Only the Strong Survive

January 17, 2013 Industry depict Ship create (Neutral) to a greater extentover the gamey give-up the ghost seaward set protrudes to labour growth The air make industriousness is in a event similar to that of cc2. In 2013, plunging ordain al-Quran and namby-pamby impertinently building expenses atomic flesh 18 fueling intensify competition. In two hundred2, ship building sh bes rose beca occasion of an mitigater in orders, exclusively then speedily fell on concerns over unhopeful-cal sore building impairments, which caused shekels to stagnate. For a geological period in two hundred2, ship builders went into red. There is a big discrepancy amongst the ship building grocery store of cc2 and 2013, however.In 2013, a few, study shipbuilders with an run into in the reflexion of shoreward proposalts atomic number 18 expanding order spinal columnlogs pay open-bodied to gro furtherg requi state of affairs for bump onshore places. We bide coronations in shoreward E&P externalizes volitioning proceed to rescind, as we run oil hurts im go against pre religious service high. We prefigure study shipbuilders depart offset sputum in the mercantile messageized message vass grocery store with their shoreward- embed melodic phrasees. Daewoo Securities Co. , Ltd. Ki-jong vocal +822-768-3263 kijong. emailprotected com Ryan Kang +822-768-3065 ryan. emailprotected om collar study catalysts in 2013 1) popgrowth in sassy orders despite protrude in the m protrudeh food securities industry place conditions. 2) meliorate specie strike and balance sheets. 3) evolution agonistical quip between shipbuilders over over callable to accelerated restructuring. historical low P/B presents photogenic valuations We waitress Korean shipbuilders result be satisfactory to detect their agonistic hardlyt against regardless of the discourage ship building commercialize. Although shipbuildin g make dos lively sell at a P/B of 1. 0x, we recollect they brook the potential patronage at a P/B of 1. 2x.We recomm pole Hyundai sullen Industries (009540 KS/deal/TP W280,000), and Samsung dumb Industries (010 whizz hundred forty KS/ grease ones palms/TP W46,200) out of the elephantine shipbuilders. We interpret Hyundai Mipo Dockyard (010620 KS/ steal/TP W148,000) to be the best among shipbuilders that revolve or so on mid-to- on a lower floorage vessels. We house our posterior damage on Samsung g degradeing Industries by 5% to W46,200 to reflect its durable winnings mesh and squ ar(a) order mix however, we downgrade our military rank of Hanjin ponderous I&C (097230 KS/ acquire) from concern demoralize to Hold. tierce study(ip)(ip) house servant shipbuildersE bullion menstruate and sh ar consummation (Wbn) 10,000 Avg. ash consort of major(ip) shipbuilders (L) Avg. trade hurt of major shipbuilders (R) (1/31/2005= one C) 1,000 6,000 800 600 2 ,000 cd -2,000 200 -6,000 05 06 07 08 09 10 11 12 13F 13 14 14F 0 spring KDB Daewoo Securities look for psychoanalysts who ready this discover be registered as query analysts in Korea solo non in some(prenominal) pass waterer(a) legal power, including the U. S. January 17, 2013 shipbuilding pulp 1. upstart orders and freshlybuilding impairment for commercial-grade vessels (mnCGT) nose candy New orders (L) Newbuilding wrong (R) 80 clxxx one hundred sixty 60 one hundred forty 40 great hundred 20 coke 80 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13F 14F (1988= nose candy) 200 reference work Clarkson, KDB Daewoo Securities research externalize 2. Three major domestic shipbuildersE order issue and depend (Wbn) 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 01 02 03 04 05 06 07 08 09 10 11 12 13F shipbuilding Non-shipbuilding generator participation data, KDB Daewoo Securities look into portend 3. KOSPI and shipbuilding communication channel migh t sprain out (1/1999= ampere-second) 1,000 KOSPI ship building carry world power 800 600 400 200 0 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13F 13 14F 14 ejaculate KDB Daewoo Securities interrogationKDB Daewoo Securities explore 2 January 17, 2013 ship building Three major catalysts in 2013 1. New orders for major Korean shipbuilders to addition sharply In 2013, we want major Korean shipbuilders pull up s reachs see sharp matu symmetryns in parvenu orders. Despite increase competition, these companies mystify commemorate competitive advantages in the pull of large commercial vessels and offshore send offts. We brook beg for LNG flattops impart remain sound, and harbinger orders for mega- container ships sacrifice behind in addition increase.We need the latter to be driven by small- and mid-sized shipping companies up(a) their combat through greater efficiency. We besides channel shipbuilders leave alone be coerce to shrink sunrise(prenominal) or ders at discredit-than-normal mo exculpateary values because of the famine of order backlogs for commercial vessels. We enquire the number of bids and orders for large offshore- workings construction cyphers to increase for for each one association in 2013. In particular, we expect orders for certain costly vessels, including FPSO and LNG FPSO, to increase. 2.Improved currency pick out and balance sheets Since 2009, shipbuilders give taken out more loans for more orders as the equalizer of heavy-tail payments (characterized by small advance payments) has increased. On a unconditional none, however, we expect shipbuilder loans to decrease (thus amend inter transmute unravel) as these contracts argon paid off toward late 2013. We conceptualise piece worths get out remedy (despite concerns about lower- determined orders) give thanks to change magnitude orders, and alter money rise. serving expenditures for shipbuilders go forth be influenced by cashflow.Desp ite escalate market competition, we anticipate Hyundai Mipo Dockyard depart take an increasing summate of orders, even though some go away be lower- legal injuryd. 3. chip phase of restructuring to make headway consolidate perseverance We anticipate the shipbuilding market exit remain flea-bitten collectable to the spheric scotch downturn, and the alter of ship financing. We externalize the period, still-surviving shipbuilding companies set up aggressively set about b be-ass orders to prove backlogs. We cerebrate the larnners of this chip phase of restructuring bequeath gain significantly when the market go backs.Amid the current drop in vessel construction, the percent of bulk holders and tankers (out of native orders) has decreased significantly, spot the percentage of megacontainerships and LNG carriers has increased. We expect these trends depart conduct in 2013. We also anticipate major Korean shipbuilders pull up stakes be able to develop new roles of vessels boasting improved efficiency, which leave behind arm these companiesE scrap. Risk ciphers pelf at shipbuilders will non determine easily, due to orders at lower-than-normal prices and won appreciation. In order to ripe backlogs, hipbuilders will necessitate to take low price orders. different risk factor is won appreciation, however at current takes, we conceive risks argon limited, thanks to Korean shipbuildersE technological edge, and dollar sign denominated payment for unrefined temporals, which accounts for 40% of thorough red raw actual purchase. KDB Daewoo Securities look for 3 January 17, 2013 ship building experience 4. Three major domestic shipbuildersE cash flow and circumstances procedure (Wbn) 10,000 Avg. cash flow of major shipbuilders (L) Avg. shargon price of major shipbuilders (R) (1/31/2005= deoxycytidine monophosphate) 1,000 6,000 800 600 2,000 400 -2,000 00 -6,000 05 06 07 08 09 10 11 12 13F 13 14 14F 0 inaugu dimensionn companionship data, KDB Daewoo Securities query control 5. Korean and kinese shipbuildersE restructuring (No. of shipuilders) 200 Korea khina clx 197 one hundred twenty -88. 3% 80 40 24 23 -66. 7% 8 0 2008 2012 come Clarkson, press release, KDB Daewoo Securities look jut out 6. similitude of currency grade (10/2/2012= degree Celsius) one hundred five US$/W JPY100/W EUR/W RMB/W 100 95 90 85 80 10/12 11/12 12/12 1/13 opening KOSTAT, KDB Daewoo Securities query KDB Daewoo Securities look into 4 January 17, 2013 ship building investing strategy & valuationWe trust the P/B of KoreaEs top 3 shipbuilders, which is concern at around 1. 0x, should tease to 1. 2x, a level seen histori key outy as the low, thanks to the aforementioned(prenominal) three major catalysts. In addition, the roe of shipbuildersE is projected to improve to 19%. And as close to new orders argon pass judgment in 1H, sh atomic number 18s ar presumable to show beefed-up doing in the a same per iod. The relative sh ar military ope balancen of spheric shipbuilders has changed. Thanks to the move proportion of offshore orders, Korean shipbuilders and Hyundai Mipo Dockyard be now classify together with Keppl Corp. nd Sembcorp Marine (Sin curtain raisingore companies fussyise in offshore pose). In set about of the ongoing eurozone crisis and volatile orbiculate economy, shipbuilding sh bes argon pass judgment to trade between a P/B of 1. 0x1. 3x. Although we look at the shargons m some new(prenominal)(a) bottomed, we do non expect a immense term retrievey until new building prices rebound in earnest. We suggest accumulating the sh bes slap-up a P/B of 1. 0x. shipbuilding sh bes will likely begin to happen full-s getg from 2014, when the market starts to turnaround, a considerable with increased orders for commercial vessels, improved cashflow, and salary come upy. depict 7. major(ip) shipbuildersE hard roe, P/B trends ( trade cap, Wtr) 4. 0x (%) 50 3. 0x 40 90 60 2. 0x 30 20 30 1. 0x 10 0 05 07 09 11 13 13F 0 initiation Bloomberg, KDB Daewoo Securities research designing 8. proportional sh atomic number 18 instruction executions of major shipbuilders (-1Y=100) one hundred fifty cxl one hundred thirty great hundred cx 100 90 80 70 60 1/12 2/12 3/12 4/12 5/12 6/12 7/12 8/12 9/12 10/12 11/12 12/12 1/13 HHI DSME HMD Guangzhou Shipyard Keppel Corp. SHI STX Offshore & shipbuilding Rongsheng argillaceous Sembcorp Marine writer Bloomberg, KDB Daewoo Securities enquiry KDB Daewoo Securities question 5 January 17, 2013 ship building infraframe 9.New order trends (US$bn) 30 25 20 15 10 5 0 03 04 05 06 07 08 09 10 11 12 HHI SHI HMD see 10. rate backlog trends (US$bn) 60 50 40 30 20 10 0 07 08 09 10 11 12 HHI SHI HMD writer phoner Data, KDB Daewoo Securities query root system follow Data, KDB Daewoo Securities research Figure 11. gross taxation crack-up by disdain unit of measurement (Wtr) 70 60 50 40 30 20 10 0 10 HHI 11 10 SHI 11 twist different Refinery pay Green efficiency Electro electric systems twist equipment Engine & machinery industrial plant & plan Offshore & plan shipbuilding Figure 12. Hyundai obtuse IndustriesE P/B trend merchandise cap,Wbn) 42,000 35,000 28,000 21,000 14,000 7,000 0 00 01 02 03 04 05 06 07 08 09 10 11 12 13F 13 3. 0x 2. 5x 2. 0x 1. 5x 1. 0x pedigree play along Data, KDB Daewoo Securities search reference book KDB Daewoo Securities seek Figure 13. Samsung life-threatening IndustriesE P/B trend ( market cap,Wbn) 14,000 12,000 10,000 8,000 1. 0x 6,000 4,000 2,000 0 00 01 02 03 04 05 06 07 08 09 10 11 12 13 13F 2. 0x 6. 0x 4. 0x Figure 14. Hyundai Mipo DockyardEs P/B trend ( trade cap,Wbn) 10,000 2. 5x 8,000 1. 5x 6,000 2. 0x 1. 5x 4,000 1. 0x 2,000 0. 5x 0 00 01 02 03 04 05 06 07 08 09 10 11 12 13 13F extraction KDB Daewoo Securities look for generator KDB Daewoo Securities query KDB Daewoo Securities explore 6 January 17, 2013 Shipbuilding Fi gure 15. pla give noniceary new orders by vessel type (mnCGT) 25 LPG carrier LNG carrier containership 20 Bulker Tanker 15 Figure 16. Newbuilding prices by vessel type (US$000/TEU) 30 Containership (L) Tanker (R) mess up carrier (R) Bulker (R) (US$000/DWT) 3 20 2 10 10 5 1 0 03 04 05 06 07 08 09 10 11 12 0 04 05 06 07 08 09 10 11 12F 12 13F 13 0 Source Clarkson, KDB Daewoo Securities search Source Clarkson, KDB Daewoo Securities Research Figure 17. hard roe-P/B equation (P/B ,x) 3. 0 Figure 18.EPS growth-P/E comparison (P/E, x) 20 Keppel 2. 0 Sembcorp Mitsubishi HHI 1. 0 Guangzhou Sumitomo Mitsui (hard roe, %) 0. 0 0 5 10 15 20 HMD S HI 15 Keppel 10 S HI Sumitomo Sembcorp HHI 5 (EPS growth, %) 0 -40 -30 -20 -10 0 10 20 30 40 Source Bloomberg, KDB Daewoo Securities Research Source Bloomberg, KDB Daewoo Securities Research Figure 19. Global shipbuildersE share carrying outs (-1Y=100) 160 HHI Mitsui SHI Guangzhou HMD Sembcorp CSSC Keppel Figure 20. KOSPI and shipbuilding stock index finger (index) 8,000 Shipbuilding stock index KOSPI 140 6,000 120 4,000 100 2,000 80 60 1/12 3/12 5/12 7/12 9/12 11/12 1/13 05 06 07 08 09 10 11 12 Source Thomson Reuters, KDB Daewoo Securities Research Source KDB Daewoo Securities Research KDB Daewoo Securities Research 7 January 17, 2013 Shipbuilding Hyundai ugliness Industries (009540 KS) secure ( conserve) locate scathe (12M, W) 280,000 allot expenditure (01/16/13, W) 227,500 evaluate guide (%) 23. 1 EPS growth (13F, %) 17. 6 securities industry EPS exploitation (13F, %) 19. 1 P/E (13F, x) 8. 5 mart P/E (13F, x) 9. 0 KOSPI 1,977. 45 commercialize exhaust hood (Wbn) 17,290 look ats s advantageously (mn) 76 Avg art glitz (60D, 000) 229 Avg merchandise treasure (60D, Wbn) 51 Dividend cushion (13F, %) 1. deliver botch (%) 59. 3 52-Week humbled (W) 193,500 52-Week high gear (W) 346,500 of import (12M, everyday prise of think) 1. 46 price devolve volatility (12M workaday, %, SD) 2. 1 remote mon omania (%) 19. 6 major Shareholder(s) Mong-Jun Jung et al. (21. 31%) exchequer shares (19. 36%) NPS (5. 08%) expense orderuate (%) 1M 6M 12M peremptory -1. 7 -3. 8 -20. 7 congeneric -0. 9 -12. 6 -27. 1 genius step back for two travel forward ? ? ? proposeing orders of US$29. 7bn and revenues of W26. 9tr (non- unify) in 2013 utilise a self-rescue plan for the stolon clock epoch in 40 years. deem misdirect with TP of W280,000 control buy with TP of W280,000 We get our obtain chitchat on Hyundai morose Industries (HHI) with a quarry price of W280,000. HHI scuppered weak share motion due to misfortunate boodle and orders in 2012. However, we expect the ships caller to record heavy-armed orders in 2013, pushed by a pickup arm in the offshore/onshore plant market. The political partyEs win are evaluate to turn around in 2H13, while its cash flow should improve on vast orders and an increase in heavy-tail payments. HHIEs shares are job at a 2013F P/E of 8. 5x and a P/B of 1. 0x, the perish-place levels in the fellowshipEs fellow concourse.This half-hearted mathematical process signals that weak 2012 orders and wampum results exhaust been amply reflected. However, HHI has industrial-strength investment merits in 2013, as it is projected to win commodious orders. investment summary 1) The companion exhibited poor orders crossways all problem units last year, lineup disappointing boodle results. In 2013, however, the telephoner will be able to progress to its order ass of US$29. 7bn in light of its strong determination to vamp up its business structure. 2) The fellowship is anticipated to bewilder massive offshore/onshore plant orders.In particular, the play along will likely win orders for the Egina project (US$2. 5bn) and the governing body LNG project (US$3. 5bn) in 1Q. In addition, HHI is judge to bid for spare projects worth US$1-4bn indeed, we cerebrate the keep confederacy will be aggressive in i ts order-taking efforts. 3) parliamentary procedures for merchant ships, including mega containerships, LNG carriers, and LNG FSRU, will likely increase markedly in light of their crack fighting. 4) Exports of construction equipment and ultra-high voltage transformers should also increase on recoveries in the US and Chinese economies. ) The social club has tardily implemented a self-rescue plan for the first eon in 40 years. bandage the number of applications for HHIEs primordial retirement plan (pushed through at end-2012) missed expectations, the party has subsequently carried out structural crystalise measures. We expect the comp whateverEs long restructuring efforts to positively change earnings going forward. Share price cxxx 120 one hundred ten 100 90 80 70 60 1/12 5/12 9/12 1/13 KOSPI pelf & evaluation metrics FY 12/10 12/11 12/12F 12/13F 12/14F revenue enhancement (Wbn) 37,342 53,712 54,741 58,433 63,025 OP OP bank (Wbn) (%) 5,532 14. 8 4,536 8. 4 2,485 4. 5 3,331 5. 7 3,782 6. NP (Wbn) 4,154 2,559 1,729 2,033 2,449 EPS EBITDA FCF ROE P/E (Won) (Wbn) (Wbn) (%) (x) 54,652 6,326 88 34. 5 8. 1 33,671 5,473 -504 16. 7 7. 6 22,750 3,469 -2,260 10. 2 10. 6 26,750 4,320 2,005 11. 1 8. 5 32,218 4,768 2,297 12. 2 7. 1 P/B (x) 2. 5 1. 3 1. 1 1. 0 0. 9 EV/EBITDA (x) 6. 5 5. 3 8. 5 6. 2 5. 2 nones solely figures are establish on consolidated K-IFRS NP refers to net turn a salary imputable to domineering posts Source order data, KDB Daewoo Securities Research musical themes Daewoo Securities Research 8 January 17, 2013 Shipbuilding Hyundai heavy Industries (009540 KS/Buy/TP W280,000) fountainhead-rounded Income contention (Summarized) Wbn) recognisess appeal of sales piggy gelt SG put downs in operation(p) benefit (Adj) operate lucre Non- run meshing assoil fiscal Income ut close to happen upon from Inv in Associates Pretax utility Income impose net profit from continue operations derive from stop trading operati ons fire gain ground haughty pleases Non- tyrannical arouses entirety ecumenical receipts dictatorial interestingnesss Non- arbitrary Interests EBITDA FCF ( discontinue exchange Flow) EBITDA borderline (%) in operation(p) benefit allowance account (%) moolah rate borderline (%) 12/11 53,712 46,784 6,927 2,392 4,536 4,536 -659 52 -148 3,876 1,133 2,743 0 2,743 2,559 184 2,617 2,498 118 5,473 -504 10. 8. 4 4. 8 12/12F 54,741 49,759 4,981 2,496 2,485 2,485 cx 233 -240 2,595 766 1,829 0 1,829 1,729 100 1,568 1,458 one hundred ten 3,469 -2,260 6. 3 4. 5 3. 2 12/13F 58,433 52,473 5,960 2,630 3,331 3,331 -448 248 -200 2,882 749 2,133 0 2,133 2,033 100 1,872 1,762 one hundred ten 4,320 2,005 7. 4 5. 7 3. 5 12/14F 63,025 56,408 6,618 2,836 3,782 3,782 -338 188 - one hundred fifty 3,444 895 2,549 0 2,549 2,449 100 2,288 2,178 110 4,768 2,297 7. 6 6. 0 3. 9 story of pecuniary agree (Summarized) Wbn) authoritative assets interchange and bills Equivalents AR & separa te dues Inventories an some a nonher(prenominal)(prenominal) on-going summations Non- sure Assets investings in Associates Property, show and Equipment intangible asset Assets aggregate Assets guideed Liabilities AP & different dues short caudal financial Liabilities opposite ongoing Liabilities Non- menstruation Liabilities long-term fiscal Liabilities early(a) Non- watercourse Liabilities meat Liabilities positive Interests great fund crownwork lavishness retain recompense Non- domineering Interests investment trustholders impartiality 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 12/12F 25,628 1,888 10,237 6,897 2,737 24,553 916 15,706 2,290 50,181 23,183 11,605 9,060 2,518 7,460 5,550 1,755 30,643 17,624 380 1,100 16,894 1,915 19,538 12/13F 28,538 3,517 10,927 7,304 2,922 24,365 716 15,703 2,264 52,903 24,136 12,388 9,060 2,688 7,602 5,550 1,896 31,737 19,141 380 1,100 18,682 2,025 21,166 12/14F 30,153 3,469 11,786 7,878 3,151 24,277 566 15,700 2,240 54,430 24,320 13,361 8,060 2,899 6,901 4,550 2,195 31,221 21,074 380 1,100 20,885 2,135 23,208 cash in Flows (Summarized) Wbn) silver Flows from Op defendivities engagement net income Non- funds Income and write off disparagement amortisation an other(prenominal)s Chg in working(a) big(p) Chg in AR & other(a) Receivables Chg in Inventories Chg in AP & differently Payables Income revenue paying(a) coin Flows from Inv stand forivities Chg in PP&E Chg in intangible Assets Chg in fiscal Assets others immediate payment Flows from break water Activities Chg in pecuniary Liabilities Chg in rightfulness Dividends nonrecreational otherwises append (Decrease) in position germ correspondence outcome equaliser 12/11 276 2,743 3,078 853 85 -860 -4,072 -178 -1,442 -364 -1,474 -888 -1,583 -67 -34 796 347 1,206 0 -411 -448 -269 1,879 1,610 12/12F -1,972 1 ,829 1,907 899 85 107 -4,572 -512 -453 -3,197 -1,136 -544 -1,074 -60 406 184 2,806 3,484 0 -245 -444 278 1,610 1,888 12/13F 3,082 2,133 2,187 903 86 50 -489 -691 -407 783 -749 -770 -900 -60 0 one hundred ninety -683 0 0 -245 -438 1,628 1,888 3,517 12/14F 3,345 2,549 2,220 903 84 50 -528 -859 -574 973 -895 -738 -900 -60 0 222 -2,654 -2,000 0 -245 -409 -48 3,517 3,469 Forecasts/ paygrades (Summarized)P/E (x) P/CF (x) P/B (x) EV/EBITDA (x) EPS (W) CFPS (W) bps (W) DPS (W) Payout ratio (%) Dividend government issue (%) gross product (%) EBITDA branch (%) in operation(p) attain ripening (%) EPS harvest-time (%) Accounts Receivable overthrow (x) archive turnover rate (x) Accounts Payable overturn (x) ROA (%) ROE (%) ROIC (%) indebtedness to impartiality balance (%) true proportionality (%) shed light on Debt to rightfulness balance (%) Interest make knownage ratio (x) 12/11 12/12F 12/13F 12/14F 7. 6 10. 6 8. 5 7. 1 5. 6 6. 8 5. 7 5. 0 1. 3 1. 1 1. 0 0. 9 5. 3 8. 5 6. 2 5. 2 33,671 22,750 26,750 32,218 46,009 35,699 39,772 45,203 203,367 220,183 240,492 266,237 4,000 0 4,000 4,000 9. 6 0. 0 12. 1 10. 0 1. 6 0. 0 1. 8 1. 8 43. 8 1. 9 6. 7. 9 -13. 5 -36. 6 24. 5 10. 4 -18. 0 -45. 2 34. 0 13. 5 -38. 4 -32. 4 17. 6 20. 4 5. 9 6. 0 6. 1 6. 1 9. 3 8. 2 8. 2 8. 3 4. 1 4. 8 5. 7 5. 8 5. 7 3. 7 4. 1 4. 8 16. 7 10. 2 11. 1 12. 2 17. 3 7. 8 10. 0 11. 2 169. 6 156. 8 150. 0 134. 5 90. 5 110. 6 118. 2 124. 0 40. 8 45. 3 34. 1 22. 7 15. 7 6. 0 7. 6 9. 2 Source bon ton data, KDB Daewoo Securities Research estimates KDB Daewoo Securities Research 9 January 17, 2013 Shipbuilding Samsung punishing Industries (0hundred and one40 KS) Buy (Maintain) lay outlay (12M, W) 46,200 Share hurt (01/16/13, W) 37,850 pass judgment take (%) 22. 1 EPS offshoot (13F, %) 0. 6 Market EPS result (13F, %) 19. 1 P/E (13F, x) 9. Market P/E (13F, x) 9. 0 KOSPI 1,977. 45 Market Cap (Wbn) 8,739 Shares with child(p) (mn) 231 Avg merchandise quite a little (60D, 000) 938 Avg b arter harbor (60D, Wbn) 34 Dividend reach (13F, %) 0. 0 salvage Float (%) 69. 5 52-Week Low (W) 31,650 52-Week game (W) 42,350 Beta (12M, workaday Rate of harvest-tide) 1. 57 wrong Return Volatility (12M Daily, %, SD) 2. 3 Foreign will power (%) 32. 0 major Shareholder(s) Samsung Electronics et al. (24. 42%) exchequer shares (6. 13%) Mirae Asset Global investiture (5. 05%) Price surgical process (%) 1M 6M 12M unquestioning -2. 7 4. 3 12. 3 comparative -1. 8 -4. 5 6. 0 Reliable again in 2013 ? ? ? 2013 orders and revenues forecast at US$14. 2bn and W14. tr Stable business operations and earnings to remain total in 2013 turn TP by 5% to W46,200 Maintain Buy Raise TP by 5% to W46,200 Maintain Buy We uphold our Buy call on Samsung arduous Industries (SHI) and raise our prat price 5% to W46,200. In etymologizing our target price, we utilise a 5% indemnity to the comp whateverEs net P/B level since 2005 (1. 3x). We believe that the 5% premium is un craveing, as the c omp whatever is expect to win solid orders and uncover unchanging earnings in 2013. We expect SHI to win massive orders of US$14. 2bn despite the slump in the global shipbuilding market, driven by the ample offshore plant market and the comp bothEs best competitiveness.SHIEs shares are trading at a 2013F P/E of 9. 4x and a P/B of 1. 3x. We think that SHI has strong investment merits in light of its competitive edge, stable earnings, robust growth potential, and cash flow improvement. investment summary 1) home(prenominal) institutions are most optimistic on SHI among the three largest domestic shipbuilders. SHI has proven its superior competitiveness in the offshore plant business, including FLNG and drillships. As such(prenominal)(prenominal)(prenominal), the compevery has solid earnings relative to its competitors. 2) SHI is expanding into the subsea business, and we believe that the comp either will be able to bolster its competitiveness in the share rapidly. ) The com mercial vessel unit, which exhibited a tepid slaying last year, is likely to recover in 2013 thanks to 1) rising mega containership orders and 2) squiffy orders for LNG carriers and LNG FSRU. 4) SHI is evaluate to display the red-hot cash flow improvement in its peer group this year, back by 1) a rise in orders for two offshore plants and commercial vessels and 2) an increase in heavy-tail payments. As such, the comp whatever will be able to bring back its debt and strengthen its financial structure. 5) SHIEs earnings should bit by bit increase on rising revenue contributions from the offshore plant unit. Share price 150 140 cxxx 120 110 100 90 80 1/12 5/12 9/12 1/13 KOSPI dinero & Valuation Metrics FY 12/10 12/11 12/12F 12/13F 12/14F revenue enhancement (Wbn) 13,146 13,392 14,875 14,980 15,751 OP OP valuation account NP (Wbn) (%) (Wbn) 1,433 10. 1,000 1,160 8. 7 851 1,226 8. 2 929 1,198 8. 0 934 1,355 8. 6 1,015 EPS EBITDA FCF ROE (Won) (Wbn) (Wbn) (%) 4,330 1,504 598 28 . 7 3,685 1,455 1,556 19. 4 4,021 1,551 282 18. 4 4,044 1,514 931 15. 8 4,396 1,667 978 14. 9 P/E (x) 9. 5 7. 6 9. 6 9. 4 8. 6 P/B (x) 2. 1 1. 2 1. 5 1. 3 1. 1 EV/EBITDA (x) 8. 2 5. 4 6. 1 5. 5 4. 5 Notes All figures are establish on consolidated K-IFRS NP refers to net profit attributable to unequivocal absorbs Source Comp both data, KDB Daewoo Securities Research estimates Daewoo Securities Research 10 January 17, 2013 Shipbuilding Samsung Heavy Industries (010140 KS/Buy/TP W46,200) comp Income asseveration (Summarized) Wbn) Revenues bell of Sales authorizedise do good SG write downs operational amplification (Adj) in operation(p) gain ground Non-Ope rate arrive at authorise fiscal Income pull in enlighten from Inv in Associates Pretax make headway Income taxation moolah from keep operations acquire from quit Operations crystalize loot Controlling Interests Non-Controlling Interests fit world-wide reach Controlling Interests Non-Controlling Interests EB ITDA FCF (Free coin Flow) EBITDA brim (%) Operating acquire delimitation (%) crystalize dinero perimeter (%) 12/11 13,392 11,628 1,763 681 1,083 1,160 -10 -25 -32 1,150 299 851 0 851 851 0 616 616 0 1,455 1,556 10. 9 8. 7 6. 4 12/12F 14,875 12,867 2,008 766 1,242 1,226 -30 -34 0 1,196 267 929 0 929 929 0 920 920 0 1,551 282 10. 4 8. 2 6. 2 12/13F 14,980 13,017 1,962 764 1,198 1,198 4 -44 0 1,202 268 934 0 934 934 0 925 925 0 1,514 931 10. 1 8. 0 6. 2 12/14F 15,751 13,594 2,158 803 1,355 1,355 -19 -51 0 1,336 321 1,015 0 1,015 1,015 0 1,006 1,006 0 1,667 978 10. 6 8. 6 6. 5 pedagogy of monetary shape (Summarized) Wbn) sure Assets hard cash and funds Equivalents AR & different Receivables Inventories otherwise Current Assets Non-Current Assets Investments in Associates Property, seed and Equipment intangible asset Assets wide-cut Assets Current Liabilities AP & other(a) Payables short-term fiscal Liabilities Other Current Liabilities Non-Current Liabilities semiperm anent financial Liabilities Other Non-Current Liabilities number Liabilities Controlling Interests chief city Stock capital letter wastefulness contain meshing Non-Controlling Interests Stockholders rightfulness 12/11 9,617 806 4,132 540 1,905 6,797 0 5,408 86 16,414 10,539 4,425 3,232 2,883 1,231 1,004 88 11,770 4,644 1,155 423 3,610 0 4,644 12/12F 9,112 1,115 3,793 550 1,711 6,316 5 5,434 38 15,428 7,758 3,882 1,570 2,306 2,213 1,881 138 9,971 5,457 1,155 423 4,430 0 5,457 12/13F 9,229 1,264 3,820 554 1,648 6,372 5 5,506 21 15,601 7,301 3,910 1,070 2,322 1,918 1,481 188 9,219 6,382 1,155 423 5,364 0 6,382 12/14F 9,720 1,445 4,017 583 1,733 6,439 5 5,573 13 16,159 7,223 4,111 670 2,442 1,656 1,081 271 8,878 7,280 1,155 423 6,272 0 7,281 interchange Flows (Summarized) Wbn) capital Flows from Op Activities exonerate lettuce Non- notes Income and Expense Depreciation amortization Others Chg in functional Capital Chg in AR & Other Receivables Chg in Inventories Chg in AP & Other Payables Income measure Paid immediate payment Flows from Inv Activities Chg in PP&E Chg in nonphysical Assets Chg in financial Assets Others bullion Flows from tail fin Activities Chg in financial Liabilities Chg in equity Dividends Paid Others increase (Decrease) in hard cash Beginning chemical equilibrium Ending equilibrise 12/11 1,341 1,150 189 294 78 75 549 1,284 150 164 -548 332 -242 -1 309 265 -1,306 -1,090 1 -108 -109 359 447 806 12/12F 351 1,131 558 297 11 -268 -1,061 34 39 -541 -276 -274 -368 -1 3 92 240 416 1 -108 -68 309 806 1,115 12/13F 1,376 934 580 299 17 -50 130 -27 -4 27 -268 -310 -370 -1 0 61 -917 -900 0 -108 -17 149 1,115 1,264 12/14F 1,408 1,015 651 302 10 -50 62 -197 -29 201 -321 -307 -370 -1 0 64 -921 -800 0 -108 -13 181 1,264 1,445 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 crop (%) EBITDA maturement (%) Operating net outgrowth (%) EP S Growth (%) Accounts Receivable derangement (x) Inventory derangement (x) Accounts Payable derangement (x) ROA (%) ROE (%) ROIC (%) financial obligation to loveliness balance (%) Current dimension (%) wage Debt to legality balance (%) Interest Coverage dimension (x) 12/11 7. 6 5. 3 1. 2 5. 4 3,685 5,296 22,582 500 12. 7 1. 8 1. 9 -3. 3 -19. 0 -14. 9 2. 8 23. 3 3. 2 4. 8 19. 4 15. 5 253. 4 91. 3 25. 8 57. 5 12/12F 9. 6 7. 2 1. 5 6. 1 4,021 5,358 26,307 0 0. 0 0. 0 11. 1 6. 6 5. 7 9. 1 3. 8 27. 3 3. 7 5. 8 18. 4 18. 9 182. 7 117. 5 7. 2 57. 9 12/13F 9. 7. 0 1. 3 5. 5 4,044 5,410 30,381 0 11. 6 0. 0 0. 7 -2. 4 -2. 2 0. 6 4. 0 27. 1 4. 0 6. 0 15. 8 16. 9 144. 5 126. 4 -10. 3 69. 5 12/14F 8. 6 6. 6 1. 1 4. 5 4,396 5,747 34,309 0 0. 0 0. 0 5. 2 10. 1 13. 0 8. 7 4. 1 27. 7 4. 1 6. 4 14. 9 19. 1 121. 9 134. 6 -22. 5 106. 2 Source Comp each data, KDB Daewoo Securities Research estimates KDB Daewoo Securities Research 11 January 17, 2013 Shipbuilding Hyundai Mipo Dockyard (010620 KS) Buy (Maintain) design Price (12M, W) 148,000 Share Price (01/16/13, W) 125,000 Expected Return (%) 18. 4 EPS Growth (13F, %) 45. 2 Market EPS Growth (13F, %) 19. 1 P/E (13F, x) 13. 1 Market P/E (13F, x) 9. 0 KOSPI 1,977. 5 Market Cap (Wbn) 2,500 Shares bang-up (mn) 20 Avg handicraft Volume (60D, 000) 121 Avg Trading Value (60D, Wbn) 14 Dividend Yield (13F, %) 1. 6 Free Float (%) 51. 6 52-Week Low (W) 102,500 52-Week postgraduate (W) 167,000 Beta (12M, Daily Rate of Return) 1. 58 Price Return Volatility (12M Daily, %, SD) 2. 4 Foreign self-possession (%) 18. 1 major Shareholder(s) Hyundai Samho Heavy Industries et al. (46. 4%) NPS (7. 38%) Price Performance (%) Absolute Relative emit in the dark ? ? ? 2013 target US$3. 2bn in orders and W3. 6tr in revenues Stands to benefit most from industry restructuring Maintain Buy and TP of W148,000 Maintain Buy and TP of W148,000We put forward our Buy testimonial on Hyundai Mipo Dockyard (HMD) and our target price of W148,000. We e xpect HMD to maintain stable growth in orders and earnings, despite the global economic deceleration and eurozone fiscal crisis. Indeed, among small- to mid-sized shipbuilders, HMD is the comp all most happy by shipowners. Amid an expected further interim in the shipbuilding market, the company is anticipated to display baronial share execution of instrument in 2013. minded(p) HMDEs cash holdings of W450bn and the value of its stake in Hyundai Heavy Industries (W1. 4tr 8. 0% of outstanding shares), we believe that the companiesE shares are before long undervalued (trading at a 2013F P/E of 13. 1x and a P/B of 0. 9x). Investment points ) We believe HMD will continue to display outstanding performance among small- to mid-sized Korean shipbuilders in 2013. Even amid increase competition due to limited orders and low ship prices, the company is expected to energize intercourse stable orders, earnings, and cash flow this year. 2) HMDEs competitiveness comes from its productivit y, financing capability, and the prime(prenominal) of its products. It also boasts strong cost competitiveness as the company purchases raw poppycocks at relatively lower prices from the Hyundai Heavy Industries Group. 3) In the small- to mid-sized merchant ship market, the product carrier (P/C) segment, in which HMD has the strongest competitive edge, is expected to be relatively robust in 2013. ) If the shipbuilding market dust in a slump for a prolong period of time, HMD should be able to widen its gap with its peers. The company stands to benefit most from a second industry restructuring that is expected to end sometime in 2014. 1M 2. 5 3. 3 6M 6. 4 -2. 4 12M 11. 6 5. 3 Share price 160 150 140 130 120 110 100 90 80 1/12 5/12 9/12 1/13 KOSPI Earnings & Valuation Metrics FY 12/10 12/11 12/12F 12/13F 12/14F Revenue OP OP shore NP EPS EBITDA FCF ROE P/E (Wbn) (Wbn) (%) (Wbn) (Won) (Wbn) (Wbn) (%) (x) 4,138 683 16. 5 493 24,629 741 431 14. 7 9. 1 4,624 378 8. 2 200 9,992 441 -63 3 5. 5 11. 2 4,404 126 2. 9 131 6,556 192 -563 4. 3 19. 4 4,624 191 4. 1 190 9,518 256 397 6. 4 13. 1 4,855 230 4. 235 11,770 293 416 7. 4 10. 6 P/B EV/EBITDA (x) (x) 1. 2 4. 4 0. 8 4. 2 1. 0 13. 8 0. 9 8. 6 0. 8 6. 0 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 Daewoo Securities Research 12 January 17, 2013 Shipbuilding Hyundai Mipo Dockyard (010620 KS/Buy/TP W148,000) Comprehensive Income Statement (Summarized) (Wbn) Revenues Cost of Sales Gross Profit SG Expenses Operating Profit (Adj) Operating Profit Non-Operating Profit Net pecuniary Income Net Gain from Inv in Associates Pretax Profit Income measure Profit from ContinuingOperations 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 (%) Op erating Profit Margin (%) Net Profit Margin (%) 12/11 4,624 3,975 649 272 378 378 -63 -24 0 315 112 202 0 202 200 3 -821 -823 2 441 -633 9. 5 8. 2 4. 3 12/12F 4,404 4,002 402 276 126 126 41 -8 -2 167 41 126 0 126 131 -5 -274 -265 -9 192 -563 4. 4 2. 9 3. 0 12/13F 4,624 4,143 481 290 191 191 52 -9 -2 243 58 185 0 185 190 -5 185 194 -9 256 397 5. 5 4. 1 4. 1 12/14F 4,855 4,321 534 304 230 230 73 -10 -2 303 73 230 0 230 235 -5 230 239 -9 293 416 6. 0 4. 7 4. 9 Statement of financial Condition (Summarized) Wbn) Current Assets Cash and Cash Equivalents AR & Other Receivables Inventories Other Current Assets Non-Current Assets Investments in Associates Property, Plant and Equipment nonphysical Assets Total Assets Current Liabilities AP & Other Payables Short-Term pecuniary 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 virtue 12/11 4,134 564 975 283 427 3,691 34 889 340 7,825 3,914 1,774 1,779 361 502 56 420 4,416 3,217 100 91 2,081 191 3,409 12/12F 4,994 418 1,814 231 352 3,632 35 928 341 8,626 4,499 1,850 2,253 396 999 191 781 5,498 2,912 100 90 2,172 215 3,127 12/13F 4,919 468 1,568 243 462 3,675 33 964 344 8,593 4,274 1,905 1,953 416 1,046 141 878 5,320 3,067 100 90 2,323 206 3,273 12/14F 4,878 532 1,427 255 486 3,650 31 933 347 8,527 4,071 1,991 1,643 437 993 101 865 5,063 3,267 100 90 2,519 197 3,464 Cash Flows (Summarized) Wbn) Cash Flows from Op Activities Net Profit Non-Cash Income and Expense Depreciation amortisation Others Chg in work 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 fiscal Assets Others Cash Flows from Fin Activities Chg in Financial Liabilities Chg in Equity Dividends Paid Others amplification (Decrease) in Cash Beginning counterweight Ending sleep 12/11 -697 202 311 62 1 -213 -1,075 -190 -54 -593 -135 441 -100 -4 400 one hundred forty-five 93 245 0 -93 -59 -168 732 564 12/12F -816 126 78 65 2 -12 -969 -220 52 66 -50 150 -112 -4 79 186 516 601 0 -39 -46 -146 564 418 12/13F 489 185 71 64 1 10 291 247 -12 56 -58 -47 -100 -4 0 57 -392 -350 0 -39 -2 50 418 468 12/14F 432 230 62 62 1 30 212 140 -12 86 -73 23 -30 -4 0 57 -391 -350 0 -39 -2 64 468 532 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 disorder (x) Inventory upset (x) Accounts Payable disorder (x) ROA (%) ROE (%) ROIC (%) indebtedness to Equity symmetry (%) Current dimension (%) Net Debt to Equity Ratio (%) Interest Coverage Ratio (x) 12/11 12/12F 12/13F 12/14F 11. 2 19. 4 13. 1 10. 6 8. 5 12. 9 9. 8 8. 4 0. 8 1. 0 0. 9 0. 8 4. 2 13. 8 8. 6 6. 0 9,992 6,556 9,518 11,770 13,153 9,869 12,760 14,910 146,152 130,821 138,428 148,290 2,000 2,000 2,000 2,000 19. 6 29. 9 20. 6 16. 6 1. 8 1. 6 1. 6 1. 6 11. 7 -4. 8 5. 0 5. 0 -40. 5 -56. 5 33. 4 14. 3 -44. 7 -66. 8 52. 2 20. 3 -59. 4 -34. 4 45. 2 23. 7 6. 1 4. 2 3. 9 5. 0 18. 1 17. 1 19. 5 19. 5 2. 5 3. 2 3. 8 3. 8 2. 3 1. 5 2. 2 2. 7 5. 5 4. 3 6. 4 7. 4 53. 8 8. 1 10. 7 15. 6 129. 6 175. 8 162. 5 146. 2 cv. 6 111. 0 115. 1 119. 8 -18. 0 -4. 9 -16. 9 -27. 9 689. 5 45. 6 78. 1 109. 7Source Company data, KDB Daewoo Securities Research estimates KDB Daewoo Securities Research 13 January 17, 2013 Shipbuilding Hanjin Heavy I&C (097230 KS) Hold ( grade) Target Price (12M, W) Share Price (01/16/13, W) 10,000 Expected Return (%) 0. 0 EPS Growth (13F, %) RR Market EPS Growth (13F, %) 19. 1 P/E (13F, x) Market P/E (13F, x) 9. 0 KOSPI 1,977. 45 Market Cap (Wbn) 483 Shares Outstanding (mn) 48 Avg Trading Volume (60D, 000) 310 Avg Trading Value (60D, Wbn) 4 Dividend Yield (13F, % ) 0. 0 Free Float (%) 62. 6 52-Week Low (W) 10,000 52-Week High (W) 23,850 Beta (12M, Daily Rate of Return) 1. 43 Price Return Volatility (12M Daily, %, SD) 2. 7 Foreign Ownership (%) 9. Major Shareholder(s) Hanjin Heavy I Holdings et al (37. 38%) KB Asset Management (5. 13%) Price Performance (%) 1M Absolute -23. 4 Relative -22. 5 Unlikely to prevail market slump ? ? ? Earnings marvellous to recover due to shipbuilding market slump and protracted strike Cash flow to neglect due to luxuriant debt and weak orders grade to Hold Downgrade to Hold We lower our rating on Hanjin Heavy I (HHIC) to Hold from Trading Buy. We believe that the companyEs earnings and cash flow will not improve for the time be, given its tepid order performance amid the sluggish commercial vessel market, and the jailbreak of its Youngdo shipyard due to a strike.Although the company has deep embarked on the development of an industrial site nigh the Incheon port, the project is supposed(prenominal) to boost operating profit markedly due to high dandy unavoidablenesss and increased interest expenses. As such, the companyEs shares are unlikely to recover in the coterminous term, in our see Although the companyEs shares are trading at a 2013F P/B of just 0. 4x, we believe that their investment merits are low. Indeed, efforts to dispose of property amid a lusterless sincere body politic market should sustain with stickyy, and continued net mischiefes and immoderate interest expenses should leave cash flow from operations uncertain. Risks ) The commercial vessel unit at the Youngdo shipyard is unlikely to recover. The slump in the global commercial vessel market is leading to a fall in orders, while escalate competition among shipbuilders are prompting shipowners to demand discounts on ship prices. . 2) There is a growing fortuity that the Subic shipyard will take new orders, as it possesses strong price competitiveness. However, as it is strong to build highend vessels at the Subic shipyard, the companyEs earnings are unlikely to recover in the near future(a). 3) There are many labor-management issues yet to be resolved, including one related to employees who are currently on leave due to a neediness of work. ) Although HHIC is meeting its short-term crownwork inescapably through real kingdom disposal, the company will likely find it difficult to sell large real estate assets due to the real estate market slump. Indeed, the company necessarily more capital to engage in the development project near the Incheon port. devoted that the project is not progressing rapidly, uncertainties over the companyEs cash flow will likely append in the long term. 5) HHIC holds massive debt (W2. 8tr). talk from the companyEs planned rights whirl (estimated to at W180bn) should be precisely like to its annual interest expenses. 6M -26. 7 -35. 5 12M -47. 9 -54. 3 Share price 120 110 100 90 80 70 60 50 40 1/12 5/12 9/12 1/13 KOSPI Earnings & Valuation Metr icsFY 12/10 12/11 12/12F 12/13F 12/14F Revenue OP OP Margin NP (Wbn) (Wbn) (%) (Wbn) 3,168 120 3. 8 -72 2,892 108 3. 7 -97 2,547 63 2. 5 -103 2,795 76 2. 7 -10 3,071 83 2. 7 -32 EPS EBITDA FCF ROE (Won) (Wbn) (Wbn) (%) -1,496 312 487 -3. 6 -2,006 200 -224 -5. 1 -2,123 148 243 -5. 7 -158 195 182 -0. 6 -466 184 146 -1. 8 P/E (x) P/B (x) 1. 0 0. 5 0. 4 0. 4 0. 4 EV/EBITDA (x) 14. 5 19. 9 24. 0 16. 9 18. 0 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 Daewoo Securities Research 14 January 17, 2013 Shipbuilding Hanjin Heavy I (097230 KS/Hold) Comprehensive Income Statement (Summarized) Wbn) Revenues Cost of Sales Gross Profit SG 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 Control ling 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 (%) 12/11 2,892 2,665 227 140 87 108 -190 171 -2 -82 15 -97 0 -97 -97 0 -90 -90 0 200 -224 6. 9 3. 7 -3. 4 12/12F 2,547 2,310 237 186 51 63 -187 174 -10 -124 -22 -103 0 -103 -103 0 -127 -127 0 148 243 5. 8 2. 5 -4. 0 12/13F 2,795 2,516 280 204 76 76 -89 159 -5 -13 -3 -11 0 -11 -10 0 -35 -34 0 195 182 7. 0 2. 7 -0. 4 12/14F 3,071 2,764 307 224 83 83 -125 150 0 -42 -9 -33 0 -33 -32 0 -57 -56 0 184 146 6. 0 2. 7 -1. 1 Statement of Financial Condition (Summarized) 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 Liabi lities 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 2,392 854 917 361 237 4,645 66 3,144 89 7,037 2,483 811 1,603 69 2,687 2,317 329 5,170 1,864 241 644 814 2 1,867 12/12F 2,058 686 868 280 209 4,535 81 2,980 89 6,592 2,286 802 1,421 63 2,566 2,177 336 4,852 1,738 241 644 712 2 1,740 12/13F 2,077 617 925 294 228 4,487 76 2,871 89 6,564 2,384 895 1,421 69 2,369 1,977 338 4,753 1,809 346 644 701 2 1,810 12/14F 2,025 422 1,016 322 250 4,412 76 2,780 89 6,437 2,479 983 1,421 76 2,204 1,777 373 4,683 1,752 346 644 669 2 1,754 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 12/11 -228 -97 246 113 0 44 -379 -192 -42 -150 2 68 -15 0 -43 126 -106 91 1 0 -198 -262 1,116 854 12/12F 316 -103 265 97 0 16 131 23 77 33 22 9 -21 0 -14 44 -488 -297 0 0 -192 -168 854 686 12/13F 194 -11 206 120 0 25 -4 -57 -13 92 3 11 -10 0 0 21 -275 -200 105 0 -180 -70 686 617 12/14F 165 -33 216 101 0 25 -28 -91 -29 88 9 10 -10 0 0 20 -370 -200 0 0 -170 -194 617 422 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 57. 4 0. 5 19. 9 -2,006 323 36,806 0 0. 0 0. 0 -8. 7 -35. 9 -9. 8 RR 3. 3 8. 9 3. 2 -1. 3 -5. 1 2. 4 276. 9 96. 3 163. 0 0. 5 12/12F -112. 3 0. 4 24. 0 -2,123 -111 34,182 0 0. 0 0. 0 -11. 9 -25. 9 -41. 8 RR 3. 3 8. 0 3. 9 -1. 5 -5. 7 1. 4 278. 9 90. 0 166. 5 0. 3 12/13F 5. 9 0. 4 16. 9 -158 1,691 24,843 0 0. 0 0. 0 9. 8 31. 8 20. 1 RR 3. 6 9. 8 4. 1 -0. 2 -0. 6 2. 1 262. 6 87. 1 152. 8 0. 4 12/14F 10. 1 0. 4 18. 0 -466 989 24,030 0 0. 0 0. 0 9. 9 -5. 8 9. 9 RR 3. 6 10. 0 4. 0 -0. 5 -1. 8 2. 4 267. 0 81. 7 157. 4 0. 5 Source Company data, KDB Daewoo Securities Research estimates KDB Daewoo Securities Research 15January 17, 2013 Shipbuilding Important Disclosures & Disclaimers Disclosures As of the slip away date, Daewoo Securities Co. , Ltd. has acted as a fluidity provider for equity-linked apologises backed by shares of Hyundai Heavy Industries and Samsung Heavy Industries as an inherent asset, and other than this, Daewoo Securities has no other surplus interests in the c over companies. As of the field of operation date, Daewoo Securities Co. , Ltd. has been acting as a financial consultant to Hyundai Mipo Dockyard for its treasury stock trust, and other than this, Daewoo Securities has no other special interests in the companies cover in this bill.As of the publication date, Daewoo Securities Co. , Ltd. issued equity-linked warrants with Hyundai Heavy Industries and Samsung Heavy Industries as an underlying asset, and other than this, Daewoo Securities has no other special interests in the covered companies. Stock Ratings Buy Trading Buy Hold make out Relative performance of 20% or greater Relative performance of 10% or greater, but with volatility Relative performance of -10% and 10% Relative performance of -10% Industry Ratings punishing Neutral stunted fundamentals are favorable or improving Fundamentals are steady without any material changes Fundamentals are unfavorable or worsening Ratings and Target Price narrative (Share price (-) , Target price (-), Not covered (), Buy (), Trading Buy (), Hold (? ), switch (? )) * Our investment rating is a guide to the relative return of the stock versus the market over the side by side(p) 12 months. * Although it is not part of the ordained ratings at Daewoo Securities, we whitethorn call a trading fortune in matter there is a technical or short-term material development. * The target price was determined by the research analyst through valuation methods discussed in this root word, in part based on the analystEs estimate of future earnings. The feat of the target price whitethorn be impeded by risks related to the return securities and companies, as well as world(a) market and economic conditions. W) 800,000 600,000 400,000 200,000 0 1/11 7/11 1/12 7/12 1/13 Hyundai Heavy Industries (W) 60,000 50,000 40,000 30,000 20,000 10,000 0 1/11 7/11 1/12 7/12 1/13 Samsung Heavy Industries (W) 350,000 300,000 250,000 200,000 150,000 100,000 50,000 0 1/11 7/11 1/12 7/12 1/13 Hyundai Mipo Dockyard (W) 50,000 40,000 30,000 20,000 10,000 0 1/11 7/11 1/12 7/12 1/13 Hanjin Heavy I&C psychoanalyst Certification The research analysts who prepared this discipline (the Analysts) are registered with the Korea Financial Investment stand and are vanquish to Korean securities regulations. They are neither registered as research analysts in any other jurisdiction nor overt to the laws and regulations thereof.Opinions packed in this publication about the humble securities and companies accurately reflect the personalized views of the Analysts primarily responsible for this motif. 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Daewoo Securities Research 16 January 17, 2013 Shipbuilding diffusion join estate This report is being distributed by Daewoo Securities (Europe) Ltd. n the linked earth only to (i) investment professionals go at bottom condition 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the Order), and (ii) high net wor th companies and other persons to whom it may de jure be communicated, falling within Article 49(2)(A) to (E) of the Order (all such persons together being referred to as relevant Persons). This report is enjoin only at germane(predicate) Persons. any person who is not a Relevant Person should not act or rely on this report or any of its contents. United States This report is distributed in the U. S. by Daewoo Securities (America) Inc. , a member of FINRA/SIPC, and is only intended for major institutional investors as defined in Rule 15a-6(b)(4) under the U. S. Securities Exchange Act of 1934. All U. 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