margin
3.2
3.5
3.9
1.9
2.8
3.5
Note: Based on consolidated K-IFRS / Source: KDB Daewoo Securities Research estimates

12P
0.4
-19.8
-44.0
-43.2
-45.7

Change
13F
-3.8
-28.3
-28.5
-27.1
-28.4

14F
-5.8
-20.7
-20.9
-19.3
-20.1

Comments
Sluggish order-taking in 2012
Won appreciation, low-priced orders

Table 3. Quarterly earnings and forecasts

(Wbn, %, %p)

2012
2013F
1Q
2Q
3Q
4QP
1QF
2QF
3QF
4QF
Revenues
13,938 13,700 13,199 14,136 14,008 14,084 13,621 14,489
Operating profit
969
359
597
54
554
618
563
654
Pretax profit
765
209
1,009
-529
419
557
496
587
Net profit
523
134
729
-348
317
421
375
443
OP margin
7.0
2.6
4.5
0.4
4.0
4.4
4.1
4.5
Net profit margin
5.5
1.5
7.6
-3.7
2.9
5.3
4.1
1.4
Note: Based on consolidated K-IFRS / Source: KDB Daewoo Securities Research estimates

4Q12P growth
QoQ
YoY
7.1
-2.7
-90.9
-93.9
TTR
TTR
TTR
RR

2011

2012P

2013F

2014F

53,712
4,560
3,876
2,743
8.4
7.2

54,973
1,993
1,454
1,038
3.6
2.6

56,202
2,389
2,060
1,555
4.3
3.4

59,398
3,000
2,725
2,057
5.1
3.5

Buy after the firm regains investors trust

Improvement in orders,
earnings, and cash flow
to boost investors
confidence starting in
2Q

We recommend conservative investment strategies for HHI. Investors confidence in the

firm has seen a significant decline, and, it could be a while before it recovers. As <Figure 1>
shows, HHIs cash flow, orders, and operating performance are expected to improve in 2013.
However, investors are not advised to buy the companys shares until 2Q, when order
recovery is anticipated to begin, led by merchant ship orders. Meanwhile, even factoring in
its lackluster earnings and share performance, HHI is undervalued in light of its growth
potential and asset value. Thus, we still see strong long-term upside to HHIs share price.
Figure 1. Share price with key variables
(Wbn)
6,000

FCF (L)

(W)
600,000

Share price (R)

4,000

500,000

2,000

400,000

300,000

-2,000

200,000

-4,000

100,000

-6,000

(US$bn)
30

New orders (L)

25
20
15
10
5
0
(Wbn)
2,000

Operating profit (R)

1,500
1,000
500
0
-500
05

06

07

08

09

10

11

12

13F
13

14F
14

15F
15

Source: Company data, KDB Daewoo Securities Research

KDB Daewoo Securities Research

February 8, 2013

Hyundai Heavy Industries

Figure 2. Earnings by business unit

(Wbn)
6,000

3Q12 revenues (L)

3Q12 OP margin (R)

5,000

Figure 3. Revenue breakdown by business unit

(%)
50

4Q12P revenues (L)

4Q12P OP margin (R)

30

4,000

10

3,000

-10

2,000

-30

1,000

-50

-70

ip
Sh
Of

in g
il d
bu

fsh

&
ore
u
I nd

e
gin
en
ia
str

lp

eri

la

n ig

&
nt s

nt
rgy
ms
ne
me
ste
ne
u ip
sy
e
q
e
c
i
&
ne
Gr
ctr
t io
es
e le
uc
g in
str
tro
En
n
c
Co
El e

g in
en

r in
ee

c
ma

e
hin

ry

Re

e
fin

Shipbuilding/Engines
Electro electric systems/Green energy
Refinery

ry
F in

ce
an

34.2%

36.4%

9.5%
4.7%
11.2%

5.6%
5.9%

Offshore/Industrial plants
Construction equipment
Financial

39.9%

13.0%

7.5%
5.9%
10.4%

6.7%
5.9%
10.3%

12.7%

38.6%

37.8%

35.5%

35.4%

37.1%

2Q11

1Q12

2Q12

3Q12

4Q12P

Source: Company data, KDB Daewoo Securities Research

Source: Company data, KDB Daewoo Securities Research

Figure 4. Quarterly earnings trends

Figure 5. Annual earnings trends

(%)

(Wbn)
16,000

Revenues (L)

18

12

6.2%
5.0%

(%)

(Wbn)
70,000

18

Revenues (L)

OP margin (R)
15

37.5%

39.1%

OP margin (R)

60,000

15

50,000

12

40,000

12,000

9
30,000

6
3
0

8,000
1Q11

3Q11

1Q12

3Q12

1Q13F

20,000

10,000
0

3Q13F

06

07

08

09

10

11

12P

Source: Company data, KDB Daewoo Securities Research

Source: Company data, KDB Daewoo Securities Research

Figure 6. Order backlogs by vessel type (as of Dec. 2012)

Figure 7. New order trends by business unit

(US$mn)
12,000

Semi-rig Other
3%
3%
Containership
21%

Special vessels
7%

2011

2012

13F

2013 target

10,000
8,000
6,000
4,000
2,000

Source: Company data, KDB Daewoo Securities Research

KDB Daewoo Securities Research

en
er
gy

en
t
tio
n

Co

ns
tru
c

Gr
ee
n

sy

st e

eq
u ip
m

ms

ery
tr ic
le c

&

ma
ch
in
El
ec
tro
e

pl a
n
us
tria
l

LNG carrier
19%

Of
f sh

ore
LPG carrier
5%

Ind

Bulk carrier
0%

En
g in
e

t&

en
g in

en
gi n
e
&

Drillship
35%

ee
rin
g

Sh
ip b
u il
d in
g

US$ 20.7bn

eri
nig

Tanker
7%

Source: Company data, KDB Daewoo Securities Research

February 8, 2013

Hyundai Heavy Industries

Figure 8. P/E band

Figure 9. P/E-ROE comparison of global peer group (2013F)

(Market cap, Wbn)

(P/E, x)

42,000

20.0x

35,000

30

Mitsui Engineering

25
Mitsubishi Heavy

15.0x
28,000

20

21,000

10.0x

15
Sumitomo Heavy

14,000

Keppel

HMD

Sembcorp
HHI

10

S HI

5.0x
7,000

(ROE, %)
00

01

02

03

04

05

06

07

08

09

10

11

12

13 F

10

15

20

Source: Company Data, KDB Daewoo Securities Research

Source: Bloomberg, KDB Daewoo Securities Research

Figure 10. P/B band

Figure 11. P/B-ROE comparison of global peer group (2013F)

(Market cap, Wbn)

(P/B, x)

3.0x

2.5x

2.5

35,000

2.0x

2.0

28,000

1.5x

21,000

1.0x

42,000

Keppel
Sembcorp

1.5
Mitsubishi Heavy
1.0

S HI

Sumitomo Heavy
Mitsui Engineering

14,000

HHI

HMD
7,000

0.5

0.0
00

01

02

03

04

05

06

07

08

09

10

11

12

13 F

Guangzhou
Shipyard
(ROE, %)
0

10

15

20

Source: Company data, KDB Daewoo Securities Research

Source: Bloomberg, KDB Daewoo Securities Research

Figure 12. Relative share performances of three major shipbuilders

Figure 13. Relative share performances of global peers

(-1Y=100)
140

HHI

SHI

(-1Y=100)
140

DSME

120

120

100

100

80

80

60

60

40

HHI
Guangzhou Shipyard
Sembcorp

Keppel
Mitsui Engineering

40
2/12

4/12

6/12

8/12

10/12

12/12

Source: Thomson Reuters, KDB Daewoo Securities Research

KDB Daewoo Securities Research

2/13

2/12

4/12

6/12

8/12

10/12

12/12

2/13

Source: Thomson Reuters, KDB Daewoo Securities Research

February 8, 2013

Hyundai Heavy Industries

Hyundai Heavy Industries (009540 KS/Buy/TP: W260,000)

Comprehensive Income Statement (Summarized)
(Wbn)
Revenues
Cost of Sales
Gross Profit
SG&A Expenses
Operating Profit (Adj)
Operating Profit
Non-Operating Profit
Net Financial Income
Net Gain from Inv in Associates
Pretax Profit
Income Tax
Profit from Continuing Operations
Profit from Discontinued Operations
Net Profit
Controlling Interests
Non-Controlling Interests
Total Comprehensive Profit
Controlling Interests
Non-Controlling Interests
EBITDA
FCF (Free Cash Flow)
EBITDA Margin (%)
Operating Profit Margin (%)
Net Profit Margin (%)

Statement of Financial Condition (Summarized)

12/11 12/12P
53,712 54,973
46,784 50,331
6,927 4,643
2,392
2,667
4,536
1,976
4,536
1,976
-659
-522
52
233
-148
-322
3,876
1,454
1,133
416
2,743
1,038
0
0
2,743
1,038
2,559
938
184
100
2,617
778
2,498
668
118
110
5,473
2,960
-504 -2,635
5.4
10.2
3.6
8.4
4.8
1.7

12/13F
56,202
51,144
5,058
2,670
2,389
2,389
-329
229
-200
2,060
505
1,555
0
1,555
1,455
100
1,295
1,185
110
3,378
1,630
6.0
4.3
2.6

12/14F
59,398
53,577
5,821
2,821
3,000
3,000
-275
175
-200
2,725
668
2,057
0
2,057
1,957
100
1,797
1,687
110
3,987
1,907
6.7
5.1
3.3

12/11 12/12P
276 -2,165
2,743
1,038
2,189
3,078
899
853
85
85
-860
-443
-4,072 -4,606
-556
-178
-483
-1,442
-364 -3,148
-786
-1,474
-888
-544
-1,583 -1,074
-60
-67
-34
406
796
184
347
2,806
1,206
3,484
0
0
-245
-411
-448
-444
-269
85
1,879
1,610
1,695
1,610

12/13F
2,670
1,555
1,823
903
86
100
-204
-230
-99
261
-505
-765
-900
-60
0
195
-1,577
-1,000
0
-153
-424
328
1,695
2,023

12/14F
2,934
2,057
1,929
903
84
100
-385
-598
-399
677
-668
-754
-900
-60
0
206
-2,534
-2,000
0
-153
-381
-354
2,023
1,669

Cash Flows (Summarized)

(Wbn)
Cash Flows from Op Activities
Net Profit
Non-Cash Income and Expense
Depreciation
Amortization
Others
Chg in Working Capital
Chg in AR & Other Receivables
Chg in Inventories
Chg in AP & Other Payables
Income Tax Paid
Cash Flows from Inv Activities
Chg in PP&E
Chg in Intangible Assets
Chg in Financial Assets
Others
Cash Flows from Fin Activities
Chg in Financial Liabilities
Chg in Equity
Dividends Paid
Others
Increase (Decrease) in Cash
Beginning Balance
Ending Balance

(Wbn)
Current Assets
Cash and Cash Equivalents
AR & Other Receivables
Inventories
Other Current Assets
Non-Current Assets
Investments in Associates
Property, Plant and Equipment
Intangible Assets
Total Assets
Current Liabilities
AP & Other Payables
Short-Term Financial Liabilities
Other Current Liabilities
Non-Current Liabilities
Long-Term Financial Liabilities
Other Non-Current Liabilities
Total Liabilities
Controlling Interests
Capital Stock
Capital Surplus
Retained Earnings
Non-Controlling Interests
Stockholders' Equity

12/11
23,076
1,610
9,525
6,478
2,359
25,924
973
15,565
2,324
49,001
25,491
14,339
8,903
2,249
5,334
3,224
1,954
30,824
16,379
380
1,100
15,399
1,797
18,177

12/12P
25,519
1,695
10,280
6,927
2,749
24,335
835
15,706
2,290
49,854
23,243
11,654
9,060
2,529
7,863
5,550
2,158
31,106
16,833
380
1,100
16,104
1,915
18,748

12/13F
26,237
2,023
10,510
7,025
2,810
24,249
635
15,703
2,264
50,486
22,560
11,915
8,060
2,585
8,037
5,550
2,332
30,597
17,864
380
1,100
17,405
2,025
19,889

12/14F
27,040
1,669
11,107
7,425
2,970
24,114
435
15,700
2,240
51,154
22,385
12,592
7,060
2,732
7,237
4,550
2,532
29,622
19,398
380
1,100
19,209
2,135
21,532

Forecasts/Valuations (Summarized)
P/E (x)
P/CF (x)
P/B (x)
EV/EBITDA (x)
EPS (W)
CFPS (W)
BPS (W)
DPS (W)
Payout ratio (%)
Dividend Yield (%)
Revenue Growth (%)
EBITDA Growth (%)
Operating Profit Growth (%)
EPS Growth (%)
Accounts Receivable Turnover (x)
Inventory Turnover (x)
Accounts Payable Turnover (x)
ROA (%)
ROE (%)
ROIC (%)
Liability to Equity Ratio (%)
Current Ratio (%)
Net Debt to Equity Ratio (%)
Interest Coverage Ratio (x)

12/11 12/12P 12/13F 12/14F

7.6
19.6
10.9
8.1
5.6
9.6
6.5
5.4
1.3
1.2
0.9
0.9
5.3
10.0
7.6
6.1
33,671 12,347 19,145 25,752
46,009 25,296 32,167 38,738
203,367 209,781 223,695 244,183
4,000
0
2,500
2,500
9.6
0.0
10.5
7.8
1.6
0.0
1.2
1.2
43.8
2.4
2.2
5.7
-13.5
-45.9
14.1
18.0
-18.0
-56.4
20.9
25.6
-38.4
-63.3
55.1
34.5
5.9
6.0
6.0
6.0
9.3
8.2
8.1
8.2
4.1
4.8
5.6
5.7
5.7
2.1
3.1
4.1
16.7
5.7
8.4
10.5
17.3
6.3
7.4
9.2
169.6
165.9
153.8
137.6
90.5
109.8
116.3
120.8
40.8
48.3
38.8
28.2
15.7
4.8
5.6
7.9

Source: Company data, KDB Daewoo Securities Research estimates

KDB Daewoo Securities Research

February 8, 2013

Hyundai Heavy Industries

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 Hyundai Heavy Industries 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 Hyundai Heavy Industries as an underlying asset, and other than this, Daewoo
Securities has no other special interests in the covered companies.

Stock
Ratings

Industry
Ratings

Buy

Relative performance of 20% or greater

(W)

Trading Buy

Relative performance of 10% or greater, but with volatility

800,000

Hold

Relative performance of -10% and 10%

600,000

Sell

Relative performance of -10%

400,000

Overweight

Fundamentals are favorable or improving

200,000

Neutral

Fundamentals are steady without any material changes

Underweight

Fundamentals are unfavorable or worsening

2/11

Hyundai Heavy Industries

8/11

2/12

8/12

1/13

* 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 analysts 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 Analysts 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.

KDB Daewoo Securities Research

February 8, 2013

Hyundai Heavy Industries

Distribution
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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
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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)
Head Office
34-3 Yeouido-dong, Yeongdeungpo-gu
Seoul 150-716
Korea
Tel: 82-2-768-3026

Daewoo Securities (Hong Kong) Ltd.

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Suites 2005-2012
8 Finance Street, Central
Hong Kong
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Suite 301
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United States
Tel: 1-212-407-1022

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London EC2N 1HQ
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KDB Daewoo Securities Research