Korea Auto Insight. Benefiting most from US market s big recovery. Top picks

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1 Korea Auto Insight Sector Monthly / Autos March 9, 211 Top picks Company Rating TP (KRW) Kia Motors BUY 75, Mando BUY 185, Hyundai Wia BUY 85, Contents I. Valuations & earnings forecasts...1 Cross-border valuations KIS auto universe ratings and valuations Earnings forecasts II. Data...5 Global total sales Korean plant sales US and Western Europe sales CKD exports Overseas plant sales Imported car sales Best-selling models III. Published list...2 IV. Recommendation and TP changes...21 Sung Moon Suh sungmoon.suh@truefriend.com Benefiting most from US market s big recovery Kia s record-breaking rally to continue The US market s recovery since 21 is accelerating and the trend should benefit Hyundai Motor (Hyundai) and Kia Motors (Kia) most, we believe. The US market posted double-digit YoY growth in February for a sixth straight month and the SAAR (seasonally adjusted annual rate) reached 13.45mn units, the most since August 28 with the exception of August 29 when the cash-for-clunkers program boosted sales. Given that Hyundai and Kia raised their US market share most significantly in and they just started the full-fledged sales of the MD Avante and the K5, we believe they should be main beneficiaries. Kia (27, TP W75,) and Mando (698, TP W185,) remain our top picks. Despite the recent record-breaking rally, Kia s market cap remains at 57% of Hyundai s. At present, Kia s annual production capacity stands at 68% of Hyundai s. We add Hyundai Wia (1121, TP W85,) as a top pick on its attractive valuation and greater exposure to Kia. Kia posts bigger growth 15 months in a row Hyundai and Kia showed impressive sales numbers in February (458,638 units (+17.4% YoY)), led by constant strong overseas sales and Kia s robust domestic sales. Hyundai s sales grew 11.9% YoY to 281,292 units, led by vigorous overseas sales (exports 68,224 (-.6% YoY), overseas plant sales (163,655 (+22.3% YoY)). Kia posted a higher sales growth rate (177,346, +27.2% YoY) for a 15th straight month on the back of solid domestic (+17.5% YoY) and overseas sales (exports 72,122 (+29.3% YoY), overseas plant sales (66,195 (+31.3% YoY)). We forecast this powerful sales trend to continue thanks to the strengthening new model effects amid higher oil prices. Hyundai s HG Grandeur sold 11,489 units domestically. Kia s new Morning minicar emerged as the nation s best-selling model (12,16 sold), which is the first time for Kia since the K5 took the top spot in June and July 21. US market share reached 7.7% in February Hyundai and Kia s US sales (76,339 units) once again posted a stellar growth rate of 31.5% YoY in February due to new models and their bigger exposure to small cars amid rising oil prices. US demand also had solid growth of 27.3% YoY to 993,535 units while Hyundai s sales galloped 28% YoY to 43,533 and Kia s jumped 36.4% YoY to 32,86. As a result, Hyundai s market share remained at 4.4% from a year earlier but Kia s rose to 3.3% from 3.1%. Their combined market share recovered to 7.7% from 7.4% a year earlier. The new models like the K5, Sportage, Sonata and Elantra led the sales gains. The 4-mpg MD Elantra sold 8,83 in February, up from 4,724 in December and 4,792 in January, raising its CAFE (corporate average fuel economy) to 35.2 mpg from 34.7 mpg in January and 31.7 mpg for the 29 model year.

2 Cross-border & KIS Auto Universe valuations Fig 1 Cross-border valuations autos Company Hyundai Kia Ford Daimler VW Toyota Honda Nissan Brilliance Geely Dongfeng Price (3/7/11) (KRW, USD, EUR, JPY, HKD) 182,5 63, ,695 3, week high 23, 64, ,91 3, week low 17, 2, ,812 2, Market cap (W bn, USD bn, EUR bn, JPY bn, HKD bn) 4,2 25, ,74 6,222 3, Market cap (USD bn) Relative performance to market (%) 1M M M EPS (KRW, USD, EUR, JPY, HKD) FY9, 3/1 1,43 3, FY1F, 3/11F 18,52 5, FY11F, 3/12F 21,145 6, NA P/E (x) FY9, 3/ NM NM FY1F, 3/11F NA FY11F, 3/12F NA Relative FY1 P/E (%) NA FY9, 3/1 PBR (x) NM Sales (W bn, USD bn, EUR bn, JPY bn, HKD bn) 31,859 18, ,951 8,579 7, Sales (USD bn) Pre-tax profit (W bn, USD bn, EUR bn, JPY bn, HKD bn) 3,781 1, Pre-tax profit margin (%) ROE (%) NA Dividend yield (%).6.8 NA Note: EPS forecasts for foreign automakers are based on IBES figures. Source: Datastream, KIS estimates Fig 2 Cross-border valuations tires Company Hankook Nexen Michelin Bridgestone Goodyear Continental Yokohama Cooper Price (3/7/11) (KRW, USD, EUR, JPY) 29,1 1, , week high 34,45 12, , week low 2, 5, , Market cap (W bn, USD bn, EUR bn, JPY bn) 4,429 1, , Market cap (USD bn) Relative performance to market (%) 1M M M EPS (KRW, USD, EUR, JPY) FY9, 3/1 2,36 1, FY1F, 3/11F 2, FY11F, 3/12F 3,13 1, P/E (x) FY9, 3/ ,296.2 NM NM FY1F, 3/11F FY11F, 3/12F FY9, 3/1 PBR (x) Sales (W bn, USD bn, EUR bn, JPY bn) 2, , Sales (USD bn) Pre-tax profit (W bn, USD bn, EUR bn, JPY bn) Pre-tax profit margin (%) ROE (%) Dividend yield (%) NA NA Note: EPS forecasts for foreign automakers are based on IBES figures. Source: Datastream, KIS estimates 1

3 Fig 3 Cross-border valuations auto parts Company Mobis Mando HCC Wia S&T Daewoo DYM Denso Magna Price (3/7/11) (KRW, JPY, CAD) 279, 155, 17,7 72,2 29,5 15,6 3, week high 318, 157,5 23,25 76,5 36,2 15,7 3, week low 142, 95, 12,9 65,8 22,7 5,67 2, Market cap (W bn, JPY bn, CAD bn) 27,159 2,823 1,89 1, , Market cap (USD bn) Relative performance to market (%) 1M NA M NA M 55.1 NA 9. NA EPS (KRW, JPY, CAD) FY9, 3/1 17,43 6,653 1,418 3, FY1F, 3/11F 24,888 1,975 1,897 6,326 2,631 1, FY11F, 3/12F 28,921 14,291 2,17 6,9 3,563 1, P/E (x) FY9, 3/ NM FY1F, 3/11F FY11F, 3/12F FY9, 3/1 PBR (x) Sales (W bn, JPY bn, CAD bn) 1,633 1,513 1,41 3, , Sales (USD bn) Pre-tax profit (W bn, JPY bn, CAD bn) 2, Pre-tax profit margin (%) ROE (%) Dividend yield (%) Note: EPS forecasts for foreign automakers are based on IBES figures Source: Datastream, KIS estimates Fig 4 KIS Auto Universe ratings and valuations 52-week Price 12M tgt. 12m forward Upside Mkt 12m forward Company Rating high low (3/7/11) price target PER (%) cap PER EV/EBITDA EPS chg Div yield (KRW) (KRW) (KRW) (KRW) (x) (USD mn) (x) (x) (% YoY) (%) HMC (538 KS) BUY 23, 17, 182,5 25, , Mobis (1233 KS) BUY 318, 142, 279, 39, , Kia (27 KS) BUY 64,2 2,85 63, 75, , Hankook Tire (24 KS) BUY 34,45 2, 29,1 4, , Mando (698 KS) BUY 157,5 95, 155, 185, , Halla Climate Control (1888 KS) BUY 23,25 12,9 17,7 28, , Hyundai Wia (1121 KS) BUY 76,5 65,8 72,2 85, , Nexen Tire (235 KS) BUY 12,15 5, 1,6 13, S&T Daewoo (6496 KS) BUY 36,2 22,7 29,5 45, Dongyang Mecha. (1357 KS) BUY 15,7 5,67 15,6 18,

4 Earnings forecasts Fig 5 Earnings forecasts & valuations for 1 auto companies Hyundai Motor Yr to Sales OP EBT NP EPS % chg EBITDA P/E EV/ PBR ROE Dec (W bn) (W bn) (W bn) (W bn) (Won) YoY (W bn) (x) EBITDA (x) (x) (%) 28A 32, , ,795. 1, , , A 31, ,235. 3, , , , F 36, , ,37.9 5, , , F 39, , , , , , F 41, ,982. 7, , , , Hyundai Mobis Yr to Sales OP EBT NP EPS % chg EBITDA P/E EV/ PBR ROE Dec (W bn) (W bn) (W bn) (W bn) (Won) YoY (W bn) (x) EBITDA (x) (x) (%) 28A 9, , , ,9. 12, , A 1,633. 1, ,63.4 1, , , F 13, ,83.3 3,49.2 2, , , F 15,2.8 2,32.8 3, , , , F 16,74.3 2, , , , , Kia Motors Yr to Sales OP EBT NP EPS % chg EBITDA P/E EV/ PBR ROE Dec (W bn) (W bn) (W bn) (W bn) (Won) YoY (W bn) (x) EBITDA (x) (x) (%) 28A 16, , A 18, , , ,45.3 3,689 1,25.8 1, F 23, ,68.2 2, , , , F 25,2.5 1, , , , , F 26, ,14.8 3,531. 2,86.1 7, , Hankook Tire Yr to Sales OP EBT NP EPS % chg EBITDA P/E EV/ PBR ROE Dec (W bn) (W bn) (W bn) (W bn) (Won) YoY (W bn) (x) EBITDA (x) (x) (%) 28A 2, A 2, ,36 1, F 3, , F 3, , F 4, , Mando Yr to Sales OP EBT NP EPS % chg EBITDA P/E EV/ PBR ROE Dec (W bn) (W bn) (W bn) (W bn) (Won) YoY (W bn) (x) EBITDA (x) (x) (%) 28A 1, , A 1, , F 2, , F 2, , F 2, , Halla Climate Control Yr to Sales OP EBT NP EPS % chg EBITDA P/E EV/ PBR ROE Dec (W bn) (W bn) (W bn) (W bn) (Won) YoY (W bn) (x) EBITDA (x) (x) (%) 28A 1, A 1, , F 1, , F 1, , F 2, ,

5 Hyundai Wia Yr to Sales OP EBT NP EPS % chg EBITDA P/E EV/ PBR ROE Dec (W bn) (W bn) (W bn) (W bn) (Won) YoY (W bn) (x) EBITDA (x) (x) (%) 28A 3, , A 3, , F 4, , F 4, , F 5, , Nexen Tire Yr to Sales OP EBT NP EPS % chg EBITDA P/E EV/ PBR ROE Dec (W bn) (W bn) (W bn) (W bn) (Won) YoY (W bn) (x) EBITDA (x) (x) (%) 28A TD 12.7 NM A ,127 TP F 1, F 1, , F 1, , S&T Daewoo Yr to Sales OP EBT NP EPS % chg EBITDA P/E EV/ PBR ROE Dec (W bn) (W bn) (W bn) (W bn) (Won) YoY (W bn) (x) EBITDA (x) (x) (%) 28A , A F , F , F , Dongyang Mechatronics Yr to Sales OP EBT NP EPS % chg EBITDA P/E EV/ PBR ROE Dec (W bn) (W bn) (W bn) (W bn) (Won) YoY (W bn) (x) EBITDA (x) (x) (%) 28A TD 34.7 NM A TP F , F , F , Note: Closing prices on March 7. Source: Company data, KIS estimates 4

6 Strong sales continued in February Hyundai s February sales grew 11.9% YoY on strong overseas plant sales Kia s February sales continued to post eyepopping 27.2% YoY growth Global total sales Fig 6 Total sales including overseas plant sales Domestic Exports Domestic Overseas plants' sales Overseas Total sales sales + exports Hyundai Kia Total sales sales 1/1 119, , ,26 145,454 66, ,135 39,713 51,161 16, ,76 279, ,79 5,42 184, , , , , , ,139 57, ,43 458, ,393 4/1 123,21 248, , ,613 56,57 29,67 457, ,45 116, , ,75 153,316 52,888 26,24 442,71 558, , ,56 388,52 157,81 55,86 213,661 48,167 61,713 7/1 12, , ,86 143,77 49, , ,86 568,644 11, ,33 297, ,678 54, ,55 44,88 515,317 12, , , ,556 67, , , ,963 1/1 133, , , ,242 65, , , , , , ,51 164,76 78, ,679 53,67 636, , , , ,89 73, , , ,654 1/11 121,79 251, , ,885 8, , ,421 62,5 17, ,48 36, ,655 66, ,85 428, ,593 % MoM % YoY /1 225,97 351, ,38 279, ,83 396, , , /11 228,774 45,66 679,38 33,54 147, , ,319 1,157,93 % YoY Source: Respective company data, KAMA, Korea Investment and Securities Fig 7 Hyundai s sales including overseas plant sales Domestic Exports Domestic Overseas Overseas Total Overseas sales sales + exports plants' sales sales sales portion (%) 1/1 59,774 66,69 125, , , , ,981 68, , ,79 22, , ,275 95, , ,139 26, , /1 55,339 11, , , ,57 31, ,228 96, ,46 153, , , ,643 17, , ,81 264, , /1 49,55 12, , ,77 245, , ,362 81,465 13, , , , ,853 82,75 138, , , , /1 62,615 97,42 16,17 162, , , ,343 9, , ,76 255, , ,97 84, , ,89 246,47 36, /11 55,412 89, , , , , ,413 68, , , , , % MoM % YoY /1 18, ,74 243, , , , /11 14, , ,56 33,54 488, , % YoY Source: Company data, KAMA, Korea Investment and Securities Fig 8 Kia s sales including overseas plant sales Domestic Exports Domestic Overseas Overseas Total Overseas sales sales + exports plants' sales sales sales portion (%) 1/1 34,7 6,123 94,13 66, ,84 16, ,29 55,796 89,5 5,42 16, , ,15 75,44 113,455 57, ,731 17, /1 38,513 79,5 118,13 56,57 135, , ,14 7,551 11,565 52, , , ,431 82, ,316 55,86 138, , /1 45,1 83, ,732 49, , , ,62 56,219 94,839 54, ,91 149, ,191 75, ,434 67, , , /1 43,147 84, ,6 65,629 15, , ,49 11, ,282 78,973 18,26 224, ,216 94, ,738 73, , , /11 4,52 93, ,615 8, ,91 214, ,29 72, ,151 66, , , % MoM % YoY /1 67, , , ,83 233,2 3, /11 79, , , , ,48 391, % YoY Source: Company data, KAMA, Korea Investment and Securities 5

7 February sales continued to be led by strong overseas sales Fig 9 Total sales including overseas plant sales 7, Domestic sales Exports 6, Ov erseas plants' sales 12-MMA total sales 5, 4, 3, 2, 1, Source: KAMA, company data, Korea Investment and Securities Overseas plant sales led the growth Fig 1 Hyundai s sales including overseas plant sales 35, Domestic sales Exports 3, Ov erseas plants' sales 12-MMA total sales 25, 2, 15, 1, 5, Source: KAMA, company data, Korea Investment and Securities Both domestic and overseas sales led the growth Fig 11 Kia s sales including overseas plant sales 225, Domestic sales Exports 2, Ov erseas plants' sales 12-MMA total sales 175, 15, 125, 1, 75, 5, 25, Source: KAMA, company data, Korea Investment and Securities 6

8 Domestic sales Fig 12 Domestic sales & growth % chg Feb Jan-Feb % of total Jan Feb Jan-Feb % of total MoM YoY over 1-2/1 Total 16, , ,79 17, , Hyundai 48,981 18, ,412 49,413 14, Kia 33,29 67, ,52 39,29 79, GM Daewoo 8,148 17, ,7 7,631 17, Daewoo Bus Tata Daewoo , Ssangyong 2,23 4, ,857 2,44 5, Renault Samsung 13,531 27, ,8 8,429 2, Source: KAMA Fig 13 Domestic sales by market class % chg Feb Jan-Feb % of total Jan Feb Jan-Feb % of total MoM YoY over 1-2/1 Total 16, ,97-121,79 17, , Cars 9, , ,233 87, , L 1,942 22, ,19 15,882 28, L 22,873 48, ,636 17,251 44, L 22,619 47, ,828 18,244 39, Above 2.L 13,719 29, ,453 17,79 32, SUV 17,636 37, ,993 16,926 36, Minivan 2,56 4, ,214 2,593 5, Com veh 16,227 34, ,846 19,72 4, Buses 5,361 1, ,773 5,479 11, Trucks 1,866 23, ,73 14,241 29, (1 ton trucks) 7,36 16, ,148 1,495 21, Source: KAMA Fig 14 Change in domestic sales (% YoY) MMA /96 1/97 1/98 1/99 1/ 1/1 1/2 1/3 1/4 1/5 1/6 1/7 1/8 1/9 1/1 1/11 Fig 15 Domestic market share (%) Hyundai Kia 7 GM Korea Ssangyong 6 Renault Samsung /96 1/97 1/98 1/99 1/ 1/1 1/2 1/3 1/4 1/5 1/6 1/7 1/8 1/9 1/1 1/11 7

9 Exports Fig 16 Exports & growth % chg Feb Jan-Feb % of total Jan Feb Jan-Feb % of total MoM YoY over 1-2/1 Total 172,76 351, , ,48 45, Hyundai 68, , ,511 68, , Kia 55, , ,113 72, , GM Daewoo 39,517 83, ,65 45,243 97, Daewoo Bus Tata Daewoo Ssangyong 2,455 4, ,722 4,242 8, Renault Samsung 6,184 1, ,28 8,979 21, Source: KAMA Fig 17 Change in exports Fig 18 Export ASP (% YoY) (USD bn) Total exports (LHS) Avg. export unit price (RHS) (USD) 13, 12, 11, 1, 4 12-MMA 2. 9, , , 6, , -6 1/96 1/97 1/98 1/99 1/ 1/1 1/2 1/3 1/4 1/5 1/6 1/7 1/8 1/9 1/1 1/11. 4, 1/97 1/98 1/99 1/ 1/1 1/2 1/3 1/4 1/5 1/6 1/7 1/8 1/9 1/1 1/11 Fig 19 Hyundai Motor s export ASP Fig 2 Kia Motors export ASP (USD bn) Total exports (LHS) Avg. export unit price (RHS) (USD) 15, 14, 13, 12, 11, 1, 9, 8, 7, 6, (USD bn) Total exports (LHS) Avg. export unit price (RHS) (USD) 14, 13, 12, 11, 1, 9, 8, 7, 6,. 5, 1/97 1/98 1/99 1/ 1/1 1/2 1/3 1/4 1/5 1/6 1/7 1/8 1/9 1/1 1/11. 5, 1/97 1/98 1/99 1/ 1/1 1/2 1/3 1/4 1/5 1/6 1/7 1/8 1/9 1/1 1/11 8

10 Total sales (domestic sales + exports) Fig 21 Total sales & growth % chg Feb Jan-Feb % of total Jan Feb Jan-Feb % of total MoM YoY over 1-2/1 Total 279, , ,637 36, , Hyundai 117, , , , , Kia 89,5 183, , , , GM Daewoo 47,665 11, ,72 52, , Daewoo Bus Tata Daewoo 547 1, , Ssangyong 4,478 8, ,579 6,682 14, Renault Samsung 19,715 38, ,828 17,48 41, Source: KAMA Fig 22 Change in total sales Fig 23 Total sales (% YoY) MMA ( units) /96 1/97 1/98 1/99 1/ 1/1 1/2 1/3 1/4 1/5 1/6 1/7 1/8 1/9 1/1 1/ Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Fig 24 Hyundai Motor s total sales ( units) Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Fig 25 Kia Motors total sales ( units) Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 9

11 Change in total sales by company Fig 26 Hyundai Motor (% YoY) 1 Fig 27 Kia Motors (% YoY) MMA MMA -1 1/96 1/97 1/98 1/99 1/ 1/1 1/2 1/3 1/4 1/5 1/6 1/7 1/8 1/9 1/1 1/11-8 1/96 1/97 1/98 1/99 1/ 1/1 1/2 1/3 1/4 1/5 1/6 1/7 1/8 1/9 1/1 1/11 Fig 28 GM Daewoo (% YoY) MMA /96 1/97 1/98 1/99 1/ 1/1 1/2 1/3 1/4 1/5 1/6 1/7 1/8 1/9 1/1 1/11 Fig 29 Ssangyong Motor (% YoY) MMA /1 1/2 1/3 1/4 1/5 1/6 1/7 1/8 1/9 1/1 1/11 Fig 3 Renault Samsung (% YoY) MMA /1 1/2 1/3 1/4 1/5 1/6 1/7 1/8 1/9 1/1 1/11 Fig 31 Big 3 s utilization rate (%) Hyundai Kia Ssangyong / 1/1 1/2 1/3 1/4 1/5 1/6 1/7 1/8 1/9 1/1 1/11 1

12 US sales Fig 32 Hyundai Motor US sales by model Accent Elantra Tiburon Sonata XG/Azera Santa Fe Tucson Veracruz Entourage Genesis Equus High-end Total 2/1 5,38 7,966 7, ,964 2, ,762 2,73 34,4 2/11 4,54 12,289 15, ,276 3, , ,74 43,533 % YoY NM NM 38.5 NM /1 11,55 15,656 12, ,168 4, ,432 37,796 64,57 1-2/11 8,748 21,948 28, ,691 6,25 1,137 4, ,51 8,747 % YoY NM NM 23.1 NM Source: Company data Fig 33 Kia Motors US sales by model Rio Spectra Forte Optima Sportage Sorento Sedona Rondo Amanti Borrego Soul High-end Total 2/1 1, ,333 2,471 1,88 8, ,6 14,115 24,52 2/11 1,852 5,34 4,844 3,965 8,641 1, ,684 18,966 32,86 % YoY -5. NM NM /1 4, ,65 5,633 1,85 16,237 1, ,43 5,745 27,916 46, /11 2,815 1,634 8,663 6,989 16,757 2, ,29 35,117 6,595 % YoY NM Source: Company data Fig 34 Hyundai Motor s US sales Fig 35 Hyundai Motor s US market share 65, 55, US retail sales 12-MMA US retail sales (%) 45, 4. 35, , , , 1/ 1/1 1/2 1/3 1/4 1/5 1/6 1/7 1/8 1/9 1/1 1/ / 1/1 1/2 1/3 1/4 1/5 1/6 1/7 1/8 1/9 1/1 1/11 Source: Automotive News Source: Automotive News Fig 36 Kia Motors US sales Fig 37 Kia Motors US market share 45, US retail sales 3.5 (%) 4, 12-MMA US retail sales 3. 35, 3, , 2. 2, , 1, 1. 5, 1/ 1/1 1/2 1/3 1/4 1/5 1/6 1/7 1/8 1/9 1/1 1/11.5 1/ 1/1 1/2 1/3 1/4 1/5 1/6 1/7 1/8 1/9 1/1 1/11 Source: Automotive News Source: Automotive News 11

13 Fig 38 Hyundai Motor s US sales by model (%) 65, 9 6, 55, 8 5, 7 45, 4, 6 35, 5 3, 4 25, 2, 3 15, 2 1, 5, 1 1/ 1/1 1/2 1/3 1/4 1/5 1/6 1/7 1/8 1/9 1/1 1/11 Accent (LHS) Coupe (LHS) XG/Azera (LHS) Tucson (LHS) Veracruz (LHS) Equus (LHS) Source: Automotive News Elantra (LHS) Sonata (LHS) Santa Fe (LHS) Entourage (LHS) Genesis (LHS) High-end portion (RHS) Fig 39 Kia Motors US sales by model 45, 4, 35, 3, 25, 2, 15, 1, 5, (%) 9 1/ 1/1 1/2 1/3 1/4 1/5 1/6 1/7 1/8 1/9 1/1 1/11 Source: Automotive News Rio (LHS) Spectra (LHS) Optima (LHS) Sorento (LHS) Amanti (LHS) Borrego (LHS) High-end portion (RHS) Sephia (LHS) Forte (LHS) Sportage (LHS) Sedona (LHS) Rondo (LHS) Soul (LHS) Fig 4 Sonata, Santa Fe US sales 26, 24, Sonata sales 22, Santa Fe sales 2, 18, 16, 14, 12, 1, 8, 6, 4, 2, 1/ 1/1 1/2 1/3 1/4 1/5 1/6 1/7 1/8 1/9 1/1 1/11 Fig 41 Sonata US sales 26, Sonata sales 24, 22, 12-MMA Sonata sales 2, 18, 16, 14, 12, 1, 8, 6, 4, 2, 1/ 1/1 1/2 1/3 1/4 1/5 1/6 1/7 1/8 1/9 1/1 1/11 Source: Automotive News Source: Automotive News Fig 42 Santa Fe US sales Fig 43 Elantra US sales 16, 14, 12, Santa Fe sales 12-MMA Santa Fe sales 25, 2, Elantra sales 12-MMA Elantra sales 1, 15, 8, 6, 1, 4, 2, 5, 1/ 1/1 1/2 1/3 1/4 1/5 1/6 1/7 1/8 1/9 1/1 1/11 1/ 1/1 1/2 1/3 1/4 1/5 1/6 1/7 1/8 1/9 1/1 1/11 Source: Automotive News Source: Automotive News 12

14 Fig 44 US vehicle sales by make (units, %) Feb Feb % chg 2 mos. 2 mos. % chg YoY YoY General Motors 27,28 141, , , Ford Motor Co. 156, , , , Toyota 141,846 1, ,72 198, Chrysler Group LLC 95,12 84, ,22 141, Honda 98,59 8, , , Hyundai Group 76,339 58, ,342 11, Nissan 92,37 7, , , VW 29,315 24, ,61 49, BMW Group 19,963 18, ,663 33, Subaru 21,683 18, ,541 33, Daimler AG 16,665 15, ,31 31, Mazda 19,387 17, ,654 32, Mitsubishi 6,893 4, ,67 8, Jaguar Land Rover 3,247 2, ,453 5, Porsche 2,19 1, ,419 3, Suzuki 1,643 1, ,25 3, Saab Spyker Automobile 546 NM 1,24 NM Maserati Isuzu NM NM Volvo Cars North America 4,795 NM 9,71 NM Other (estimate) TOTAL 993,535 78, ,813,436 1,479, Fig 45 US market shares by make (%) Feb Feb chg 2 mos. 2 mos. chg (%p) (%p) General Motors Ford Motor Co Toyota Chrysler Group LLC Honda Hyundai Group Nissan VW BMW Group Subaru Daimler AG Mazda Mitsubishi Jaguar Land Rover Porsche Suzuki Saab Spyker Automobile Maserati Isuzu Volvo Cars North America Other (estimate) TOTAL Source: Automotive News 13

15 Western Europe sales Fig 46 Western Europe sales by company % chg Dec Jan-Dec % of total Nov Dec Jan-Dec % of total MoM YoY over 1-12/9 All brands 1,136,387 15,229, ,178,765 1,114,542 14,691, HMC 2,266 37, ,774 23, , Kia 16, , ,735 16,26 225, Others 622 6, , Korea total 37,66 532, ,15 4,56 552, Source: ACEA Fig 47 Hyundai Motor s Western Europe sales Fig 48 Hyundai Motor s Western Europe market share 5, Monthly new registrations 12-MMA (%) , , 1.8 2, , 1/99 1/ 1/1 1/2 1/3 1/4 1/5 1/6 1/7 1/8 1/9 1/ /99 1/ 1/1 1/2 1/3 1/4 1/5 1/6 1/7 1/8 1/9 1/1 Source: ACEA Source: ACEA Fig 49 Kia Motors Western Europe sales Fig 5 Kia Motors Western Europe market share 31, 28, Monthly new registrations 12-MMA (%) , , , , 1. 13,.8 1,.6 7,.4 4, 1/1 1/2 1/3 1/4 1/5 1/6 1/7 1/8 1/9 1/1.2 1/1 1/2 1/3 1/4 1/5 1/6 1/7 1/8 1/9 1/1 Source: ACEA Source: ACEA 14

16 CKD exports & overseas plant sales Fig 51 CKD exports % chg Jan % of total Dec Jan % of total MoM YoY Total 95, , , HMC 7, ,612 15, Kia 4, ,1 5, GM Daewoo 82, ,551 13, Daewoo Bus Ssangyong NM NM Source: KAMA Fig 52 Hyundai Motor s overseas plant sales Turkey India China US Czech Russia Total Domestic sales Exports Total Domestic sales Exports Total Domestic sales Exports Total 2/1 3,41 1,6 4,641 31,1 23,69 54,61 37,95 21,876 4,712 26,588 12, ,428 2/11 3,4 4,5 7,54 32,629 19,378 52,7 5,717 23,536 4,661 28,197 19,48 6,53 164,363 % YoY NM /1 5,27 3,193 8,463 6,62 46,636 17,238 99,951 32,487 7,754 4,241 25,56 281, /11 5,118 8,23 13,348 62,935 32,388 95, ,36 44,688 7,919 52,67 39,728 7,76 331,82 % YoY NM 17.9 Source: Company data Fig 53 BHMC sales by model Elantra Sonata Tucson Accent i3 High-end Total 2/1 23,115 2,741 3,964 5,418 1,857 6,75 37,95 2/11 24,8 4,478 1,924 1,3 1,7 15,42 5,717 % YoY /1 62,752 7,973 9,966 13,687 5,573 17,939 99, /11 59,794 9,387 27,95 24,38 2,38 36, ,36 % YoY Source: Company data Fig 54 Kia's overseas plant sales China Slovakia US Total 2/1 24,2 15,9 1,5 5,42 2/11 25,8 21,116 2,71 66,195 % YoY /1 58,192 29,36 29, ,83 1-2/11 63,866 43,21 4, ,173 % YoY Source: Company data Fig 55 Kia's Slovakia plant sales by model cee'd Sportage Tucson Total 2/1 8,589 2,893 4,418 15,9 2/11 8,32 6,526 6,558 21,116 % YoY /1 17,16 6,17 6,12 29,36 1-2/11 17,148 12,999 12,874 43,21 % YoY Source: Company data Fig 56 Kia's China sales by model Pride Cerato Forte Lotze Carnvial Sportage Soul High-end Total 2/1 2,915 6,844 7, ,39 1,552 5,187 24,2 2/11 2,991 5,824 7, , ,642 25,8 % YoY ,113.3 NM /1 7,262 16,735 18, ,565 3,98 11,996 58, /11 8,19 14,146 21, ,498 1,716 18,28 63,866 % YoY NM Source: Company data 15

17 Fig 57 Hyundai s overseas plant sales to total volume sales Fig 58 Kia's overseas plant sales to total volume sales (%) (%) /2 1/3 1/4 1/5 1/6 1/7 1/8 1/9 1/1 1/11 4/2 4/3 4/4 4/5 4/6 4/7 4/8 4/9 4/1 Source: Company data Source: Company data Fig 59 Sales of Hyundai s China, India, Turkey, Czech Republic, US and Russia subsidiaries Fig 6 Sales of Kia s China, Slovakia and US subsidiaries 8, 7, HMI BHMC HAOS HMMA HMMC HMMR 4, 35, China Slovakia US 6, 3, 5, 25, 4, 2, 3, 15, 2, 1, 1, 5, 1/2 1/3 1/4 1/5 1/6 1/7 1/8 1/9 1/1 1/11 1/2 1/3 1/4 1/5 1/6 1/7 1/8 1/9 1/1 1/11 Note: HMI India, BHMC China, HAOS Turkey, HMMA US, HMMC Czech Republic Source: Company data Source: Company data Fig 61 HMI s domestic sales and exports Fig 62 Sales of HMI, BHMC, HAOS, HMMA, HMMC & HMMR 6, 5, Domestic sales Exports 18, 16, 14, Hyundai overseas production sales (LHS) (%) % YoY (RHS) , 12, 9 3, 1, 8, 6 2, 6, 3 1, 4, 2, 1/2 1/3 1/4 1/5 1/6 1/7 1/8 1/9 1/1 1/11-3 1/2 1/3 1/4 1/5 1/6 1/7 1/8 1/9 1/1 1/11 Source: Company data Source: Company data 16

18 Imported car sales Fig 63 Imported car sales & growth Fig 64 Sales of imported cars vs. Korean-made cars 1, (% YoY) 15 16, Sales of Korean-made cars (LHS) Imported car sales (RHS) 1, 9, 8, 7, 6, Sales growth (RHS) , 12, 1, 9, 8, 7, 6, 5, 8, 5, 4, 3, 2, 1, Monthly sales (LHS) -5 6, 4, 2, 4, 3, 2, 1, Source: Korea Automobile Importers & Distribution Association (KAIDA) Source: KAIDA, KAMA Fig 65 Imported car sales by brand (units, %) Feb Feb % chg 2 months 2 months % chg YoY YoY BMW 1, ,84 2, Mercedes-Benz 1,229 1, ,979 2, Volkswagen 824 1, ,67 1, Audi ,542 1, Toyota Honda , Ford Lexus Infiniti Chrysler Nissan Others ,912 1, Grand total 6,77 6, ,429 12, Fig 66 Imported car market shares by brand Feb Feb chg 2 months 2 months chg (%p) (%p) BMW Mercedes-Benz Volkswagen Audi Toyota Honda Ford Lexus Infiniti Chrysler Nissan Others Grand total Source: KAIDA 17

19 Fig 67 Imported car market share in Korea (%) /94 1/95 1/96 1/97 1/98 1/99 1/ 1/1 1/2 1/3 1/4 1/5 1/6 1/7 1/8 1/9 1/1 1/11 Source: KAIDA, KAMA KRW/USD, KRW/JPY vs. exports Fig 68 KRW/USD vs. exports Fig 69 KRW/JPY vs. Hyundai/Kia exports ( units) (KRW/USD) 29 1, MMA auto unit exports (LHS) KRW/USD (RHS) 1,6 1,4 1,2 1, ( units) (KRW/JPY) Hyundai & Kia's 12-MMA exports (LHS) KRW/JPY (RHS) Source: KAMA, Korea National Statistical Office (KNSO) Source: KAMA, KNSO Oil prices vs. sales Fig 7 Domestic oil prices vs. domestic sales Fig 71 WTI vs. exports (KRW/liter) 2, 1,8 1,6 1,4 1,2 1, 8 6 ( units) Domestic gasoline price (LHS) 12-MMA domestic auto sales (RHS) (USD/bbl) MMA exports (RHS) ( units) 27 WTI (LHS) Source: KAMA, Korea National Statistical Office (KNSO) Source: KAMA, KNSO 18

20 Top 1 selling cars in Korea Fig 72 February 211 Fig 73 2 months 211 Morning (TA) 12,16 Avante HD 2,573 Grandeur (HG) 11,489 Grandeur (HG) 17,515 Avante MD 7,226 Morning (TA) 13,97 YF Sonata 6,364 YF Sonata 13,249 K5 6,216 K5 13,19 SM5 (L43) 4,367 SM5 (L43) 1,38 Matiz Creative 3,588 Matiz Creative 8,482 Sportage R 3,468 Sportage R 8,254 Tucson ix 3,385 New SM3 7,189 Sorento R 3,38 Tucson ix 6,98 2, 4, 6, 8, 1, 12, 14, 5, 1, 15, 2, 25, Source: KAMA Source: KAMA Top 1 Korean export cars Fig 74 February 211 Fig 75 2 months 211 Forte 16,949 Forte 38,325 Avante 16,318 Avante 35,141 Pride 13,333 Lacetti Premiere 31,912 Tucson ix 12,57 Pride 31,78 Gentra - X 12,128 Gentra - X 25,524 Lacetti Premiere 11,87 Tucson ix 25,369 Soul 9,471 Soul 2,41 Santa Fe 9,233 Sportage R 17,86 Winstorm 8,51 Santa Fe 17,71 Sportage R 7,632 Matiz Creative 16,883 5, 1, 15, 2, 1, 2, 3, 4, Source: KAMA Source: KAMA 19

21 Fig 76 Auto papers since November 1, 21 Date Subject Code Pages Recommendation 11/8/1 HMC: To sell 1mn units in China in BUY 11/8/1 Mando: Main beneficiary of Hyundai and Kia s outrunning in China BUY 11/1/1 (Nov 21): Revved up in 4Q1 2 Overweight 11/1/1 Kia: Main beneficiary of KORUS FTA 27 1 BUY 11/11/1 DYM: Strong earnings to continue BUY 11/12/1 S&T Daewoo: Pedal-to-the-metal growth BUY 11/15/1 HCC: Robust earnings to continue BUY 11/17/1 Mobis: Rapidly narrowing the technology gap with Mando BUY 11/18/1 HMC: 211 Elantra cruises past rivals in the US BUY 11/22/1 SWH: Growing momentum from overseas plants BUY 11/24/1 HMC: A feast on Thanksgiving BUY 11/25/1 Autos: 211 outlook - Re-rating to continue 11 Overweight 11/29/1 HMC: Main beneficiary of booming economy in India BUY 12/1/1 HMC: Virtuous circle at US dealerships BUY 12/2/1 Autos: Kia posts record-high sales in Nov 2 Overweight 12/3/1 Kia: Revise up TP to W7, on strong fundamentals 27 3 BUY 12/6/1 Autos: KORUS FTA - Better late than never 1 Overweight 12/8/1 (Dec 21): Korean automakers ready to race into Overweight 12/1/1 Mobis: Rally to continue BUY 12/1/1 Kia: Surprise in US brand loyalty 27 2 BUY 12/15/1 Kia: Joining "glboal top-1 club" with 2mn units 27 2 BUY 12/16/1 Mobis: New orders from GM to accelerate re-rating BUY 12/17/1 HMC: Positive news from Sonata and Equus BUY 12/21/1 HMC: Two straight months of record export prices BUY 12/29/1 Kia: Remarkable outrunning to continue in BUY 1/3/11 HMC: Uncertainty takes a backseat to strong fundamentals BUY 1/3/11 Autos: Hyundai and Kia jumped to global no. 5 in 21 2 Overweight 1/5/11 Autos: Hyundai and Kia s US m/s to rise to 8.4% in Overweight 1/1/11 (Jan 211): Korean auto plays go full throttle in Overweight 1/17/11 HMC: HG Grandeur to lead rally BUY 1/2/11 Mando: Earnings recovery to step on the gas BUY 1/24/11 Nexen: Re-rating to continue BUY 1/27/11 HMC: Robust earnings continued in 4Q BUY 1/27/11 Mobis: 13% OPM continued for three consecutive quarters BUY 1/28/11 Kia: K5 drives Kia to new heights 27 3 BUY 1/28/11 HT: Full utilization and strong pricing power 24 3 BUY 2/7/11 Hyundai Wia: Another Mobis is coming BUY 2/7/11 Kia: Record China sales and highest US m/s in Jan 27 2 BUY 2/15/11 (Feb 211): Bargain-hunting chance 2 Overweight 2/15/11 Mando: Trio of positives to be in focus BUY 2/17/11 Nexen: Wheel of fortune points to BUY BUY 2/21/11 Kia: Robust China demand to drive Kia shares higher 27 1 BUY 2/23/11 Kia: Enough capacity with more new models 27 4 BUY 2/25/11 HMC: Higher oil prices and Toyota recalls benefit Hyundai BUY 2/28/11 HMC: Hyundai on track to dominate BRIC markets BUY 3/2/11 Kia: Sorento made CR's Top Pick list for the first time 27 1 BUY 3/2/11 HMC, Kia: Rising US market share to accelerate with launch of K5 and MD 538, 27 1 BUY 3/2/11 Kia: The new Morning now the best-selling car in Korea 27 2 BUY 3/4/11 Kia: K5 delivers superb safety 27 1 BUY 3/9/11 (Mar 211): Benefiting most from US market's big recovery 2 Overweight 2

22 Fig 77 Changes to recommendation and price target Company (Code) Date Recommendation Price target Company (Code) Date Recommendation Price target Hyundai Motor BUY 7, Nexen Tire BUY 6,2 (538) BUY 75, (235) BUY 8, BUY 8, BUY 9, BUY 87, BUY 1, BUY 94, BUY 8, BUY 13, BUY 9, BUY 118, BUY 11, BUY 14, BUY 11, BUY 15, BUY 13, BUY 17, Halla Climate BUY 1, BUY 19, Control (1888) BUY 13, BUY 21, BUY 15, BUY 23, BUY 17, BUY 25, BUY 2, Kia Motors BUY 11, BUY 23, (27) BUY 1, BUY 28, BUY 11,4 Hyundai Wia (1121) BUY 85, BUY 12, S&T Daewoo BUY 15, BUY 13, (6496) Hold 1, BUY 14, Hold 14, BUY 16, Hold 17, BUY 18, BUY 26, BUY 22, BUY 31, BUY 25, BUY 37, BUY 28, BUY 45, BUY 3, Dongyang Hold 3, BUY 34, Mechatronics Hold 4, BUY 43, (1357) BUY 5, BUY 53, BUY 8, BUY 59, BUY 9, BUY 7, BUY 12, BUY 75, BUY 18, Hyundai Mobis BUY 15, (1233) BUY 11, BUY 116, BUY 13, BUY 15, BUY 182, BUY 22, BUY 24, BUY 26, BUY 3, BUY 34, BUY 39, Hankook Tire Hold 14, (24) Hold 15, BUY 22, BUY 23, BUY 28, BUY 3, BUY 34, BUY 37, BUY 4, Mando (698) BUY 115, BUY 15, BUY 185, 21

23 Hyundai Motor (538) Kia Motors (27) Mobis (1233) Hankook Tire (24) Mando (698) Nexen Tire (235) Halla Climate Control (1888) Handai Wia (1121) 22

24 S&T Daewoo (6496) Dongyang Mechatronics (1357) 23

25 Guide to Korea Investment & Securities Co., Ltd. stock ratings based on absolute 12-month forward share price performance BUY: Expected to give a return of +15% or more Hold: Expected to give a return between -15% and +15% Underweight: Expected to give a return of -15% or less * As of June 2, 28, Korea Investment & Securities Co., Ltd. has adopted a new stock rating system comprised of BUY, Hold and Underweight. Guide to Korea Investment & Securities Co., Ltd. sector ratings for the next 12 months Overweight: Recommend increasing the sector s weighting in the portfolio compared to its respective weighting in the Kospi (Kosdaq) based on market capitalization. Neutral: Recommend maintaining the sector s weighting in the portfolio in line with its respective weighting in the Kospi (Kosdaq) based on market capitalization. Underweight: Recommend reducing the sector s weighting in the portfolio compared to its respective weighting in the Kospi (Kosdaq) based on market capitalization. Analyst Certification I/We, as the research analyst/analysts who prepared this report, do hereby certify that the views expressed in this research report accurately reflect my/our personal views about the subject securities and issuers discussed in this report. I/We do hereby also certify that no part of my/our compensation was, is, or will be directly or indirectly related to the specific recommendations or views contained in this research report. Important Disclosures As of the end of the month immediately preceding the date of publication of the research report or the public appearance (or the end of the second most recent month if the publication date is less than 1 calendar days after the end of the most recent month), Korea Investment & Securities Co., Ltd., or its affiliates does not own 1% or more of any class of common equity securities of the companies mentioned in this report. There is no actual, material conflict of interest of the research analyst or Korea Investment & Securities Co., Ltd., or its affiliates known at the time of publication of the research report or at the time of the public appearance. Korea Investment & Securities Co., Ltd., or its affiliates has not managed or co-managed a public offering of securities for the companies mentioned in this report in the past 12 months. Korea Investment & Securities Co., Ltd., or its affiliates has not received compensation for investment banking services from Hyundai Motor (HMC) in the past 12 months; Korea Investment & Securities Co., Ltd., or its affiliates does not expect to receive or intends to seek compensation for investment banking services from the companies mentioned in this report in the next 3 months. Korea Investment & Securities Co., Ltd., or its affiliates was not making a market in the securities of the companies mentioned in this report at the time that the research report was published. Korea Investment & Securities Co., Ltd. does not own over 1% shares of autos as of March 9, 211. Korea Investment & Securities Co., Ltd. issued ELW underlying Hyundai Motor, Kia Motors, Hyundai Mobis, Hankook Tire and Halla Climate Control and is the LP. Korea Investment & Securities Co., Ltd. is the liquidity provider of single stock futures & options with underlying stock of Hyundai Motor and Kia Motors. Korea Investment & Securities Co., Ltd. has provided this report to various third parties. Neither the analyst covering this company nor his spouse owns any autos shares as March 9, 211. This report was written by Korea Investment & Securities Co., Ltd. to help its clients invest in securities over which Korea Investment & Securities Co., Ltd. holds the copyright. This report cannot be copied, redistributed, forwarded or altered in any way without the consent of Korea Investment & Securities Co., Ltd. This report has been prepared by Korea Investment & Securities Co., Ltd. and is provided for information purposes only. Under no circumstances is it to be used or considered as an offer to sell, or a solicitation of any offer to buy. We make no representation as to its accuracy or completeness and it should not be relied upon as such. The company accepts no liability whatsoever for any direct or consequential loss arising from any use of this report or its contents. The final investment decision is based on the client s judgment, and this report cannot be used as evidence in any legal dispute related to investment decisions.

26 HEAD OFFICE WON-JAE RHEE, Executive Managing Director ) PAUL CHUNG, Sales Trading ) 27-1 Yoido-dong, Youngdeungpo-ku, Seoul , Korea Toll free: US HK SG Fax: ~3 Telex: K22966 NEW YORK DONG KIM, Managing Director (dkim@kisamerica.com ) ELAINE LIM, Head of Sales (Elaine@kisamerica.com ) JU KIM, Sales (jukim@kisamerica.com ) Korea Investment & Securities America, Inc. 135 Avenue of the Americas, Suite 111 New York, NY 119 Fax: HONG KONG STEVE KIM, Managing Director (steve.kim@kisasia.com ) SANGME LEE, Managing Director, Head of Asia Sales (sangme.lee@kisasia.com ) DAN SONG, Sales (dan.song@kisasia.com, ) JUN HWAN KIM, Sales (jun.kim@kisasia.com, ) Korea Investment & Securities Asia, Ltd. Suite 221-2, Jardine House 1 Connaught Place, Central, Hong Kong Fax: SINGAPORE SUNG NAMGOONG, Managing Director (snamgoong@truefriend.com ) TERRY SHIN, Sales (terryshin@truefriend.com ) Korea Investment & Securities Singapore Pte Ltd 1 Raffles Place, #43-4, OUB Center Singapore Fax: LONDON JJ MOON, Managing Director (jamesmoon@kiseurope.com ) BRANDON JUNE, Sales (brandonjune@kiseurope.com ) MINGOO KANG, Sales (mingookang@kiseurope.com, ) Korea Investment & Securities Europe, Ltd. 2nd Floor, 35 Moorgate London EC2R 6AR Fax: Telex: This report has been prepared by Korea Investment & Securities Co., Ltd. and is provided for information purposes only. Under no circumstances is it to be used or considered as an offer to sell, or a solicitation of any offer to buy. While all reasonable care has been taken to ensure that the information contained herein is not untrue or misleading at the time of publication, we make no representation as to its accuracy or completeness and it should not be relied upon as such. This report is provided solely for the information of professional investors who are expected to make their own investment decisions without undue reliance on this report and the company accepts no liability whatsoever for any direct or consequential loss arising from any use of this report or its contents. This report is not intended for the use of private investors All rights reserved. No part of this report may be reproduced or distributed in any manner without permission of Korea Investment & Securities Co.,Ltd.