Korea Auto Insight. A better 2H than 1H. Top picks

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1 Korea Auto Insight Sector Monthly / Autos July 8, 211 Top picks Company Rating TP (KRW) Hyundai Motor BUY 32, Kia Motors BUY 15, Hyundai Mobis BUY 47, Contents I. Valuations & earnings forecasts...1 Cross-border valuations KIS auto universe ratings and valuations Earnings forecasts II. Data...6 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...21 IV. Recommendation and TP changes...22 Sung Moon Suh sungmoon.suh@truefriend.com A better 2H than 1H Strong growth to continue We believe Hyundai Motor (Hyundai) and Kia Motors (Kia) rising trend for global market share will continue on the back of continuing competitive model releases and improving brand image and awareness. In 1H11, Hyundai and Kia sold 3.19mn units (+15.8% YoY: Hyundai 1.96mn (+1.8% YoY), Kia 1.23mn (+24.5% YoY)). Given our conservative estimates for their 211F sales at 6.45mn units (+12.3% YoY: Hyundai 3.96mn (+9.8% YoY), Kia 2.49mn (+16.7% YoY)), their 2H11 sales would amount to 3.26mn and keep them on a growth track. In other words, in 2H11 Hyundai and Kia will be able to sell as many as 2.1mn and 1.26mn vehicles for 8.8% YoY and 9.8% YoY gains, respectively. Top picks: Hyundai, Kia and Mobis Japanese automakers US market share continued to drop from 4% in March to 35.5% in April, 3.4% in May and 3% in June. Hyundai and Kia s combined US June market share slipped to 9.9% from 1.1% in May but is their second-highest and a sharp rise from 8.4% a year earlier, 8.5% in March and 9.4% in April. In particular, their combined sales exceeded the 1,-mark for a fourth straight month and Hyundai set a record US market share for two straight months. In this regard, Kia (27, TP W15,) remains our top pick and we add Hyundai (538, TP W32,) to the list. Meanwhile, as the KOREU FTA takes effect from July, Hyundai Mobis (1233, TP W47,) also remains a top pick. Kia posts bigger growth for 19 months in a row Hyundai posted record sales of 352,255 units (+12.3% YoY) in June on healthy domestic sales and robust overseas plant sales (178,935, +13.4% YoY). Hyundai s domestic sales surged 22.9% YoY to 59,761 and exports grew 6% YoY to 113,559. Kia s sales of 217,315 (+18.6% YoY) were the third-highest and were led by overseas sales. As such, Kia posted a higher sales growth rate for a 19th straight month; Kia s domestic sales dropped 5% YoY but overseas sales surged 26.2% YoY (exports 11,55 (+21.9% YoY), overseas plant sales 74,6 (+32.6% YoY)). US sales surpassed the 1,-mark four months in a row Their US June sales jumped to 25.4% YoY to 14,253 units. US demand grew 7.1% YoY to 1,53,45 while Hyundai s sales jumped 15.6% YoY to 59,29 and Kia s surged 41.2% YoY to 45,44. As such, Hyundai s market share rose to 5.6% from 5.2% from a year earlier. Kia s soared to 4.3%, its second-highest, from 3.2% in the period. We attribute the continued terrific results to: 1) their offering competitive products, 2) their brand image has been markedly improving since the financial shock, and 3) brand awareness has been sharply increasing with record sales as of 21.

2 Cross-border & KIS Auto Universe valuations Fig 1 Cross-border valuations autos Company HMC Kia GM Ford Daimler VW Toyota Honda Nissan Brilliance Geely Dongfeng Price (7/6/11, KRW, USD, EUR, JPY, HKD) 246,5 76, ,425 3, week high 257, 84, ,91 3, week low 128,5 29, ,812 2, Market cap (W bn, USD bn, EUR bn, 54, ,31.7 JPY bn, HKD bn) ,89.4 5, , Market cap (USD bn) Relative performance to market (%) 1M M M NA EPS (KRW, USD, EUR, JPY, HKD) FY1, 3/11 18,52 5, FY11F, 3/12F 24,655 8, NA FY12F, 3/13F 27,273 8, NA P/E (x) FY1, 3/ FY11F, 3/12F NA FY12F, 3/13F NA Relative FY1 P/E (%) FY1, 3/1 PB (x) NM Sales (W bn, USD bn, EUR bn, JPY bn, 36, ,261.4 HKD bn) ,994. 8,937. 7, Sales (USD bn) Pre-tax profit (W bn, USD bn, EUR bn, JPY bn, HKD bn) 6,37.9 2, Pre-tax profit margin (%) ROE (%) NA NA Dividend yield (%).6.7 NA NA NA Note: EPS forecasts for foreign automakers are IBES figures. Source: Datastream, KIS estimates Fig 2 Cross-border valuations tires Company Hankook Nexen Michelin Bridgestone Goodyear Continental Yokohama Cooper Price (7/6/11, KRW, USD, EUR, JPY) 45,7 2, , week high 47,75 2, , week low 24,1 6, , Market cap (W bn, USD bn, EUR bn, JPY bn) 6, , , Market cap (USD bn) Relative performance to market (%) 1M M M EPS (KRW, USD, EUR, JPY) FY1, 3/11 2, FY11F 3,477 1, FY12F 4,7 1, P/E (x) FY1, 3/ NM FY11F FY12F FY1, 3/1 PB (x) Sales (W bn, USD bn, EUR bn, JPY bn) 3, , , 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 tiremakers are IBES figures. Source: Datastream, KIS estimates 2

3 Fig 3 Cross-border valuations auto parts Company Mobis Wia Mando HCC DYM S&T Daewoo Denso Magna Price (7/6/11, KRW, JPY, CAD) 399,5 167,5 216, 25,7 18,5 32,8 2, week high 412, 171, 226,5 27,15 2,7 36,2 3, week low 188,5 65,8 113,5 15,8 6,33 24,9 2, Market cap (W bn, JPY bn, CAD bn) 38, ,39.8 3, , , Market cap (USD bn) Relative performance to market (%) 1M M M 55. NA EPS (KRW, JPY, CAD) FY1, 3/11 24,888 6,289 1,975 1,897 1,468 2, FY11F, 3/12F 28,921 1,441 14,932 2,211 1,898 4, FY12F, 3/13F 31,236 12,957 19,93 2,438 2,115 4, P/E (x) FY1, 3/ FY11F, 3/12F FY12F, 3/13F FY1, 3/1 PB (x) Sales (W bn, JPY bn, CAD bn) 13, , ,19.6 1, , Sales (USD bn) Pre-tax profit (W bn, JPY bn, CAD bn) 3, Pre-tax profit margin (%) ROE (%) Dividend yield (%) Note: EPS forecasts for foreign parts makers are IBES figures Source: Datastream, KIS estimates Fig 4 KIS Auto Universe ratings and valuations 52-week Price 12M tgt. 12MF Upside Mkt 12MF Company Rating high low (7/6/11) price target PE (%) cap PE EV/EBITDA EPS chg Div yield (KRW) (KRW) (KRW) (KRW) (x) (USD mn) (x) (x) (% YoY) (%) HMC (538 KS) BUY 257, 128,5 246,5 32, , Mobis (1233 KS) BUY 412, 188,5 399,5 47, , Kia (27 KS) BUY 84,6 29,5 76, 15, , Hankook Tire (24 KS) BUY 47,75 24,1 45,7 48, , Hyundai Wia (1121 KS) BUY 171, 65,8 167,5 17, , Mando (698 KS) BUY 226,5 113,5 216, 27, , Halla Climate Control (1888 KS) BUY 27,15 15,8 25,7 28, , Nexen Tire (235 KS) BUY 2,7 6,39 2,25 23, , Dongyang Mecha. (1357 KS) BUY 2,7 6,33 18,5 22, S&T Daewoo (6496 KS) BUY 36,2 24,9 32,8 45,

4 Earnings forecasts Fig 5 Earnings forecasts & valuations for 1 auto companies Hyundai Motor Yr to Sales OP EBT NP EPS % chg EBITDA PE EV/ PB ROE Dec (W bn) (W bn) (W bn) (W bn) (KRW) YoY (W bn) (x) EBITDA (x) (x) (%) 29A 31, ,235. 3, , , , A 36, , ,37.9 5, , , F 39,83.7 3,93.5 8,45.4 7, , , F 42,21.1 4,28.8 9,354. 7, , , F 43, , ,355. 8, ,1 1. 6, Hyundai Mobis Yr to Sales OP EBT NP EPS % chg EBITDA PE EV/ PB ROE Dec (W bn) (W bn) (W bn) (W bn) (KRW) YoY (W bn) (x) EBITDA (x) (x) (%) 29A 1,633. 1, ,63.4 1, , , A 13, ,83.3 3,49.2 2, , , F 15,2.8 2,32.8 3, , , , F 16,74.3 2, , , , , F 17,77.6 2,411. 4, , , , Kia Motors Yr to Sales OP EBT NP EPS % chg EBITDA PE EV/ PB ROE Dec (W bn) (W bn) (W bn) (W bn) (KRW) YoY (W bn) (x) EBITDA (x) (x) (%) 29A 18, , , ,45.3 3,689 1,25.8 1, A 23, ,68.2 2, , , , F 26,21.2 2,116. 4,93.1 3, , , F 27, ,287. 4, , , , F 29,21.8 2, ,89.8 3, , , Hankook Tire Yr to Sales OP EBT NP EPS % chg EBITDA PE EV/ PB ROE Dec (W bn) (W bn) (W bn) (W bn) (KRW) YoY (W bn) (x) EBITDA (x) (x) (%) 29A 2, ,36 1, A 3, , F 3, , F 4, , F 4, , Hyundai Wia Yr to Sales OP EBT NP EPS % chg EBITDA PE EV/ PB ROE Dec (W bn) (W bn) (W bn) (W bn) (KRW) YoY (W bn) (x) EBITDA (x) (x) (%) 29A 3, , A 4, , F 5, , F 6, , F 6, , Mando Yr to Sales OP EBT NP EPS % chg EBITDA PE EV/ PB ROE Dec (W bn) (W bn) (W bn) (W bn) (KRW) YoY (W bn) (x) EBITDA (x) (x) (%) 29A 1, , A 2, , F 2, , F 2, , F 3, ,

5 Halla Climate Control Yr to Sales OP EBT NP EPS % chg EBITDA PE EV/ PB ROE Dec (W bn) (W bn) (W bn) (W bn) (KRW) YoY (W bn) (x) EBITDA (x) (x) (%) 29A 1, , A 1, , F 1, , F 2, , F 2, , Nexen Tire Yr to Sales OP EBT NP EPS % chg EBITDA PE EV/ PB ROE Dec (W bn) (W bn) (W bn) (W bn) (KRW) YoY (W bn) (x) EBITDA (x) (x) (%) 29A ,127 TD 217. NM A 1, TP F 1, , F 1, , F 1, , Dongyang Mechatronics Yr to Sales OP EBT NP EPS % chg EBITDA PE EV/ PB ROE Dec (W bn) (W bn) (W bn) (W bn) (KRW) YoY (W bn) (x) EBITDA (x) (x) (%) 29A TD A ,468 TP F , F , F , S&T Daewoo Yr to Sales OP EBT NP EPS % chg EBITDA PE EV/ PB ROE Dec (W bn) (W bn) (W bn) (W bn) (KRW) YoY (W bn) (x) EBITDA (x) (x) (%) 29A A , F , F , F , Note: 1. K-GAAP. 2. Closing prices on July 6. Source: Company data, KIS estimates 5

6 Strong sales continued in June Hyundai posted record sales in June Kia s June sales were its third-highest 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 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, ,848 35, ,655 66, ,85 427, , ,82 258, , ,991 77, , ,54 648,136 4/11 126, , , ,916 74,85 256,1 522, ,179 12, , , ,77 78, , ,5 641, ,836 34, , ,935 74,6 252, , ,283 % MoM % YoY /1 71,676 1,338,772 2,49,448 99, ,179 1,248,292 2,587,64 3,297,74 1-6/11 739,197 1,54,772 2,279,969 1,49, ,958 1,51,11 3,41,882 3,781,79 % 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 (%) 4/1 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, , , , , ,13 85, , , ,63 325, /11 6,93 13, , , , , ,75 11, , ,77 281, , , , ,32 178, , , % MoM % YoY /1 321,24 534, ,839 99,113 1,443,712 1,764, /11 344, ,736 97,178 1,49,152 1,611,888 1,956, % 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 4/1 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 7,212 19,241 66, ,47 175, ,1 99, ,311 77, , , /11 42,52 89,17 131,69 74,85 163,192 25, ,12 81, ,76 78,953 16, , ,2 11,55 143,255 74,6 175, , % MoM % YoY /1 228, , , , , , /11 248, , , , ,35 1,234, % YoY Source: Company data, KAMA, Korea Investment and Securities 6

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

8 Domestic sales Fig 12 Domestic sales & growth % change Jun Jan-Jun % of total May Jun Jan-Jun % of total MoM YoY over 1-6/1 Total 121,546 71, , , , Hyundai 48, , ,75 59, , Kia 44, , ,12 42,2 248, GM Korea 1,32 57, ,43 13,761 69, Daewoo Bus 222 1, Tata Daewoo 561 2, , Ssangyong 3,4 14, ,515 2,777 2, Renault Samsung 14,653 85, ,12 9,434 52, Source: KAMA Fig 13 Domestic sales by market class % chg Jun Jan-Jun % of total May Jun Jan-Jun % of total MoM YoY over 1-6/1 Total 121,546 71,676-12, , , Cars 1, , ,2 16,218 67, L 13,761 78, ,157 16,61 92, L 21, , ,735 24, , L 3,97 15, ,811 2, , Above 2.L 11,849 82, ,783 19,58 113, SUV 19, , ,62 19, , Minivan 2,454 14, ,112 5,918 23, Com veh 21, , ,338 22, , Buses 5,674 35, ,648 5,977 35, Trucks 15,523 85, ,69 16,641 95, (1 ton trucks) 1,556 58, ,746 12,242 68, Source: KAMA Fig 14 Change in domestic sales Fig 15 Domestic market share (% YoY) 12-MMA (%) Hyundai GM Korea Renault Samsung Kia Ssangyong /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 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

9 Exports Fig 16 Exports & growth % chg Jun Jan-Jun % of total May Jun Jan-Jun % of total MoM YoY over 1-6/1 Total 266,56 1,338, ,126 34,452 1,54, Hyundai 17, , , , , Kia 82, , ,694 11,55 534, GM Korea 61,577 35, ,94 67, , Daewoo Bus Tata Daewoo 436 3, , Ssangyong 4,148 2, ,64 7,527 34, Renault Samsung 1,289 5, ,612 14,778 7, Source: KAMA Fig 17 Change in exports Fig 18 Export ASP (% YoY) 12-MMA (USD bn) Total exports (LHS) Avg. export unit price (RHS) (USD) 14, 13, 12, 11, 1, 9, 8, 7, 6, 5, -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 (USD bn) (USD) 1.6 Total exports (LHS) 16, 1.4 Avg. export unit price (RHS) 15, 14, , 1. 12, 11,.8 1,.6 9,.4 8, 7,.2 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 Fig 2 Kia Motors export ASP (USD bn) (USD) , 1.2 Total exports (LHS) Avg. export unit price (RHS) 13, 12, 1. 11,.8 1,.6 9, 8,.4 7,.2 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 9

10 Total sales (domestic sales + exports) Fig 21 Total sales & growth % chg Jun Jan-Jun % of total May Jun Jan-Jun % of total MoM YoY over 1-6/1 Total 388,52 2,49, , ,288 2,279, Hyundai 155, , , ,32 97, Kia 127, , ,76 143, , GM Daewoo 71,69 363, ,497 8,877 45, Daewoo Bus 259 1, , Tata Daewoo 997 5, ,45 4, Ssangyong 7,152 35, ,155 1,34 55, Renault Samsung 24, , ,624 24, , Source: KAMA Fig 22 Change in total sales Fig 23 Total sales 12 (% YoY) 45 ( units) 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/ 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 1

11 Change in total sales by company Fig 26 Hyundai Motor Fig 27 Kia Motors (% YoY) MMA (% YoY) 12-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 Korea (% 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 (%) 13 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 11

12 US sales Fig 32 Hyundai Motor US sales by model Accent Elantra Sonata XG/Azera Santa Fe Tucson Veracruz Genesis Equus High-end Total 6/1 4,615 14,245 17, ,586 3, ,569 32,345 51,25 6/11 3,612 19,992 18, ,987 4, , ,65 59,29 % YoY NM /1 27,78 57,564 89,249 1,581 44,376 19,689 3,354 12, ,14 255, /11 24,18 13,31 115,14 1,95 34,821 23,537 4,165 15,454 1, , ,797 % YoY 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 6/1 1, ,467 1,55 1,448 8,615 3, ,851 6,429 16,191 31,96 6/11 1,954 8,191 7,99 4,377 1,13 2, ,314 23,585 45,44 % YoY 8.4 NM NM NM /1 13, ,467 15,627 8,743 5,785 1,912 3, ,737 28,637 93,999 17,69 1-6/11 11, ,22 36,617 25,369 61,778 11, , , ,14 % YoY NM Source: Company data Fig 34 Hyundai Motor s US sales Fig 35 Hyundai Motor s US market share 65, 55, 45, 35, 25, 15, US retail sales 12-MMA US retail sales (%) , 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 5, US retail sales 5. (%) 45, 12-MMA US retail sales 4.5 4, 4. 35, 3.5 3, 3. 25, 2.5 2, 2. 15, 1.5 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 12

13 Fig 38 Hyundai Motor s US sales by model (%) 65, 6, 55, 5, 45, 4, 35, 3, 25, 2, 15, 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 Source: Automotive News Accent (LHS) Coupe (LHS) XG/Azera (LHS) Tucson (LHS) Veracruz (LHS) Equus (LHS) Elantra (LHS) Sonata (LHS) Santa Fe (LHS) Entourage (LHS) Genesis (LHS) High-end portion (RHS) Fig 39 Kia Motors US sales by model (%) 5, 45, 4, 35, 3, 25, 2, 15, 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 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 Santa Fe sales 22, 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, 24, Sonata sales 12-MMA Sonata sales 22, 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, Santa Fe sales 12-MMA Santa Fe sales 25, Elantra sales 12-MMA Elantra sales 12, 2, 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 13

14 Fig 44 US vehicle sales by make (units, %) June June % chg 6 mos. 6 mos. % chg YoY YoY General Motors 215, , ,261,61 1,77, Ford Motor Co. 193, , ,69, , Toyota 11,937 14, , , Chrysler Group LLC 12,394 92, , , Honda 83,892 16, , , Hyundai Group 14,253 83, ,91 425, Nissan 71,94 64, ,973 44, VW 38,673 29, , , BMW Group 26,98 23, , , Subaru 19,794 21, ,49 125, Daimler AG 23,37 19, ,745 11, Mazda 19,37 18, , , Mitsubishi 8,299 4, ,115 26, Jaguar Land Rover 4,541 4, ,72 2, Porsche 2,546 2, ,542 1, Suzuki 2,278 2, ,42 11, Saab Spyker Automobile , Maserati , Volvo Cars North America 7,1 NM 36,34 NM Other (estimate) ,464 1, TOTAL 1,53,45 983, ,333,313 5,614, Fig 45 US market shares by make (%) June June chg 6 mos. 6 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 Volvo Cars North America Other (estimate) TOTAL Source: Automotive News 14

15 Western Europe sales Fig 46 Western Europe sales by company % chg Mar Jan-Mar % of total Feb Mar Jan-Mar % of total MoM YoY over 1-3/1 All brands 1,8,537 4,28, ,98,228 1,736,378 4,1, HMC 43,825 93, ,614 4,591 93, Kia 29,986 65, ,21 26,679 6, Others 816 1, , Korea total 74,627 16, ,427 67, , 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 1/1 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: 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 (%) , , 19, 16, 13, ,.6 7,.4 4, 1/1 1/2 1/3 1/4 1/5 1/6 1/7 1/8 1/9 1/1 1/11.2 1/1 1/2 1/3 1/4 1/5 1/6 1/7 1/8 1/9 1/1 1/11 Source: ACEA Source: ACEA 15

16 CKD exports & overseas plant sales Fig 51 CKD exports % chg May Jan-May % of total Apr May Jan-May % of total MoM YoY over 1-5/1 Total 119, , ,45 18,19 581, HMC 12,755 55, ,11 9,374 57, Kia 4,15 22, ,5 6,12 25, GM Korea 12,41 466, ,272 92, , Daewoo Bus Ssangyong 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 6/1 4,46 5,55 9,461 27,368 18,887 46,255 54,83 26,54 5,63 31,117 18, ,458 6/11 4,367 6,336 1,73 3,42 22,129 52,531 55,136 26,316 4,97 31,223 21,673 11, ,822 % YoY NM /1 24,252 14,729 38, , ,225 37, , ,55 24, ,63 9, , /11 23,26 29,82 52,18 187, ,37 33, , ,518 27,42 172,938 12,28 47,597 1,59,369 % YoY NM 15.2 Source: Company data Fig 53 BHMC sales by model Elantra Sonata Tucson Accent i3 High-end Total 6/1 29,734 5,378 9,597 7,986 1,388 14,975 54,83 6/11 2,621 8,489 12,68 12, ,169 55,136 % YoY /1 2,79 3,32 43,257 42,527 12,59 73, , /11 164,47 42,92 79,286 71,611 6, , ,473 % YoY Source: Company data Fig 54 Kia's overseas plant sales Fig 55 Kia's Slovakia plant sales by model China Slovakia US Total 6/1 25,3 2,234 1,623 55,86 6/11 31,163 24,147 18,75 74,6 % YoY /1 16,817 13,273 75,89 339, /11 19,15 135, ,16 451,957 % YoY Source: Company data Fig 56 Kia's China sales by model cee'd Sportage Tucson Total 6/1 12,969 1,57 5,758 2,234 6/11 11,4 1,2 2,547 24,147 % YoY /1 52,636 17,987 32,65 13, /11 53,429 45,42 36, ,647 % YoY Source: Company data Pride Cerato Forte Lotze Carnvial Sportage Soul High-end Total 6/1 3,67 6,143 7, ,81 1,239 7,324 25,3 6/11 2,638 4,267 1,127 3,568 9, ,322 31,163 % YoY NM /1 2,375 42,977 48,45 1, ,87 1,19 38,87 16, /11 2,156 33,78 62,553 13,237 54,891 5,533 68,128 19,15 % YoY NM Source: Company data 16

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 4/11 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 2, 18, 16, Hyundai overseas production sales (LHS) (%) % YoY (RHS) , 3, 2, 1, 1/2 1/3 1/4 1/5 1/6 1/7 1/8 1/9 1/1 1/11 14, 12, 1, 8, 6, 4, 2, 1/2 1/3 1/4 1/5 1/6 1/7 1/8 1/9 1/1 1/ Source: Company data Source: Company data 17

18 Imported car sales Fig 63 Imported car sales & growth Fig 64 Sales of imported cars vs. Korean-made cars 12, 1, Sales growth (RHS) (% YoY) , 14, 12, Sales of Korean-made cars (LHS) Imported car sales (RHS) 12, 1, 8, 5 1, 8, 6, 8, 6, 4, 6, 4, 2, Monthly sales (LHS) -5 4, 2, 2, Source: Korea Automobile Importers & Distribution Association (KAIDA) Source: KAIDA, KAMA Fig 65 Imported car sales by brand (units, %) June June % chg 6 months 6 months % chg YoY YoY BMW 2,83 1, ,136 6, Mercedes-Benz 1,743 1, ,222 7, Volkswagen 1, ,592 4, Audi ,858 3, Toyota ,478 3, Lexus ,985 1, Ford ,924 2, Peugeot , Chrysler ,577 1, Honda ,724 2, Infiniti ,264 1, Others ,534 5, Grand-Total 8,964 7, ,664 41, Fig 66 Imported car market shares by brand June June chg 6 months 6 months chg (%p) (%p) BMW Mercedes-Benz Volkswagen Audi Toyota Lexus Ford Peugeot Chrysler Honda Infiniti Others Grand-Total Source: KAIDA 18

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 ( units) (KRW/USD) 29 1,8 6-MMA auto unit exports (LHS) 1,6 24 1,4 19 1,2 14 1, 9 KRW/USD (RHS) Fig 69 KRW/JPY vs. Hyundai/Kia exports ( 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 ( units) Domestic gasoline price (LHS) 12-MMA domestic auto sales (RHS) (USD/bbl) ( units) MMA exports (RHS) WTI (LHS) Source: KAMA, Korea National Statistical Office (KNSO) Source: KAMA, KNSO 19

20 Top 1 selling cars in Korea Fig 72 June 211 Fig 73 6 months 211 Avante MD 1,896 Avante MD 63,414 Grandeur (HG) 1,35 Grandeur (HG) 6,77 Morning (TA) 1,232 Morning (TA) 54,53 YF Sonata 7,838 YF Sonata 42,119 K5 7,85 K5 4,981 Spark 6,378 Spark 31,31 Sportage R 4,797 Sportage R 26,73 SM5 4,15 SM5 26,212 Tucson ix 3,628 Sorento R 21,32 Sorento R 3,189 Tucson ix 21,245 2, 4, 6, 8, 1, 12, 1, 2, 3, 4, 5, 6, 7, Source: KAMA Source: KAMA Top 1 Korean export cars Fig 74 June 211 Fig 75 6 months 211 Avante 21,666 Avante 125,154 Accent 19,986 Forte 111,66 Forte 17,611 Cruze 96,11 Cruze 16,29 Tucson ix 86,641 Tucson ix 15,484 Soul 76,341 Soul 15,352 Accent 74,731 Sportage R 12,795 Pride 71,419 Spark 11,881 Gentra X 67,392 Morning (TA) 11,595 Sportage R 63,54 Santa Fe 11,518 Spark 61,66 5, 1, 15, 2, 25, 2, 4, 6, 8, 1, 12, 14, Source: KAMA Source: KAMA 2

21 Fig 76 Auto papers since March 1, 211 Date Subject Code Pages Recommendation 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 3/1/11 HMC: Veloster brings New Thinking. New Possibilities BUY 3/14/11 HMC & Kia: Jumbled Japanese cars vs. shining Korean cars 538, 27 1 BUY 3/21/11 Kia: Driving to new heights on positive news 27 1 BUY 3/22/11 Kia: March sales volume likely to be record high 27 2 BUY 3/23/11 Kia: Raise TP to W85, on strong fundamentals 27 3 BUY 3/24/11 Nexen: TP raised to W15, on strengthening pricing power BUY 3/24/12 Mando: TP raised on exceptional growth potential BUY 3/29/11 Kia: Escalating export ASP growth 27 2 BUY 4/4/11 Kia: Crisis in Japan puts Kia in the fast lane 27 4 BUY 4/4/11 Kia: March sales set a historical high with record US market share 27 2 BUY 4/4/11 Mando: Growing growth potential with VW orders BUY 4/8/11 (Apr 211): Rising utilization rates fuel continued rally 2 Overweight 4/8/11 Kia: Dwindling US inventories to treat Kia kindly 27 2 BUY 4/11/11 Wia: TP raised on Kia s outrunning BUY 4/12/11 DYM: Re-rating to continue BUY 4/14/11 HMC: Raise TP on terrific mix momentum BUY 4/14/11 HT: Long-term growth potential in focus 24 3 BUY 4/18/11 Kia: Kia in more focus on ample capacity 27 2 BUY 4/2/11 HT: Higher selling price and lower rubber price 24 3 BUY 4/22/11 Nexen: TP raised on strengthening growth potential BUY 4/25/11 Kia: Toyota's utilization rate 3% vs Kia's 1% 27 1 BUY 4/25/11 Mobis: Re-rating to continue BUY 4/28/11 HMC: Better-than-expected earnings in 1Q BUY 4/29/11 Kia: Stronger-than-expected 1Q11 results 27 3 BUY 5/6/11 Kia: Re-entry point 27 4 BUY 5/9/11 Wia: TP raised on better-than-expected 1Q11 results BUY 5/12/11 (May 211): 1% US market share within striking distance 2 Overweight 5/16/11 Kia: Toyota and Honda s US inventories nosedived 27 1 BUY 5/16/11 HCC: Robust earnings to continue BUY 5/18/11 HMC, Kia: China April market share highest since May , 27 1 BUY 5/2/11 HMC: Highest mpg to further boost sales and image BUY 5/23/11 HMC, Kia: Limited impact from Yoosung s strike 538, 27 1 BUY 5/25/11 HMC, Kia: Resolution of strike at Yoosung 538, 27 1 BUY 5/25/11 Nexen: TP raised on rising capacity in a seller's market BUY 5/26/11 HMC, Kia: Positive on likely 1% US market share in May 538, 27 1 BUY 5/3/11 Mobis: Driving closer to the world s top-five OEM club BUY 6/2/11 HMC, Kia: Outrunning to continue after Japan s recovery 538, 27 2 BUY 6/7/11 Kia: Short K5 supply to be resolved by US expansion 27 2 BUY 6/8/11 Mobis: New orders from Japan to accelerate re-rating BUY 6/9/11 (June 211): Recent far outrunning has positive impact 2 Overweight 6/1/11 HMC: Labor dispute largely reflected in stock price BUY 6/13/11 HMC: Positive on short-lived labor dispute at Asan plant BUY 6/13/11 HT: Oversold on China recall 24 1 BUY 6/14/11 HMC, Kia: Another record for US market share in June 538, 27 2 BUY 6/17/11 S&T Daewoo: Most undervalued parts stock BUY 6/2/11 Mando: Rally to continue BUY 6/24/11 Kia: IQS also improves markedly 27 1 BUY 6/27/11 HMC: Equus surprise adds shine to the Genesis effect BUY 6/29/11 Autos: KOR-EU FTA countdown 1 Overweight 7/1/11 HMC, Kia: Positive on upward revision to US sales forecast 538, 27 1 BUY 7/4/11 HMC, Kia: Price rebound to continue on strong fundamentals 538, 28 2 BUY 7/8/11 (July 211): A better 2H than 1H 2 Overweight 21

22 Fig 77 Changes to recommendation and price target Company (Code) Date Recommendation Price target Company (Code) Date Recommendation Price target Hyundai Motor BUY 87, Mando (698) BUY 115, (538) BUY 94, BUY 15, BUY 13, BUY 185, BUY 118, BUY 23, BUY 14, BUY 27, BUY 15, Halla Climate BUY 13, BUY 17, Control (1888) BUY 15, BUY 19, BUY 17, BUY 21, BUY 2, BUY 23, BUY 23, BUY 25, BUY 28, BUY 275, Nexen Tire BUY 6, BUY 32, (235) BUY 8,3 Kia Motors BUY 16, BUY 9,5 (27) BUY 18, BUY 1, BUY 22, BUY 8, BUY 25, BUY 9, BUY 28, BUY 11, BUY 3, BUY 11, BUY 34, BUY 13, BUY 43, BUY 15, BUY 53, BUY 19, BUY 59, BUY 23, BUY 7, Dongyang Hold 4, BUY 75, Mechatronics BUY 5, BUY 85, (1357) BUY 8, BUY 92, BUY 9, BUY 15, BUY 12,5 Hyundai Mobis BUY 13, BUY 18, (1233) BUY 15, BUY 22, BUY 182, S&T Daewoo Hold 17, BUY 22, (6496) BUY 26, BUY 24, BUY 31, BUY 26, BUY 37, BUY 3, BUY 45, BUY 34, BUY 39, BUY 47, Hankook Tire Hold 15,2 (24) BUY 22, BUY 23, BUY 28, BUY 3, BUY 34, BUY 37, BUY 4, BUY 48, Hyundai Wia BUY 85, (1121) BUY 15, BUY 17, 22

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

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

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 July 7, 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 July 7, 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: K2296 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 ) ALEX JUN, Managing Director (alex.jun@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.