KOREA / AUTOMOBILES & COMPONENTS WOORY INDUSTRIAL 215360 … · 2016-04-11 · Valeo and Hanon...

Woor y Industrial 215360 KS BNP PARIBAS H James Yoon

11 APRIL 2016 KOREA / AUTOMOBILES & COMPONENTS

WOORY INDUSTRIAL 215360 KS

Electrifying growth KEY STOCK DATA

Sources: FactSet estimates; BNP Paribas estimates

Revenue and earnings to more than double by 2020E We are buyers of WRI because we expect its high-margin non-conventional parts sales to see a five-year CAGR of 31%, to reach management’s goal of 50% revenue contribution by 2020, up from 6% in 2011 and 27% in 2015. As a result of this expanded contribution, we expect total revenue and earnings to more than double by 2020.

Beneficiary of surging demand for NEVs WRI is major beneficiary of aggressive government and corporate NEV volume growth strategies, which should drive demand for non-conventional energy-saving products such as PTC heaters. We expect NEV volumes to double in both China and Korea in 2016, and leading BEV makers are calling for exponential growth through 2020.

Second-tier auto parts supplier with first-tier relationships WRI supplies climate control, eco-friendly and electronic components to global auto parts suppliers such as Mobis, Denso, Delphi, Valeo and Hanon Systems. It has the largest global market share of HVAC actuators, at c22%, and a diversified customer base; about half of revenues come from outside its largest customer, HMG.

Initiate coverage at BUY; 44% potential upside to KRW41,000 TP We initiate coverage on WRI with a BUY rating and DCF-based TP of KRW41,000 (2016E target P/E of 20x). Its diversifying global customer base should drive a positive mix shift toward high-margin products to secure robust earnings growth.

Operating profit by product segment

Sources: Woory Industrial; BNP Paribas estimates

H James Yoon [email protected] +822 2125 0533

Ray Chung [email protected] +82 2 2125 0537

Our research is available on Thomson One, Bloomberg, TheMarkets.com, FactSet and on http://eqresearch.bnpparibas.com/index. Please contact your salesperson for authorisation. Please see the important notice on the back page.

PREPARED AND PUBLISHED BY NON-US BROKER-DEALER(S): BNP PARIBAS SECURITIES KOREA CO LTD . THIS MATERIAL HAS BEEN APPROVED FOR U.S DISTRIBUTION. ANALYST

CERTIFICATION AND IMPORTANT DISCLOSURES CAN BE FOUND AT APPENDIX ON PAGE 27

BUY TARGET PRICE KRW41,000

UP/DOWNSIDE +43.6%

CLOSE KRW28,550

HOW WE DIFFER FROM CONSENSUS MARKET RECS

TARGET PRICE (%) 51.9 POSITIVE 1

EPS 2016 (%) 28.7 NEUTRAL 0

EPS 2017 (%) 0.1 NEGATIVE 0

2015A 2016E 2017E 2018E

Revenue 197 299 351 404

Rec. net profit 12 19 21 25

Recurring EPS (KRW) 1,262 2,028 2,340 2,747

EPS growth (%) - 60.7 15.4 17.4

Recurring P/E (x) 22.6 14.1 12.2 10.4

Dividend yield (%) 0.2 0.4 0.5 0.6

EV/EBITDA (x) - 10.2 8.5 7.3

Price/book (x) 4.8 3.7 2.9 2.4

Net debt/Equity (%) 113.9 83.6 62.2 40.7

ROE (%) - 29.5 26.7 25.1

Share price performance 1 Month 3 Month 12 Month

Absolute (%) 15.4 15.8 -

Relative to country (%) 15.5 10.6 -

Next Results

Mkt cap (USD m) 226

3m avg daily turnover (USD m) 4.3

Free float (%) 61

Major shareholder Woory Industrial Holdings Co (39%)

12m high/low (KRW) -/-

3m historic vol. (%) 63.4

ADR ticker -

ADR closing price (USD) -

Issued shares (m) 9

YE Dec (KRW b)

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32,000May-15 Aug-15 Oct-15 Jan-16

Woory Industrial Rel to MSCI Korea(KRW) (%)

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Woory Industrial 215360 KS H James Yoon

Investment thesis

WRI is a second-tier supplier with first-tier relationships with global auto parts suppliers such as Mobis, Denso, Delphi, Valeo and Hanon Systems. We forecast a three-year EPS CAGR of 17%, based on management’s target to raise the contribution of high-margin non-conventional products to 50% of revenues by 2020, up from 27% in 2015.

Due to the energy-saving characteristics of its main non-conventional product, PTC (Positive Thermal Coefficient) heaters, we expect WRI’s business to continue to benefit from aggressive government and corporate NEV volume growth strategies in order to raise fuel efficiencies and reduce emissions. We believe NEV volumes could double in both China and Korea in 2016, and leading BEV makers are calling for exponential growth through 2020.

We initiate coverage on WRI with a BUY rating and DCF-based TP of KRW41,000, equating to a 2016E target P/E of 20x, due to industry-leading earnings growth, a positive mix shift toward high-margin non-conventional parts, and near 50% exposure to a diversified global (non-HMG) customer base.

Catalyst

The main potential catalysts consist of increased supply to the following groups: 1) HMG for its expanding NEV product line-up, on top of existing supply business; 2) Chinese brand OEMs focused on BEV growth; and 3) leading global BEV manufacturers.

Risk to our call

The key risks to our DCF-based TP are 1) inability to penetrate China OEMs; and 2) disappointing global NEV sales due to the low fuel price environment.

Company background Key assumptions

Established as an auto component supplier to HMG in 1989, Woory Industrial focuses on climate control and electronic parts. The opco was split out from its holding co on 1 April 2015, forming Woory Industrial Holdings (sales and marketing) and WRI, (technology development and manufacturing).

2016E 2017E 2018E

Total revenue (KRW b) 299.0 351.3 404.0

HVAC actuator 98.9 109.8 120.8

Clutch coil 31.8 32.2 32.5

Heater control 59.0 66.2 72.8

Others 109.3 143.1 177.9

OP margin (%) 6.0 6.2 6.2

Key executives

Age Joined Title

Jung Woo Kim 45 2015 CEO Won Jae Lee 56 2015 Vice President Yoon Seok Seo 48 2015 Vice President

http://www.woory.com/ Source: BNP Paribas estimates

Principal activities (revenue, 2015) Earnings sensitivity

Bear-case Base-case Bull-case

Non-conventional parts as % of total sales revenue

25 30 35

2016E EPS (KRW) 1,972 2,028 2,084

Change (%) (2.8) 2.8

Source: Woory Industrial Source: BNP Paribas estimates

Event calendar

Date Event

1st of each month HMG monthly sales data

12th of each month China's NEV sales data

26-Apr-16 HMG – 1Q16 result (Korea EV market proxy)

28-Apr-16 BYD – 1Q16 result (China EV market proxy)

May-16 Tesla – 1Q16 result (US EV market proxy)

16-May-16 Woory Industrial - 1Q16 result

A 5ppt change in non-conventional parts contribution would result in a 2.8% change in FY16E EPS, all else being equal

We expect expansion of non-conventional parts contributions to accelerate through our forecast period

HVAC Actuator - 30.1%

Clutch Coil - 12.5%

Control Head - 19.9%

PTC Heater - 14.6%

Electronic Parts - 8.6%

EPB - 4.1%

Others - 10.2%

2 BNP PARIBAS 11 APRIL 2016


Revenues and earnings to more than double by 2020E

We forecast sales of high-margin non-conventional parts at WRI to see a five-year CAGR of 31%, to reach management’s goal of 50% revenue contribution by 2020, up from 6% in 2011 and 27% in 2015. As a result of this expanded contribution, we expect total revenues and earnings to more than double by 2020, as supply could increase to the following groups: 1) HMG for its expanding NEV product line-up on top of existing supply business; 2) local Chinese brand OEMs, as we believe management is focused on China’s growth potential; and 3) leading BEV manufacturers. We project a five-year EPS CAGR of 17% through 2020.

The contribution of non-conventional products to total operating profit we forecast to reach 66% by 2020, up from 10% in 2013 and 43% in 2015, due to greater sales contributions and high product margins. We assume WRI’s non-conventional products provide an 8-9% operating margin vs 4-5% for conventional products. Thus, we expect blended OPM to rise above 6% during our forecast period, up from 2.5% in 2011 and 5.6% in 2015. Toward the end of the forecast period, we conservatively project gradual margin contraction for two reasons: 1) increasing portion of relatively lower-margin parts within non-conventional products; and 2) declining margins on existing contracts as volume discounts kick in, which is typical as benefits of scale economies are shared by both supplier and customer.

Exhibit 1: Sales revenue by product segment Exhibit 2: Operating profit by product segment

Note: 2015 based on pro forma estimates for full-year income statement as actual 2015 results consist of only 9-months of data post-HoCo split on 01April 2015. Sources: Woory Industrial; BNP Paribas estimates


Exhibit 3: OPM by product segment Exhibit 4: Net profit and NPM trend



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In terms of non-conventional products, we expect PTC heaters to become the largest product category for WRI, reaching 34% of revenue by 2020, up from 14% in 2015. As the majority of WRI’s order contract backlog for PTC heaters from Hanon Systems (018880 KS, BUY), Doowon Climate Control (not listed), Denso (6902 JP, BUY) and GM (GM US, not rated) have or will expire over 2014-16, we expect major contracts to have been renewed last year or be renewed in 2016. In particular, new contracts for NEV models in the product pipelines of HMG and other OEMs should act as drivers of additional PTC heater demand during our forecast period.

WRI expanded its exposure to high-margin non-conventional auto parts to 27% of total revenues in 2015, up from 6% in 2011. This shift was achieved by a four-year CAGR of 63% during 2011-2015 vs 5% for the company’s conventional auto parts. While PTC revenues surged the most within non-conventional parts, with a four-year CAGR of 97% to reach 14% of total revenues in 2015, other non-conventional parts saw a four-year CAGR of 45%. We estimate other major non-conventional revenue contributors were HLD (headlamp levelling device, 3.4%), power module (3.2%) and EPB (electrical parking brake, 4.0%). (Note: We use pro forma estimates for the 2015 full year income statement as actual 2015 results consist of only nine months of data post-HoCo split.)

For conventional products, we estimate HVAC actuators will become WRI’s second largest product category (replaced by PTC heaters) accounting for 28% of revenue in 2020E, down from 31% in 2015. In 1Q15, WRI received HVAC actuator orders worth a total of KRW107b from Denso (Japan) and Valeo (FR FP, not rated) for supply from 2016 to 2022. As these contracts represent the addition of new overseas end-demand for its main product on top of existing customers, namely HMG, we believe HVAC actuator revenues could nearly double by 2020. Meanwhile, demand for control heads and clutch coils should demonstrate mid-single digit growth, in line with end-product growth, as more manual control heads are upgraded to electronic ones.

We forecast an overall five-year revenue CAGR of 15% based on our expectations for a five-year CAGR of 31% for non-conventional (7% for conventional), as higher-priced orders have increased the value of WRI’s orderbook, which stood at cKRW1.6t in 2015 following cKRW400b in new orders last year. HMG accounts for little more than 50% of the order backlog at this time. According to management, last year’s orders were a bit higher than the annual average of KRW300b-400b in previous years due to higher-priced product orders. We believe this trend should continue this year, to drive c25% growth in new orders toward cKRW500b in 2016E.

While we have not explicitly included increased sales in China as we are waiting to hear concrete evidence of new supply contracts to China OEMs, we believe there is upside risk to our earnings forecasts, based on management’s positive new order outlook this year. Although we expect further diversification of WRI’s customer base into China, we believe HMG will likely remain the largest demand source due to plans to expand its ‘green’ car line-up from eight models in 2015 to 26 by 2020.

Exhibit 5: Sales revenue trend by product Exhibit 6: Non-conventional parts 27% of revenues in 2015

Source: Woory Industrial Source: Woory Industrial

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Other (LHS) EPB (LHS)Electric Parts (LHS) PTC Heater (LHS)Control Head (LHS) Clutch Coil (LHS)HVAC Actuator (LHS) % of nonconventional (RHS) HVAC

Actuator30.6%

Clutch Coil 12.7%Control

Head 20.3%

PTC Heater14.3%

Electric Parts8.3%

EPB4.0%

Other9.9%



Maintaining a steady profitability outlook

Management does not provide any breakdown of operating profitability, but we assume WRI’s conventional parts warrant an OPM in the 4-5% range, which is typical for a second-tier auto parts supplier with steady relationships with first-tier suppliers and healthy utilisation rates in the 80-90% range. This would translate to a high single-digit operating margin for WRI’s non-conventional products, as they tend to be higher-priced items based on quoted prices rather than simple cost-plus prices, with volume discounts built-in. Thus the shift in mix should be beneficial to OPM and earnings growth, in our view. We estimate that an increase in contribution of non-conventional parts revenue of 5ppt should result in an OP increase of 2.8%.

As volumes of non-conventional products increase and become standardised, volume discount prices should be offered. But a premium operating margin should be sustainable as the manufacturer also lowers its own costs to a certain extent through operating leverage and higher utilisation rates. Another factor influencing the long-term profitability is the stage of the product cycle for the contract. Margins would be higher at the start of the supply contract and gradually shrink toward the end of the contract term.

We forecast OPM to improve to the 6% level from 2016 onward vs 5.5% in 2015, due to 1) improving mix with increasing contribution of non-conventional products; 2) better profitability of conventional products stemming from new customer contracts; and 3) a favourable shift in transfer pricing of material sales (“Other” sales) to overseas affiliates, which are now subsidiaries of the holding company. As the operations of the overseas subsidiaries continue to grow, it is natural for management to localise more material supply in order to reduce costs. As a result, we believe “Other” revenue should continue to decline, and thus management may want to raise transfer pricing in order to capture some of those cost savings at the domestic level.

However, we conservatively forecast OPM to remain around 6% without much further expansion due to constant pricing pressure from customers. Thus, we forecast a five-year OP CAGR of 17% through 2020, slightly ahead of the five-year revenue CAGR of 15%. We do believe there may be upside risk to this assumption, provided customers are willing to pay a premium for a stable supply of certain quality non-conventional products, especially in China.

Bottom-line earnings are forecast to grow 21% y-y in 2016 (compared with pro forma 2015 full year earnings) due to 1) sales revenue growth of 14% y-y; 2) improvement in OPM of 50bps to 6.0% stemming from mix improvement; and 3) a lack of one-off items in the non-operating account. Given our conservative OPM assumption, a five-year earnings CAGR through 2020E of 17% is driven for the most part by revenue growth.

Exhibit 7: New order and backlog trend


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WRI also receives royalty payments from overseas subsidiaries, which are based on affiliate revenues (not profits, and thus not affected by transfer pricing). Royalty income is reflected in other operating income, and during the past five-year period has on average represented 4.2% of respective affiliate gross revenues on our calculations, (vs around 5% of net revenues). We project royalty income to continue to expand in line with WRI’s overall growth outlook, to contribute c25% of pre-tax profit on an annual basis as new Hungary and Mexico operations begin to contribute.

Royalty income reached an historical high of 5.4% of affiliate sales in 2015 due to a sharp increase in royalties from WRT (Woory Industrial Thailand), of which WRI owns only 50%, and inclusion of retroactive royalty payments from Woory Industrial India for the first time. Meanwhile, we assume the royalty income from wholly-owned subsidiaries in China has remained steady in the 4-5% range for the past few years.

Exhibit 8: Pro-forma income statement

(KRW b) ------------- 2015 ------------ 2016E 2017E 2018E

Actual Pro-forma

Sales 197 262 299 351 404

COGS 168 224 255 299 344

Gross profit 28 38 44 52 60

SG&A 18 23 26 31 35

Operating profit 11 15 18 22 25

Financial income 4 6 4 1 1

Financial costs 6 8 6 4 4

Other non-operating gains/ losses 2 1 3 2 3

Pre-tax profit 13 16 21 24 28

Income tax 3 3 4 5 6

Minority interest 0 0 0 0 0

Reported net profit 10 14 17 19 23

Change (y-y %) Sales 14.2 17.5 15.0

Gross profit 17.7 18.2 14.1

Operating profit 20.3 21.4 15.6

Net profit 21.4 15.9 18.0

Margins (%) GPM 14.4 14.4 14.8 14.9 14.8

OPM 5.5 5.7 6.0 6.2 6.2

NPM 5.2 5.2 5.6 5.5 5.6




Beneficiary of surging demand for NEVs

BNPP forecasts NEVs to reach 12.6% of global auto sales by 2020

While the end-game for the global auto industry may be zero-emissions and autonomous driving, the ability of OEMs to offer a variety of options that raise fuel economies and reduce emissions is just as important, as in the interim OEMs must have the right model mix to meet the needs and wants of different consumers while adhering to more restrictive regulatory requirements. Based on BNP Paribas forecasts, NEVs are expected to reach 12.2m units or 12.6% of the 97m unit global auto market by 2020, up from 2.4m units or 2.9% of 84m unit global market in 2015.

We believe it is not a question of whether NEV sales can reach 12m units (BNPP forecast) by 2020, but how OEMs can reach that amount as they must sell more NEVs in order to meet tougher government environmental regulations around the world. If regulatory restrictions are not met, OEMs will face penalties/taxes on sales of cars that do not meet the required standards. Recently, various leading OEMs around the globe have announced aggressive NEV volume growth expectations, and both the China and Korea NEV markets could double in 2016, according to our channel checks. It is clear that the global auto industry continues to embrace the need to supply more NEVs.

The leading Chinese BEV maker, BYD (1211 HK, BUY), guides for a tripling in demand for its BEV and PHEV models this year to c150k units vs c58k units in 2015 based on five new NEV model launches scheduled for 2016. Meanwhile, Tesla (TSLA US, not rated) announced pre-orders of 325k units of its Model 3, even though deliveries are not scheduled to begin until 4Q17; the brand’s total volume stood at c50k units in 2015. Even HMG projects the launch of Hyundai (05380 KS, BUY) Ioniq and Kia (000270 KS, BUY) Niro models could enable its NEV sales to nearly double to 140k units this year vs 70,450 units in 2015.

GM (GM US, not rated) has not stated an official volume target for its BEV models, but according to Chevrolet management, production capacity could support 50k units per annum. Meanwhile, some suppliers claim a 2016 target for the new Chevy Bolt of 30k units per annum (vs peak 28.7k unit sales of Chevy Volt). Toyota (7203 JP, BUY), the leader in hybrids, conservatively expects to meet last year’s 350k unit sales of Prius in 2016, thanks to replacement demand with the launch of its next generation hybrid model.

Exhibit 9: NEVs as % of light-vehicle sales

Sources: Industry associations; IEA; LMC; BNP Paribas

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http://cleantechnica.com/2016/01/15/chevy-bolt-not-limited-to-30000-sales-a-year/


Aggressive Korean NEV targets

Until this year, WRI supplied high voltage PTC heaters only to HMG’s EV models – Kia Soul and Kia Ray – and low voltage PTC heaters to the group’s diesel models. With the launch of Hyundai Ioniq and Kia Niro NEVs, however, the company will begin to supply low voltage PTC heaters to the group’s hybrid models as well. Going forward, we would expect that low voltage PTC heaters may be supplied to HMG’s gasoline-ICE powered models in order to facilitate improvement in fuel efficiencies. Thus, we expect PTC heater sales to HMG to reach KRW7b in 2016, and this amount could double to KRW14b (in the absence of any new supply to gasoline models, which is not part of our current forecast) in 2018E, to contribute a steady 14% of annual PTC heater revenues.

The Korean government set forth its five-year “Green Car Plan” in 4Q15, which targets annual NEV production of 920k units in Korea by 2020, up from 80k units made in 2015. According to this plan, about 30% of total production (340k units) would be to supply domestic demand, and 70% (580k units) to export overseas in 2020. During the next five years, cumulative Korean production of NEVs would total more than 2m units. This is an overly aggressive plan, in our view, especially considering the government’s 2016 budget for green car subsidies stands at cKRW150b, or only enough for an estimated 41k NEV units this year. Unless the government can raise its green car subsidy budget drastically through 2020, we doubt that such market demand could meet government targets, especially given the current low oil price environment. Conversely, meaningful recovery of oil prices would likely help to instigate stronger momentum in global NEV sales.

HMG is developing various NEVs to provide different ways to reduce emissions by 25% and to raise efficiencies of its fleet by 2020. The company plans to increase its offering of “green cars” to 26 models by 2020 from the eight NEV models in 2015. HMG’s existing NEV models contributed 0.9% of global sales in 2015. HMG had four HEV versions and one PHEV of existing sedan models. It also has one FCEV model and two BEV models. HMG plans to maintain annual R&D-to-sales spending of more than 5% (KRW6t-7t) focused on new engine and NEV product development for the next few years.

Following introduction of HMG’s first dedicated NEV platform with the launch of Hyundai Ioniq and Kia Niro this year, HMG targets its total NEV model line-up to reach 2.6% of global sales by 2018. If we assume HMG can reach NEV production of 500k units (5% of global production) by 2020, it would only reach 54% of the government’s target NEV production of 920k units in 2020. Moreover, we estimate that cumulative production would reach only 66% of the more than 2m unit five-year cumulative production target. Nonetheless, even if HMG can reach 500k unit production of NEVs by 2020, we believe WRI would be a clear beneficiary.

Exhibit 10: Government NEV production targets – Korea Exhibit 11: NEV sales trend and outlook – HMG

Source: MoTIE Sources: Companies; BNP Paribas estimates

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China offers great potential for NEV auto parts suppliers

Given the market’s high growth expectations for BEVs in China, we believe WRI could be a major beneficiary as a new supplier to China OEMs, which need to outsource components for new BEV models. In 2015, there were 44 NEV models manufactured by local China brands and 16 supplied by import brands. An estimated 53 new models are in the pipeline to be launched in 2016-17 (see Exhibit 22). We believe the China NEV market offers a positive opportunity for WRI’s business, but have not explicitly included any new China business in our earnings forecasts as the company’s plans to enter the China market have not been finalised at this time. We believe this would be a logical step to facilitate management’s strategy to expand the contribution of its non-conventional product sales toward management’s target of 50% of total revenues, as well as a new catalyst for earnings growth during our forecast period.

The diversification of WRI’s client base into China OEMs is a major potential catalyst, in our view. A broad overview of the NEV strategies of the top nine China OEMs would indicate total target annual NEV production volume of 1.5m units by 2020. The China government targets NEVs to contribute 5% of the country’s annual auto sales volume vs 1.3% (331k units) in 2015. In order for China’s NEV market demand to match the targeted supply, we would have to assume a five-year CAGR of 5% for the China auto industry. At this rate, the government’s NEV target translates to 1.5m units out of a c31m unit total auto market by 2020. If we assume WRI can capture 10% of the BEV market, which is forecast to reach c400k units in 2018, PTC revenues could reach KRW10b (see Exhibit 18).

Exhibit 12: NEV product pipeline – HMG Exhibit 13: Capex and R&D trend – HMG

2015 2020E

HEV HMC Sonata HEV 10 Models

HMC Grandeur HEV

Kia K5 HEV

Kia K7 HEV

PHEV - 8 Models

EV Kia Soul EV 6 Models

Kia Ray EV

FCEV HMC Tuscon ix FCEV 2 Models

Total 7 models 26 models

Source: Hyundai Motor Sources: Companies; BNP Paribas estimates

Exhibit 14: Ownership cost comparison of HMC NEVs Exhibit 15: Ownership cost comparison of Kia Niro HEV

HMC Avante HMC

Ioniq HEV HMC

Ioniq EV

Price (KRW m) 14-24 23-27 40-43

Tax savings (KRW m) - 1.4 1.4

Government subsidy (KRW m) - 1.0 16.0

Adjusted price (KRW m) 20.9 24.2 26.2

Gas mileage (mpg) 38.0 52.0 -

Gas mileage (Km/l) 16.4 22.4 -

Annual distance (km) 24,135 24,135 -

Fuel consumption (l) 1,474 1,077 -

Gas price (KRW/l) 1,400 1,400 -

Annual operating cost (KRW m) 2.06 1.51 0.50

Payback period (year) 6.0 3.4

Average compact SUV Kia Niro HEV

Price (KRW m) 19-25 23-27

Tax savings (KRW m) - 1.4

Government subsidy (KRW m) - 1.0

Adjusted price (KRW m) 22.0 24.2

Gas mileage (mpg) 35.1 45.9

Gas mileage (Km/l) 14.9 19.5

Annual distance (km) 24,135 24,135

Fuel consumption (l) 1,617 1,237

Gas price (KRW/l) 1,400 1,400

Annual operating cost (KRW m) 2.26 1.73

Payback period (year) 4.1

Sources: Hyundai Motor; BNP Paribas estimates Note: average compact SUV values based on Chevy Trax, RS QM3, SYMC Tivoli Sources: Companies; BNP Paribas estimates

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5% or more of sales to be spent on R&D



The China government plans to offer BEV and PHEV subsidies, which will gradually diminish, through 2020. In addition to subsidies, the government also recognises the infrastructural needs of electrified vehicles and thus targets the construction of 12k new centralised charging stations, 4.8m new charging poles and four East-West and four North-South inter-city charging networks and 1k inter-city fast charging facilities by 2020. While we cannot guarantee such rapid penetration of NEVs in the China market, the potential strength of NEV market growth backed by the government’s willingness to support growth is clear.

We note that Hanon Systems (018880 KS, BUY) has openly discussed intentions to expand its China-related business through the establishment of JVs and the willingness to grow inorganically through acquisitions. At the very least, as a supplier to Hanon, we believe that taking a serious look at China opportunities is in the best interest of WRI. Despite the lack of China government regulations requiring auto parts suppliers to set up joint ventures and WRI’s existing China subsidiaries supplying conventional parts, we believe a local JV partner could help WRI to gain better access to China OEMs, as WRI could focus on its core manufacturing competencies and leave the sales and marketing to a local JV partner.

Exhibit 16: Number of NEV models available in China Exhibit 17: NEV target under the 13th FYP

Number of model available BEV PHEV Total

2015

Domestically produced 33 11 44

Imported 5 11 16

Total 38 22 60

2016-2017E

Domestically produced 30 23 53

Imported - - -

Total 30 23 53

(%, units) 2020E

Main cities/provinces Min target as % of vehicle sales 6.0

Min target (per city/ province) 70,000

Second cities/provinces Min target as % of vehicle sales 5.0


Other cities/provinces Min target as % of vehicle sales 3.0


Total target as % of vehicle sales 5.0

Total target (units) 1,500,000

Source: Companies Source: Ministry of Science and Technology

Exhibit 18: China EV sales Exhibit 19: China EV fleet

Sources: CEIC; BNP Paribas estimates Sources: CEIC; BNP Paribas estimates

30

35

40

45

50

55

60

65

70

0.0

0.5

1.0

1.5

2.0

2.5

2015 2016E 2017E 2018E 2019E 2020E

(%)(m units) BEV (LHS) Total volume (LHS)

BEV portion (RHS)

10

15

20

25

30

35

40

45

50

0

1

2

3

4

5

6

7

8

9

2015 2016E 2017E 2018E 2019E 2020E

(%)(m units) BEV (LHS) Total volume (LHS)

BEV portion (RHS)



Exhibit 20: Major China OEMs’ NEV strategies

OEM NEV volume (2020E) Strategy

Geely 900,000 Released 'Blue Geely initiative' on 18 November 2015

Target to have 90% of Geely's auto sales from new energy vehicles by 2020, 65% of which will be HEV

SAIC 300,000 Released its NEV strategy "Green Core" on 6 Nov 2015, target at selling 300,000 NEV PVs p.a. and 22,000 NEV CVs p.a.by 2020 ( 15%-20% market share)

Developing 2nd generation EDU (Electric Drive Unit) technology by 2020, targeting range of >350KM for their BEVs

Great Wall - Released its NEV strategy in Sep 2015, will develop BEV and 48V-BSG (48V Belt Starter Generator) car for sedans and PHEV for SUVs

Will launch two sedan EV models in 2016

Chery 200,000 Released its NEV strategy in Aug 2015,target annual NEV sales at 200,000 units by 2020

Focus on BEV(NCM battery) and PHEV with secondary focus on FCV technology, will introduce a PHEV in 2015 and a BEV sedan, a BEV SUV and PHEV SUV in 2016

Changan 400,000 Released its NEV strategy on 6 March 2015, target to sell a total of 400,000 NEVs by 2020 and 2m units by 2025 (10% market share)

Will develop BEV platform (for A0 and A class) and PHEV platform (for B and C class) with a focus on BEV

BAIC Group 200,000 Released NEV strategy on25 January 2015, target to reach annual NEV sales volume of 200,000 units by 2020

Will Introduce 11 new models by 2016,and invest charging station business mainly in four major cities (Beijing, Shanghai, Guangzhou and Shenzhen)

GAC 200,000 Released its "153" NEV strategic plan in 2015,target sell 200,000 NEVs p.a. by 2020 (incl. Chinese and JV brands) and introduce six NEV models in the next five years

Develop one R&D platform, five core technologies and three major product series (BEV/PHEV/HEV)

DFM - Released its NEV strategy in March 2015 , targets to sell >5,000 NEVs in 2015

New NEV strategy for 2016-2020 due to be announced by end 2015 but is still pending

FAW Group 200,000 Released NEV strategic plan on 20 April 2014 with a target market share of 15% in NEV market by 2020

Will start mass-production of powertrain system, battery in 2016, launch seven NEV models by end-2016, including one BEV sedan, three PHEV, two electric CV and one Hybrid CV

Sources: Company data; BNP Paribas

Exhibit 21: China government subsidy on passenger NEV

Subsidy (RMB '000 per unit) Requirement 2013 2014 2015 2016 2017E 2018E 2019E 2020E

BEV passenger vehicle 80km≤R＜150km (2013-2015) 35 33 32 - - - - -

100km≤R＜150km (2016-2020) - - - 25 20 20 15 15

150km≤R＜250km 50 48 45 45 36 36 27 27

R≥250km 60 57 54 55 44 44 33 33

PHEV (incl. extended range electric vehicle) passenger vehicle

R≥50km 35 33 32 30 24 24 18 18

Fuel-cell passenger vehicle n.a 200 190 180 200 200 200 200 200

Sources: MIIT; BNP Paribas



Exhibit 22: Major Chinese OEM NEV model pipeline

2016E 2017E

BAIC ▪ EU260 (Senova D50) ▪ EV260 (Senova D20) ▪ D80 EV ▪ EU300 (Senova D50) ▪ X25 EV ▪ Sonata PHEV [JV - Hyundai] ▪ Benz E350eL [JV - Benz] ▪ GLC 350e [JV - Benz]

GWM ▪ A0 Sedan EV(C20R) ▪ SUV PHEV

Brilliance ▪ BMW X1 PHEV [JV - BMW] ▪ BMW Zino PHEV [JV - BMW] ▪ BMW 225xe [JV - BMW]

GAC ▪ GA3S PHEV ▪ GS4 EV ▪ GS4 PHEV

Changan ▪ Benben EV ▪ Eado PHEV ▪ CS75 PHEV (SUV)

DFM ▪ Fengshen A60 EV ▪ Fengxing S50 EV

▪ New PHEV

Geely ▪ Zhidou ZD-3 [JV - Xindayang] ▪ New PHEV ▪ Zhidou Z-series [JV - Xindayang]

BYD ▪ BYD Yuan(SUV/PHEV) ▪ BYD Shang(MPV/PHEV) ▪ BYD Qin (EV) ▪ New BYD E6

SAIC ▪ Roewe E950 ▪ PHEV SUV ▪ Roewe E550 F/L ▪ Roewe E50 F/L ▪ C-Class sedan PHEV [JV - VW] ▪ Cadillac CT6 PHEV [JV - GM] ▪ Baojun E100 [JV - GM Wuling]

▪ A-Sedan EV [JV-VW] ▪ PHEV 1 [JV-GM]

Chery ▪ Arrizo 7 PHEV ▪ Arrizo 3 EV

Zoyte ▪ Yun 100S EV ▪ Zoyte E200

JAC ▪ A00 Sedan EV ▪ iEV6S EV

JMC ▪ Jiangling E200 ▪ Jiangling E300 ▪ Jiangling E170

FAW ▪ A6L e-tron ▪ e-Golf

Qoros ▪ Qoros Q-lectriq (SUV) [JV]

Lifan ▪ Lifan 820 EV ▪ New PHEV

Source: Company data



Second-tier auto parts supplier with first-tier relationships

Global leading climate control parts supplier

The majority of WRI’s conventional products are climate control-related mechanical and electrical components, which it has supplied to HMG since its inception in 1989. The company began to export to overseas customers in 2000. Since then, the company has expanded its product mix to include non-conventional electronic and eco-friendly auto parts, and its global footprint to six overseas manufacturing facilities in five countries – one in Slovakia, one in Hungary and four in Asia (Thailand, India and two in China) – and two warehouse facilities in the US and Slovakia. Its latest overseas plant is slated to commence operations in Mexico in 2H16. In Korea, Woory has four plants (two in Pyeongtaek, one in Cheonan and one in Osan) and one R&D technical centre (Yongin).

WRI’s three main conventional products are 1) HVAC actuators, 2) Control heads and 3) Clutch coils, which are related to a vehicle’s climate control system. An HVAC actuator is a device used for moving HVAC (heating, ventilation, air condition) door flaps to control temperature, fan speed, and air circulation inside of a vehicle by allowing in external fresh air. A control head is a control panel for the interior climate-control mounted on a car’s dashboard. A clutch coil is a part that switches a car’s air conditioner compressor on and off and is installed with a compressor-belt pulley.

WRI’s main customers of climate control equipment – Denso (24% global sales volume market share as of 2014) Hanon Systems (13%), Valeo (13%), Behr (unlisted, 8%), Calsonic (7248 JP, not rated, 5%), etc – are leaders in the supply of climate control systems for auto makers. Thanks to this strong diversified client base, WRI became the largest global supplier of HVAC actuators in 2015 with a sales volume market share of c22%, surpassing the former market leader Saia-Burgess (not listed), a wholly-owned subsidiary of Johnson Controls (JCI US, not rated). Other traditional competitors such as TRW (TRW US, not rated) and Robert Bosch (not listed), which are larger companies with a more varied product line-up, have exited or reduced market shares, as smaller suppliers with the ability to focus on resources on specific parts have taken the lead in such conventional product areas. While not advanced high-margin products, we believe that conventional parts such as HVAC actuators will remain a cash cow business for WRI.

Exhibit 23: Conventional parts

Part Figure Description

HVAC actuator

A device for moving HVAC door flap to control temperature, fan speed, and air circulation inside of a vehicle

Clutch coil

A component that switches a compressor on and off for air conditioner installed with compressor a V-belt pulley

Control head

A control panel including the system mounted in the dashboard for controlling heater and air conditioner systems

Source: Woory Industrial

Exhibit 24: Woory HVAC actuator market share trend and outlook

2011 2012 2013 2014 2015 2016E 2017E 2018E

Global auto volume (A) (m units) 73 78 81 84 85 88 90 93

Avg HVAC actuator/vehicle (B) (units) 3 3 3 3 3 3 3 3

HVAC actuator sales volume (C = A * B) (m units) 201 213 221 230 234 240 246 254

Woory global sales volume (D) (m units) 33 38 41 46 51 62 69 76

Woory market share (D/C) (%) 16.5 17.9 18.6 20.0 21.6 25.8 28.0 30.1




Keeping pace with the evolution of the auto industry

Management’s product strategy is focused on developing more than one world-class product to be used in NEVs, in addition to its showcase product PTC heaters, which are self-regulating heaters used to avoid overheating and offer energy savings, lower equipment cost and longer lifespan/lower maintenance cost. Management targets R&D investment to sales of 5% (vs 3.4% in 2015) through the cultivation of its engineering human resources to acquire core technologies. R&D staff of 100 people accounts for approximately a quarter of WRI employees.

Main examples of non-conventional climate control components are 1) High voltage electronic PTC heaters used in BEVs and low voltage PTC pre-heaters for diesel and hybrid vehicles; 2) Active air flap actuator used in the radiator grille of recent models launched by HMG to assist in thermal management; 3) Coolant heaters; and 4) Control power modules. These types of components are used in various climate control modules and systems, especially in NEVs and hybrids, while some are now being utilised in gasoline ICE-powered vehicles in order to save energy and raise fuel efficiencies. Please see our initiation note on Hanon Systems (11 December 2015, which is one of WRI’s main customers for both conventional and non-conventional products, which supplies climate control and thermal management systems.

The company also has a line-up of non-conventional electronic and sensor components, such as 1) Electric current monitoring sensors used in PRAs (power relay assembly), BMSs (battery management system) and inverters/converters to monitor the current for high-precision response; 2) HLDs (headlamp levelling device) used in adaptive headlamp systems to adjust the angle and distance of headlamp projection; 3) EPBs (electric parking brake) actuators; 4) SBRs (seat belt reminders) and 5) TSPs (touch sensor package). These types of components are used in various NEV modules, ADAS (advanced driving assistance systems) and are now standard equipment in many passenger cars. Key customers of electronic components are Hyundai Mobis, Mando Corp, Hanon Systems, Denso, Valeo, etc.

WRI was one of the first domestic auto parts makers to locally develop and launch 1) EPBs actuators, Cable-puller, MoD (motor-on-disk type), MoC (motor-on-caliper type); 2) current sensors like PWMs (pulse width module), which actuate vehicle interior fan blower motor speed by changing input voltage (power supplied) into a pulse signal; 3) SBRs, which are membrane switch-type sensors to alert a passenger to wear a seat belt; and 4) TSPs (touch sensor package) installed on exterior door handles to lock/unlock doors through detection of a wireless password embedded in the smart key.

Exhibit 25: Non-conventional parts


PTC heater

An auxiliary quick heating system utilizing PTC plates with fast-heating response times and self-regulating plateau temperatures (high voltage 350V and low voltage 12V types)

Active air flap actuator

A type of motor that adjusts the opening of the air flap equipped in the radiator grill to improve fuel efficiency of vehicles by enabling adjustment of external air flow

Coolant heater

A device that warms an engine prior to starting to reduce idling time

Power module (for blower motor)

A system that changes the input voltage to pulse signals to control the blower motor speed in climate control systems



https://eqresearch.bnpparibas.com/researchfs/CR__f8803c0da6cc48d6b9273e0ffaa1acc1.pdf


Some additional examples of new technology products within the non-conventional category are 1) 3-way cooling valves, a motorised devise to control the flow of water-cooling thermal management systems; 2) COD heaters (cathode oxygen depletion), a heating device used in FCEVs; 3) solar energy chargers, a battery charger utilising solar energy; and 4) climate sensors, sensors installed in the interior cabin of passenger vehicle to control the amount of air pollution (CO, CO2, NOx).

The company has developed a LIN (local interconnect network) stepper motor actuator for use in autonomous-driving smart cars. As smart cars may allow the driver to be seated in alternative positions within the vehicle, the HVAC actuator may need to be placed in different positions as well. The LIN actuator has the networking capability necessary to accommodate such changes in position. In order to provide different climate controls for different passengers, more than eight LIN stepper actuators may be used in one vehicle.

Exhibit 26: Non-conventional parts (continued)


Current sensor

Sensors that detect the flow of electricity along a wire by measuring the magnetic field that is set up by the flow of the current

HLD (Headlight levelling device)

A device used in adaptive headlamp systems to adjust the angle and distance of headlamp light projection

EPB (Electric parking brake)

A device that allows electronic brakes when the car is at standstill, and unwinds the brake when the accelerator is pressed (Cable-puller, MoC – motor on caliper – and MoD – motor on disk – types)

SBR (Seat belt reminder)

A membrane switch-type sensor that alerts passengers to wear seat belts

TSP (Touch sensor package)

Sensors attached to exterior door handles to lock/unlock doors through detection of a wireless password embedded in the smart key

Resistors (for blower motor)

A component that controls a blower motor speed by changing current with the input signal from the register


Exhibit 27: Woory Industrial’s main products




Initiate coverage at BUY; 44% potential upside to KRW41,000 TP

Justified valuation premium

We initiate coverage of WRI with a BUY rating. Our TP of KRW41,000 offers 44% potential upside and is based on DCF of operating cash flows through 2020E, utilising a risk free rate of 2.2% and market risk premium of 6.0% for WACC of 4.2%. The TP equates to a 2016E P/E of 20x, which is in line with the previous peak valuation. We back-up our DCF-based TP with average of fair value estimates derived from EV-ROIC (KRW39,836) and P/B-ROE (KRW39,784), which approximates our DCF-based TP.

We believe WRI’s valuation premium at a target 2016E P/E of 20x relative to Korean auto parts suppliers reflects 1) near 50% exposure to a diversifying global (non-HMG) customer base; 2) 27% revenue exposure to higher-margin non-conventional products in 2015, expanding to 50% by 2020E due to NEV end-product demand; and 3) an industry-leading five-year earnings CAGR of 17% through 2020E. WRI’s current valuations seem to be more in line with those of the Korean EV battery supply chain (Samsung SDI, Ecopro), rather than auto parts peers. With the upside risk of China penetration to our earnings forecast, we feel comfortable the valuation premium will continue to be justified.

Exhibit 28: Fair value calculation (DCF method)

2016E 2017E 2018E 2019E 2020E

(KRW b) (KRW b) (KRW b) (KRW b) (KRW b)

EBIT 18 22 25 29 32

Taxes (4) (5) (6) (6) (7)

NOPAT 14 17 20 22 25

Depreciation 9 10 11 13 14

Gross cash flow 23 27 31 35 39

Change in working capital (3) (3) (3) (3) (3)

Capital expenditures (17) (17) (17) (17) (17)

FCFF 3 7 11 15 19

WACC (%) 4.2 Terminal growth rate (%) 0.0 Discount free cash flow 3 5 10 12 16

Total discount free cash flow 46 Total terminal value 390 Enterprise value 437 Net debt 59 Equity Value 377 Number of shares (m) 9 DCF value per share (KRW) 41,344




Focus to remain on earnings growth, not dividends

Following the reorganisation of Woory Industrial into a holding company structure in 1Q15, the operating company was left with the domestic operations, while a majority of the cash and overseas affiliate holdings were transferred to the holding company in order to fulfil its minimum asset requirements. As a result, net gearing stood at 114% (vs 73% pre-split) and adjusted ROE at 25% (based on the 2015 pro forma income statement) at the end of last year (vs 20% pre-split). Despite the need for continued capex of KRW17b per annum, we forecast net gearing to improve to 41% by 2018 due to steadily increasing cash flow generation over the next three years as ROE is projected to average 26%.

In terms of shareholder returns, WRI raised dividend per share by 67% y-y to KRW50 in 2015 in order to keep the total payout steady in the range of KRW450m. Although we project more than 50% CAGR in dividends through 2018, albeit from a low base, the payout ratio should remain minimal at well below 10%, as management remains focused on growth through 2020. However, given the founder and his son are the largest shareholders of the holding company, which in turn is the largest shareholder of WRI, we can expect more meaningful dividend payout in the long-term as gearing subsides and ROE trends downward toward 20%.

Key risks

Key downside risks to our view and target price are the following:

1 Inability of WRI to expand its China business would represent a significant missed opportunity for the company to expand its non-conventional parts business, as we expect China’s NEV growth to be one of the most robust during our forecast period due to government commitment to electric vehicles.

2 Potential for disappointing global NEV sales due to the low fuel price environment is an external risk, as consumer demand may remain weak due to longer payback periods to recoup the higher initial cost of purchasing a hybrid or electric vehicle through operational cost savings.

Exhibit 29: Fair value calculation (EV-ROIC and P/B-ROE)

2016E 2017E 2018E

Operating invested capital (KRW b) 126 140 151

Return on invested capital (KRW b) 17 20 24

Shares (m) 9 9 9

ROIC (%) 14.0 15.3 16.3

WACC (%) 4.2 4.2 4.2

ROIC/WACC 3.35 3.67 3.90

Fair EV (KRW b) 422 514 587

Net debt/(Net cash) (KRW b) 59 56 45

Core business value (KRW b) 363 458 542

Core business per share (KRW) 39,774 50,170 59,359

Investment asset per share (KRW) 62 62 62

Fair value (KRW/share) 39,836 50,233 59,422

ROE 29.5 26.7 25.1

COE 5.8 5.8 5.8

ROE/COE 5.12 4.63 4.35

g 0% 0% 0%

(ROE-g)/(COE-g) 5.12 4.63 4.35

BVPS 7,763 9,778 12,145


P/B (x) 3.6 2.9 2.3

P/E (x) 15.5 13.4 11.3





Exhibit 30: 12M FWD P/E band Exhibit 31: 12M FWD P/BV band

Note: Historical data based on pre-HoCo split shares on 01 April 2015. Sources: Bloomberg; BNP Paribas estimates


Exhibit 32: Historical 12M FWD P/E Exhibit 33: Historical 12M FWD P/BV



Exhibit 34: BNP Paribas Asian auto-parts maker coverage – EPS growth

Note: FY15 EPS for Woory Industrial and Mando on a pro-forma basis Sources: Bloomberg; BNP Paribas estimates

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

2011 2012 2013 2014 2015 2016

(KRW)

19.4x

15.8x

12.2x

8.6x

4.9x

HoCo OpCo split

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

2011 2012 2013 2014 2015 2016

(KRW)

3.6x

2.8x

1.9x

1.1x

0.3x

HoCo OpCo split

0

5

10

15

20

25

30

2011 2012 2013 2014 2015 2016

(x)

+2 SD

+1 SD

Avg

-1 SD

-2 SD

HoCo OpCo split

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

2011 2012 2013 2014 2015 2016

(x)

+2 SD

+1 SD

Avg

-1 SD

-2 SD

HoCo OpCo split

0

5

10

15

20

25

WooryIndustrial

HanonSystems

HyundaiMobis

HyundaiWia

Mando Aisin Seiki DensoCorp

Peeraverage

(y-y %) 2015-2018E EPS CAGR



Exhibit 35: Global Auto Parts – valuation comparison Local CCY (FY16E, F3/17E) BBG code Rec Price Target price Upside/ downside P/E P/BV EV/EBITDA Pay-out ratio Div. yield ROE

(LC) (LC) (%) (x) (x) (x) (%) (%) (%)

Korea Woory Industrial 215360 KS Buy 28,550 41,000 43.6 16.1 3.7 11.8 5.7 0.4 28.8

Hanon Systems 018880 KS Buy 9,220 12,000 30.2 15.7 2.4 8.0 6.1 0.4 16.4

Hyundai Mobis 012330 KS Buy 236,000 270,000 14.4 6.0 0.8 5.7 2.8 0.5 13.3

Hyundai Wia 011210 KS Buy 101,000 170,000 68.3 5.2 0.7 3.8 5.4 1.0 14.9

Mando 204320 KS Buy 169,500 176,000 3.8 8.1 1.2 5.4 2.5 0.3 15.4

S&T Motiv 064960 KS n/a 66,900 n/a n/a 10.0 1.3 5.6 17.1 1.7 14.1

Average 10.2 1.7 6.7 6.6 0.7 17.2

US

Autoliv ALV US n/a 111.6 n/a n/a 16.5 2.7 8.1 35.4 2.1 16.4

Borg Warner BWA US n/a 34.2 n/a n/a 10.5 2.0 6.4 16.5 1.6 19.4

Delphi DLPH US n/a 71.6 n/a n/a 11.8 6.3 8.1 18.9 1.6 59.1

Johnson Controls JCI US n/a 38.4 n/a n/a 10.2 2.1 7.9 30.4 3.0 20.0

Magna MGA US n/a 39.8 n/a n/a 7.8 1.4 5.2 19.5 2.5 22.0

Average 9.9 3.2 7.1 22.9 2.4 33.7

Europe

Continental CON GY n/a 184 n/a n/a 12.0 2.5 5.9 28.0 2.3 21.7

Valeo FR FP n/a 128 n/a n/a 12.2 2.4 5.3 31.1 2.5 21.6

Average 12.1 2.4 5.6 29.5 2.4 21.6

Japan

Aisin Seiki 7259 JP Reduce 3,960 3,300 (16.7) 12.4 0.9 (0.1) 5.0 0.4 7.6

Denso Corp 6902 JP Hold 3,954 4,600 16.3 12.3 0.9 (0.9) 4.2 0.3 7.5

Mitsubishi Electric 6503 JP n/a 1,106 n/a n/a 10.6 1.1 1.5 28.1 2.7 10.9

Sumitomo Electric 5802 JP n/a 1,216 n/a n/a 8.7 0.6 0.2 28.6 3.3 7.6

Toyota Boshoku 3116 JP n/a 1,701 n/a n/a 9.7 1.2 0.2 21.1 2.2 12.6

Average 10.3 1.0 0.3 20.5 2.1 9.6

ROW

Motherson Sumi MSS IN n/a 253 n/a n/a 19.4 6.3 0.5 34.4 1.8 34.7

Average 19.4 6.3 0.5 34.4 1.8 34.7

Global average 11.1 2.2 4.6 17.8 1.6 20.4

Priced at close of business 11 Apr 2016; Sources: Bloomberg; BNP Paribas estimates for covered stocks

Exhibit 36: Korea EV supply chain– valuation comparison (KRW) BBG code Rec Price Target price Upside/ downside P/E P/BV EV/EBITDA Pay-out ratio Div. yield ROE

(LC) (LC) (%) (x) (x) (x) (%) (%) (%)

Battery Samsung SDI 006400 KS Buy 101,500 142,000 39.9 33.7 0.5 11.4 33.0 1.0 1.7

LG Chem 051910 KS Buy 320,000 360,000 12.5 15.1 1.6 6.9 10.7 0.7 11.4

SK Innovation 096770 KS Buy 170,000 220,000 29.4 8.8 0.9 6.6 2.9 0.3 10.9

Average 19.2 1.0 8.3 15.5 0.7 8.0

IT-Auto Parts

LG Innotek 011070 KS Buy 81,900 97,000 18.4 17.9 1.0 4.8 38.5 2.1 6.0

LG Electronics 066570 KS Buy 64,300 74,000 15.1 16.8 0.8 4.8 26.1 1.6 5.0

Average 17.3 0.9 4.8 32.3 1.9 5.5

Battery Material

POSCO Chemtech 003670 KS n/a 11,950 n/a n/a 10.0 1.3 4.9 14.7 1.5 12.9

Soulbrain 036830 KS n/a 45,200 n/a n/a 8.6 1.3 4.5 9.7 1.1 15.9

Ecopro 086520 KS n/a 13,150 n/a n/a 33.7 n/a n/a n/a n/a 7.3

Average 9.3 1.3 4.7 12.2 1.3 14.4

EV average 15.8 1.1 6.3 19.4 1.2 9.1

Priced at close of business 11 Apr 2016 Sources: Bloomberg; BNP Paribas estimates for covered stocks



Appendix

Company background

Woory Industrial Holdings (WRH, 072470 KS KS) was established through reorganisation of Woory Industrial (WRI, 215360 KS) through a holding company-operating company split in 1Q15. Including the main subsidiary WRI, the holding company has 10 subsidiaries, of which two are domestic and eight are overseas. Six of the overseas subsidiaries are manufacturing operations and two are regional sales distribution companies.

WRI was founded in 1989 by the Chairman and CEO Myung Joon Kim. He began his own auto parts supply operations to parlay his 21 years of experience working within the Hyundai Group and the related Halla Group in various capacities. WRI has contributed to the localisation of auto parts supply within the Korean auto industry, as well as to the overseas expansion of Korean parts suppliers and OEMs. Trained as an engineer, his son and CEO of WRI, Jung Woo Kim, has furthered growth through the development of more advanced non-conventional auto parts.

Before the holding company reorganisation, Myung Joon Kim was the largest shareholder of WRI with 24.78% ownership stake, and is now the largest shareholder of WRH with 49.68% ownership stake. Together with his son, Jung Woo Kim, who owns 28.95% of the holding company, the family owns 78.63% of WRH, which in turn owns 39.5% of WRI.

Exhibit 37: Organisational chart – pre-split


Exhibit 38: Organisational chart – post-split


Major shareholdersListed companies

50%

50%

100%

100%

60%

100%

WooryIndustrial

IndiaPlatech Slovakia Tianjin Hungary

Wecam Thailand America Dalian

Kim Myung Joon

14.4%

Kim Jung Woo

24.8%

100%

50%

100%

Major shareholdersListed companies

60%

Woory Holdings

ThailandWoory Industrial Platech America Dalian

Wecam Slovakia India Tianjin

Kim Myung Joon

28.95%

100%

50% 100%

100% 100%

100%

Kim Jung Woo

49.68%

39.5%

50%

Hungary

50%



Woory affiliates

The domestic affiliates are Woory Platech (not listed), which makes plastic mouldings for WRI, and Wecam (not listed), which provides plastic painting for WRI. WRI operates domestic production facilities in Pyeongtech, Cheonan and Osan, which manufacture heater control assembly, LPM/PWM, PCB assembly (automotive heater control, air conditioner, camera, touch-sensor), etc. The R&D centre is based in Yongin. Overseas affiliates support the operations of major customers in each respective region.

Woory Platech (WRP, established 1999) is located in Cheonan and manufactures IMD heater control panels, membrane horn switch and heater control assembly. It also produces IMD (mobile phone case, keypads, P logo badge). Major customers are WRI, LGE, LG Chem.

Wecam (WCM, established 2014) is located in Osan and provides plastic painting for WRI.

Woory China Tianjin (WRCT, 100% ownership, established 2003, USD2m paid-in capital, 300 employees) manufactures HVAC actuator, heater control assembly, power TR and sensor.

Woory China Dalian (WRCD, 100% ownership, established 2011, USD1m paid-in capital, 220 employees) manufactures clutch coil assembly.

Woory India (WRID, 100% owned, established 2014, USD1m paid-in capital, 494 employees) manufactures HVAC actuator, heater control assembly, TR resister, clutch coil assembly, and fuel sender.

Woory Thailand (WRT 50% owned, established 2004, USD0.5m paid-in capital, 115 employees) manufactures HVAC actuator, clutch coil assembly, heater control assembly, thermocon and temperature switch.

Woory Slovakia (WRS, 50% owned, established 2009, USD0.115m paid-in capital) manufactures HVAC actuator, heater control assembly and provides engineering sales, warehouse management, technical support and services.

Woory America (WRA, 100% owned, established 2004) provides engineering sales, warehouse management, technical support and customer services.

Woory Hungary (WRH, 60% owned, established 2015) provides engineering sales, warehouse management, technical support and customer services

Exhibit 39: DuPont analysis

FY15 FY16E FY17E FY18E FY19E FY20E

Net margin (%) 5.2 6.2 6.1 6.2 6.2 6.2

Asset turnover (%) 140.7 143.8 151.1 151.6 153.0 153.9

Equity multiplier (x) 3.4 3.3 2.9 2.7 2.5 2.3

ROE (%) 25.1 29.5 26.7 25.1 23.5 22.2

Notes: FY15 on a pro-forma basis Sources: Woory Industrial; BNP Paribas estimates



Exhibit 40: Shareholding structure

Source: Woory industrial

Exhibit 41: Woory Industrial history

Date Event

Feb 1989 Founded as Woory Industrial Company

Apr 2001 Started overseas business through exports to Delphi Thermal & Interior

Jul 2003 Listed on KOSDAQ

Aug 2003 Established Tianjin Woory Electronics in Tianjin, China

Apr 2004 Established Woory Automotive India in Chennai, India

Oct 2004 Established Woory America in Michigan, US

Sep 2006 Received DaimlerChrysler NEA Supplier Quality Award

Apr 2008 Received Best Supplier of the Year Award from Visteon

Oct 2009 Established Woory Slovakia in Ilava, Slovakia

Jun 2011 Received Best Delivery Supplier of the Year Award from Denso US

Jun 2011 Established second Chinese plant in Dalian, China

Jun 2014 Received Denso Quality Award

Jul 2014 Established Woory industrial Hungary

May 2015 Split into holding company, Woory Industrial Holdings, and operating company, Woory Industrial


Exhibit 42: Major events vs share price


Woory Industrial Holdings39.5%

Standard Life Investement

10.3%

Assetplus Investment

Management6.2%

Others44.1%

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

(KRW) PTC heater order of 150,000units/year from HMG

Control head order of KRW60b from Hanon Systems

PTC heater order of KRW33b from GM global

Control head order of KRW34b from Valeo

PTC heater order of KRW22b from Hanon Systems

Clutch coil order of KRW56b from Visteon

HVAC actuator order of KRW16b from Valeo

HVAC actuator order of KRW39b from Visteon

HVAC actuator order of KRW63b from Hanon SystemsHVAC actuator order of KRW30b from Doowon CC

China announces the extension of NEV subsidies beyond 2015

Announces split into a holding co and operating co

Re-listed as op-co

VW emissions scandal

HVAC actuator order of KRW68b from ValeoHVAC actuator order of KRW39b from Denso Japan



PTC heater: Improving fuel efficiencies in any vehicle

A PTC Heater (Positive Thermal Coefficient) can produce high power when it is cold, rapidly heat itself to a constant temperature, maintain that temperature and cool down quickly as well to avoid overheating. As it can maintain a constant temperature without the need for regulating electronics to prevent overheating, it is a good self-regulating heater, which offers energy savings, lower equipment cost and longer lifespan/lower maintenance cost with reduced overheating risk. Moreover, PTC heaters can be customised and embedded in smaller spaces according to vehicle design needs. The end result is a useful combination of efficiency and safety.

Energy efficiency of traditional heating systems is low due to the lack of precision, as energy is consumed until temperature is sufficiently raised and then it must be shut down and restarted over and over again in an attempt to maintain consistent temperature. Due to the exponentially increasing resistivity of ceramics used as the heating element in PTC heaters, instead of traditional resistance wire, the heater can never be warmer than a set temperature. PTC works as a semiconductor sensitive to temperature change. Made from polycrystalline ceramic with a basis of barium titanate, the PTC heating system can have a defined maximum temperature for which resistance increases sharply in the thermistors as the temperature is approached.

PTC heaters are used in a variety of vehicle types for interior cabin heating purposes. One usage for low voltage PTC heaters is as an auxiliary quick heating system for diesel cars during cold weather to heat air directly when the ignition is on. EVs can use high voltage PTC heaters for direct and rapid heating of air inflow with voltage of 350V vs low voltage of 12V. WRI’s PTC heaters are being used for the first time in hybrids for HMG’s new dedicated NEV platform models (HEV versions of HMC Ioniq and Kia Niro). We expect them to be used in PHEV and BEV versions as well following usage by leading US BEV makers and existing HMG BEV models.

Exhibit 43: PTC heater Exhibit 44: PTC heater

Source: Woory Industrial Source: Pelonis Tech



Corporate governance

Board structure

Number of independent directors (ID) 3

Percentage of IDs in the board (%) 33.3 (1/3)

ID participation/attendance at board meetings (%) 11

ID participation in audit/remuneration committees n/a

ID terms (years of service, re-election/replacement procedures) 2 years; Nominating Committee will make recommendations to the Board on all appointments, while appointments are finalised at the general meeting

Sources: Woory Industrial; BNP Paribas

Audit practises

Auditor Daejoo AC

Length of service 1year

Reporting incidents NIL

Fee track record 690m KRW (FY15)

Policy on change of Audit firm Reviewed annually at the AGM


Compensation and remuneration

Directors' remuneration vs. earnings/ROE/share performance KRW167m (FY15)

Changes/stability in senior management As the company was split into an operating company on 1 April 2015, 100% of senior management was newly appointed in FY15

Incidents of termination of senior management NIL

Track record on Insider sales NIL


Shareholders' rights

Communication - shareholder participation in AGMs/EGMs Periodic and timely communication with shareholders for AGM/EGM

Related party transactions In FY15, the company had KRW60.6b in related party transactions for sales, purchase of raw materials, services, fixed asset purchase and disposal, etc

Voting issues - policies, incidents of rejected proposals NIL




Financial statements Woory Industrial


Profit and Loss (KRW b) Year Ending Dec 2014A 2015A 2016E 2017E 2018E

Revenue - 197 299 351 404

Cost of sales ex depreciation - (162) (245) (289) (333)

Gross profit ex depreciation - 34 54 63 71Other operating income - 0 0 0 0

Operating costs - (18) (26) (31) (35)

Operating EBITDA - 17 27 32 36Depreciation - (5) (7) (8) (9)

Goodwill amortisation - (1) (2) (2) (2)

Operating EBIT - 11 18 22 25Net financing costs - (2) (1) (3) (3)

Associates - 0 0 0 0

Recurring non operating income - 4 4 5 6

Non recurring items - 0 0 0 0

Profit before tax - 13 21 24 28Tax - (3) (4) (5) (6)

Profit after tax - 10 17 19 23Minority interests - (0) (0) (0) (0)

Preferred dividends - 0 0 0 0

Other items - 0 0 0 0

Reported net profit - 10 17 19 23Non recurring items & goodwill (net) - 1 2 2 2

Recurring net profit - 12 19 21 25

Per share (KRW)

Recurring EPS * - 1,262 2,028 2,340 2,747

Reported EPS - 1,130 1,826 2,115 2,497

DPS - 50 100 130 170

Growth

Revenue (%) - - 52.0 17.5 15.0

Operating EBITDA (%) - - 61.3 18.0 13.9

Operating EBIT (%) - - 65.7 21.4 15.6

Recurring EPS (%) - - 60.7 15.4 17.4

Reported EPS (%) - - 61.5 15.9 18.0

Operating performance

Gross margin inc depreciation (%) - 15.0 15.5 15.5 15.4

Operating EBITDA margin (%) - 8.6 9.1 9.1 9.0

Operating EBIT margin (%) - 5.5 6.0 6.2 6.2

Net margin (%) - 5.9 6.2 6.1 6.2

Effective tax rate (%) - 19.5 19.5 19.5 19.5

Dividend payout on recurring profit (%) - 4.0 4.9 5.6 6.2

Interest cover (x) - 9.9 16.5 10.0 11.6

Inventory days - - 88.2 77.7 72.4

Debtor days - - 69.6 67.5 66.3

Creditor days - - 70.0 64.5 63.4

Operating ROIC (%) - - 13.3 14.4 15.2

ROIC (%) - - 15.2 16.5 17.5

ROE (%) - - 29.5 26.7 25.1

ROA (%) - - 10.0 10.8 11.0*Pre exceptional pre-goodwill and fully diluted

Revenue By Division (KRW b) 2014A 2015A 2016E 2017E 2018E

HVAC Actuator - 59 99 110 122

Clutch Coil - 25 32 32 31

Control Head - 39 59 66 70

PTC Heater - 29 50 76 104

Electronic Parts - 17 23 28 35

EPB - 8 18 21 24

Others - 20 19 19 18



Financial statements Woory Industrial


Cash Flow (KRW b) Year Ending Dec 2014A 2015A 2016E 2017E 2018E

Recurring net profit - 12 19 21 25

Depreciation - 5 7 8 9

Associates & minorities - 0 0 0 0

Other non-cash items - 1 2 2 2

Recurring cash flow - 17 28 31 36Change in working capital - 8 (3) (5) (3)

Capex - maintenance - (13) (17) (17) (17)

Capex - new investment - 0 0 0 0

Free cash flow to equity - 13 8 9 17Net acquisitions & disposals - 0 0 0 0

Dividends paid - 0 (0) (1) (1)

Non recurring cash flows - (19) (4) (5) (5)

Net cash flow - (6) 3 4 10Equity finance - 10 0 0 0

Debt finance - 0 0 0 0

Movement in cash - 5 3 4 10

Per share (KRW)

Recurring cash flow per share - 1,907 3,021 3,444 3,962

FCF to equity per share - 1,420 829 1,010 1,814

Balance Sheet (KRW b) Year Ending Dec 2014A 2015A 2016E 2017E 2018E

Working capital assets - 120 129 140 155

Working capital liabilities - (59) (65) (71) (83)

Net working capital - 60 64 69 71Tangible fixed assets - 53 62 71 79

Operating invested capital - 113 126 140 151Goodwill - 0 0 0 0

Other intangible assets - 6 7 7 8

Investments - 1 1 1 1

Other assets - 1 1 1 1

Invested capital - 121 134 149 160Cash & equivalents - (6) (9) (13) (23)

Short term debt - 57 57 57 57

Long term debt * - 11 11 11 11

Net debt - 62 59 56 45Deferred tax - 0 0 0 0

Other liabilities - 0 0 0 0

Total equity - 55 71 89 111

Minority interests - 0 0 0 0

Invested capital - 121 134 149 160

Per share (KRW)

Book value per share - 5,988 7,763 9,778 12,145

Tangible book value per share - 5,336 7,047 8,990 11,278

Financial strength

Net debt/equity (%) - 113.9 83.6 62.2 40.7

Net debt/total assets (%) - 33.5 28.5 23.9 16.9

Current ratio (x) - 1.1 1.1 1.2 1.3

CF interest cover (x) - 9.2 6.2 4.2 6.7

* includes convertables and preferred stock which is being treated as debt

Valuation 2014A 2015A 2016E 2017E 2018E

Recurring P/E (x) * - 22.6 14.1 12.2 10.4

Recurring P/E @ target price (x) * - 32.5 20.2 17.5 14.9

Reported P/E (x) - 25.3 15.6 13.5 11.4

Dividend yield (%) - 0.2 0.4 0.5 0.6

P/CF (x) - 15.0 9.4 8.3 7.2

P/FCF (x) - 20.1 34.5 28.3 15.7

Price/book (x) - 4.8 3.7 2.9 2.4

Price/tangible book (x) - 5.4 4.1 3.2 2.5

EV/EBITDA (x) ** - - 10.2 8.5 7.3

EV/EBITDA @ target price (x) ** - - 11.9 10.1 8.8

EV/invested capital (x) - 2.7 2.4 2.1 1.9* Pre exceptional & pre-goodwill and fully diluted ** EBITDA includes associate income and recurring non operating income



Disclaimers and Disclosures

APPENDIX

DISCLAIMERS AND DISCLOSURES APPLICABLE TO NON-US BROKER-DEALER(S): BNP PARIBAS SECURITIES KOREA CO LTD

ANALYST(S) CERTIFICATION

H James Yoon, BNP Paribas Securities Korea Co Ltd , +822 2125 0533, [email protected] Ray Chung, BNP Paribas Securities Korea Co Ltd , +82 2 2125 0537, [email protected] The BNP Paribas Securities Korea Co Ltd Analysts mentioned in this disclaimer are employed by a non-US affiliate of BNP Paribas Securities Corp., and are not registered/ qualified pursuant to NYSE and/or FINRA regulations

The individual(s) identified above certify(ies) that (i) all views expressed in this report accurately reflect the personal view of the analyst(s) with regard to any and all of the subject securities, companies or issuers mentioned in this report; and (ii) no part of the compensation of the analyst(s) was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed herein.

IMPORTANT DISCLOSURES REQUIRED IN THE UNITED STATES BY FINRA RULES AND OTHER JURISDICTIONS "BNP Paribas” is the marketing name for the global banking and markets business of BNP Paribas Group. No portion of this report was prepared by BNP Paribas Securities Corp (US) personnel, and it is considered Third-Party Affiliate research under NASD Rule 2711. The following disclosures relate to relationships between companies covered in this research report and the BNP entity identified on the cover of this report, BNP Securities Corp., and other entities within the BNP Paribas Group (collectively, "BNP Paribas"). The disclosure column in the following table lists the important disclosures applicable to each company that has been rated and/or recommended in this report:

BNP Paribas represents that: 1. Within the past year, it has managed or co-managed a public offering for this company, for which it received fees. 2. It had an investment banking relationship with this company in the last 12 months. 3. It received compensation for investment banking services from this company in the last 12 months. 4. It expects to receive or intends to seek compensation for investment banking services from the subject company/ies in the next 3 months. 5. It beneficially owns 1% or more of any class of common equity securities of the subject company. 6. It makes a market in securities in respect of this company. 7. The analyst(s) or an individual who assisted in the preparation of this report (or a member of his/her household) has a financial interest position in

securities issued by this company. The financial interest is in the common stock of the subject company, unless otherwise noted. 8. The analyst (or a member of his/her household) is an officer, director, or advisory board member of this company or has received compensation from the

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IMPORTANT DISCLOSURES REQUIRED IN KOREA The disclosure column in the following table lists the important disclosures applicable to each Korea listed company that has been rated and/or recommended in this report:

1. The performance of obligations of the Company is directly or indirectly guaranteed by BNP Paribas Securities Korea Co. Ltd (“BNPPSK”) by means of payment guarantees, endorsements, and provision of collaterals and/or taking over the obligations.

2. BNPPSK owns 1/100 or more of the total outstanding shares issued by the Company. 3. The Company is an affiliate of BNPPSK as prescribed by Item 3, Article 2 of the Monopoly Regulation and Fair Trade Act. 4. BNPPSK is the financial advisory agent of the Company for the Merger and Acquisition transaction or of the Target Company whereby the size of the

transaction does not exceed 5/100 of the total asset of the Company or the total number of outstanding shares. 5. BNPPSK has taken financial advisory service regarding listing to the Company within the past 1 year. 6. With regards to the tender offer initiated by the Company based on Item 2, Article 133 of the Financial Investment Services and Capital Market Act,

BNPPSK acts in the capacity of the agent for the tender offer designated either by the Company or by the target company, provided that this provision shall apply only where tender offer has not expired.

7. The listed company which issued the stocks in question in case where 40 days has not passed since the new shares were listed from the date of entering into arrangement for public offering or underwriting-related agreement for issuance of stocks

8. The Company that has signed a nominated advisor contract with BNPPSK as defined in Item 2 of Article 8 of the KONEX Market Listing Regulation. 9. The Company is recognized as having considerable interests with BNPPSK in relation to No.1 to No. 8. 10. The analyst or his/her spouse owns (including delivery claims of marketable securities based on legal regulations and trading and misc. contracts) the

following securities or rights (hereinafter referred to as “Securities, etc.” in this Article) regardless of whose name is used in the trading. 1) Stocks, bond with stock certificate, and certificate of pre-emptive rights issued by the Company whose securities dealings are being solicited. 2) Stock options of the Company whose securities dealings are being solicited. 3) Individual stock future, stock option, and warrants that use the stocks specified in Item 1) as underlying.

Company Ticker Disclosure (as applicable)

N/A N/A N/A

Company Ticker Price (as of 11-Apr-2016 closing price) InterestWoory Industrial 215360 KS KRW28,550 N/A



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Thailand: Research relating to Thailand and Thailand based issuers is produced pursuant to an arrangement between BNP PARIBAS (“BNPP”) and Finansia Syrus Securities Public Company Limited (“FSS”). FSS International Investment Advisory Securities Co Ltd (“FSSIA”) prepares and distributes research under the brand name “BNP PARIBAS/FSS”. BNPP is not an affiliate of FSSIA or FSS. FSS also publishes a different research product under the brand name “FINANSIA SYRUS,” which is prepared by research analysts who are not part of FSSIA and who may cover the same securities, issuers, or industries that are the subject of this report. The ratings, recommendations, and views expressed in this report may differ from the ratings, recommendations, and views expressed by other research analysts or research teams employed by FSS. This report is being distributed outside Thailand by members of BNP Paribas. Turkey: This report is being distributed in Turkey by TEB Investment (TEB YATIRIM MENKUL DEGERLER A.S., Teb Kampus D Blok Saray Mah. Kucuksu Cad. Sokullu Sok., No:7 34768 Umraniye, Istanbul, Turkey, Trade register number: 358354, www.tebyatirim.com.tr) and outside Turkey jointly by TEB Investment and BNP Paribas. Information, comments and suggestions on investment given in this material are not within the scope of investment consulting. The investment consulting services are rendered tailor made for individuals by competent authorities considering the individuals’ risk and return preferences. However the comments and recommendations herein are based on general principles. These opinions may not be consistent with your financial status as well as your risk and return preferences. Therefore, making an investment decision only based on the information provided herein may not bear consequences in parallel with your expectations. This material issued by TEB Yatırım Menkul Değerler A.Ş. for information purposes only and may be changed without any prior notification. All rights reserved. No part of this material may be copied or reproduced in any manner without the written consent of TEB Yatırım Menkul Değerler A.Ş. Although TEB Yatırım Menkul Değerler A.Ş. gathers the presented material that is current as possible, it does not undertake that all the information is accurate or complete, nor should it be relied upon as such. TEB Yatırım Menkul Değerler A.Ş. assumes no responsibility whatsoever in respect of or arising out or in connection with the content of this material to third parties. If any third party chooses to use the content of this material as reference, he/she accepts and approves to do so entirely at his/her own risk.

United States: This report may be distributed in the United States only to U.S. Persons who are “major U.S. institutional investors” (as such term is defined in Rule 15a-6 under the Securities Exchange Act of 1934, as amended) and is not intended for the use of any person or entity that is not a “major U.S. institutional investor”. U.S persons who wish to effect transactions in securities discussed herein must do so through BNP Paribas Securities Corp., a US-registered broker dealer and member of FINRA, SIPC, NFA, NYSE and other principal exchanges. Certain countries within the European Economic Area: This document may only be distributed in the United Kingdom to eligible counterparties and professional clients and is not intended for, and should not be circulated to, retail clients (as such terms are defined in the Markets in Financial Instruments Directive 2004/39/EC (“MiFID”)). This document will have been approved for publication and distribution in the United Kingdom by BNP Paribas London Branch, a branch of BNP Paribas SA whose head office is in Paris, France. BNP Paribas SA is incorporated in France with limited liability with its registered office at 16 boulevard des Italiens, 75009 Paris. BNP Paribas London Branch (registered office: 10 Harewood Avenue, London NW1 6AA; tel: [44 20] 7595 2000; fax: [44 20] 7595 2555) is lead supervised by the European Central Bank (ECB) and the Autorité de Contrôle Prudentiel et de Résolution (ACPR). BNP Paribas London Branch is authorised by the ACPR and the Prudential Regulation Authority (PRA) and subject to limited regulation by the Financial Conduct Authority and PRA. Details about the extent of our authorisation and regulation by the PRA, and regulation by the Financial Conduct Authority are available from us on request. This report has been approved for publication in France by BNP Paribas, a credit institution licensed as an investment services provider by the ACPR whose head office is 16, Boulevard des Italiens 75009 Paris, France. This report is being distributed in Germany either by BNP Paribas London Branch or by BNP Paribas Niederlassung Frankfurt am Main, regulated by the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin). Other Jurisdictions: The distribution of this report in other jurisdictions or to residents of other jurisdictions may also be restricted by law, and persons into whose possession this report comes should inform themselves about, and observe, any such restrictions. By accepting this report you agree to be bound by the foregoing instructions. This report is not directed to, or intended for distribution to or use by, any person or entity that is a citizen or resident of or located in any locality, state, country, or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation. All research reports are disseminated and available to all clients simultaneously through our internal client websites. For all research available on a particular stock, please contact the relevant BNP Paribas research team or the author(s) of this report.

Additional Disclosures BNP Paribas Personal Finance and Geely Automobile Holdings Limited have entered into an agreement in December 2013 to establish a joint venture company to engage in auto financing in the People’s Republic of China. Target price history, stock price charts, valuation and risk details, and equity rating histories applicable to each company rated in this report is available in our most recently published reports available on our website: http://eqresearch.bnpparibas.com, or you can contact the analyst named on the front of this note or your BNP Paribas representative. All share prices are as at market close on 11 April 2016 unless otherwise stated.



RECOMMENDATION STRUCTURE

Stock Ratings Stock ratings are based on absolute upside or downside, which we define as (target price* - current price) / current price. BUY (B). The upside is 10% or more. HOLD (H). The upside or downside is less than 10%. REDUCE (R). The downside is 10% or more. Unless otherwise specified, these recommendations are set with a 12-month horizon. Thus, it is possible that future price volatility may cause a temporary mismatch between upside/downside for a stock based on market price and the formal recommendation. * In most cases, the target price will equal the analyst's assessment of the current fair value of the stock. However, if the analyst doesn't think the market will reassess the stock over the specified time horizon due to a lack of events or catalysts, then the target price may differ from fair value. In most cases, therefore, our recommendation is an assessment of the mismatch between current market price and our assessment of current fair value. Industry Recommendations Improving (): The analyst expects the fundamental conditions of the sector to be positive over the next 12 months. Stable (previously known as Neutral) (): The analyst expects the fundamental conditions of the sector to be maintained over the next 12 months. Deteriorating (): The analyst expects the fundamental conditions of the sector to be negative over the next 12 months. Country (Strategy) Recommendations Overweight (O). Over the next 12 months, the analyst expects the market to score positively on two or more of the criteria used to determine market recommendations: index returns relative to the regional benchmark, index sharpe ratio relative to the regional benchmark and index returns relative to the market cost of equity. Neutral (N). Over the next 12 months, the analyst expects the market to score positively on one of the criteria used to determine market recommendations: index returns relative to the regional benchmark, index sharpe ratio relative to the regional benchmark and index returns relative to the market cost of equity. Underweight (U). Over the next 12 months, the analyst does not expect the market to score positively on any of the criteria used to determine market recommendations: index returns relative to the regional benchmark, index sharpe ratio relative to the regional benchmark and index returns relative to the market cost of equity.

RATING DISTRIBUTION (as at 11 April 2016)

Should you require additional information concerning this report please contact the relevant BNP Paribas research team or the author(s) of this report. © 2016 BNP Paribas Group

Total BNP Paribas coverage universe 679 Investment Banking Relationship (%)

Buy 397 (58.5%) Buy 29.97

Hold 178 (26.2%) Hold 33.15

Reduce 104 (15.3%) Reduce 32.69


KOREA / AUTOMOBILES & COMPONENTS WOORY INDUSTRIAL 215360 … · 2016-04-11 · Valeo and Hanon...

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Transcript of KOREA / AUTOMOBILES & COMPONENTS WOORY INDUSTRIAL 215360 … · 2016-04-11 · Valeo and Hanon...