SK Hynix

(000660 KS)
In line with upbeat expectations

Technology 4Q14 review: Revenue of W5.15tr (+53% YoY), OP of W1.67tr (+112% YoY)
For 4Q14, SK Hynix announced revenue of W5.15tr (+53% YoY) and operating profit of
Results Comment W1.67tr (+112% YoY), meeting our estimates (W5.15tr and W1.66tr) and the consensus
(W5.08tr and W1.61tr). Net profit came in better than our expectation (W1.27tr) at
January 29, 2015
W1.62tr (+106% YoY), boosted by insurance claims (W500bn) from the Wuxi plant fire,
which offset the lawsuit settlement with Toshiba (W305.6bn or US$278mn).

(Maintain)
Target Price (12M, W)
Share Price (1/28/15, W)
Buy DRAM: Shipments grew 18% QoQ, while ASP fell 3% QoQ. The company’s DRAM
shipment growth was stronger than rivals’ thanks to a higher mix (50%) of 2Ynm DRAM.
64,000 Despite a slight decline in mobile DRAM prices, margins improved, supported by stable
PC DRAM prices. Customers and channels have normal inventory levels of around 3-5
49,200 weeks, but supply inventory remains low at one week.

NAND: Shipments climbed 30% QoQ, while ASP dipped 8% QoQ. Shipments remained
Expected Return 30% robust on the back of new smartphone launches and an increased portion of 1Xnm
NAND. As for margins, we estimate the NAND unit turned to a small profit in 4Q14.
Finished-goods inventory fell to 2.5 weeks, much lower than in 3Q14.
OP (14F, Wbn) 5,109
Consensus OP (14F, Wbn) 5,049 Guidance: Global memory shipments are expected to grow in the mid-20% range for
DRAM and 35-40% for NAND. Management expects DRAM shipments to be in line with
EPS Growth (14F, %) 42.5
the global market, and NAND shipments to outpace the market. For 2015, the company
Market EPS Growth (14F, %) -1.8
plans to spend a total of W5.2tr on capex (similar to last year’s level) on 1) the
P/E (14F, x) 8.2
construction of the new M14 fab (15,000 wpm), 2) purchases of related equipment, and
Market P/E (14F, x) 13.5
3) 2Znm process migration.
KOSPI 1,961.58
In 2015, DRAM should stabilize and NAND should pick up
Market Cap (Wbn) 35,818
Shares Outstanding (mn) 728 For 1Q15, we forecast revenue of W4.7tr (+26% YoY) and operating profit of W1.44tr
Free Float (%) 78.2 (+36% YoY), with DRAM and NAND shipments falling 6% and 7% QoQ, respectively.
Foreign Ownership (%) 49.8 Shipments and earnings are likely to take a temporary breather with the arrival of the
Beta (12M) 0.14 off-season. In 2015, we expect DRAM prices to become less volatile due to increased
52-Week Low 36,000
market concentration and technological barriers. Demand for DDR4, which is faster and
52-Week High 51,900
consumes less energy than DDR3, should expand this year, led by the server space, while
supply growth should be handicapped by an 8-10% die penalty. In the NAND segment,
(%) 1M 6M 12M triple-level cell (TLC) is likely to be adopted in a broader range of applications, driving
Absolute 4.7 5.7 33.7 the overall market.
Relative 4.0 10.4 30.7
Maintain Buy and TP of W64,000
160 SK Hynix KOSPI
We reiterate our Buy rating and target price of W64,000 on SK Hynix. The company’s
140 2014 dividend has been set at W300 per share, which implies a current yield of 0.6% and
120
payout of 5.2%. The size of the dividend is not significant, but it is the company’s first
since 2010. Currently, the chip maker is trading at a P/E of 7.7x and a P/B of 1.6x, levels
100 we find attractive given the company’s 2015F EPS growth of 12% and ROE of 23%. That
80 said, we believe a larger earnings contribution from NAND is needed for a re-rating.
1.14 5.14 9.14 1.15

Daewoo Securities Co.,

Co., Ltd. FY (Dec.) 12/11 12/12 12/13 12/14P 12/15F 12/16F
Revenue (Wbn) 10,396 10,162 14,165 17,126 18,776 19,777
[Semiconductor] OP (Wbn) 369 -227 3,380 5,109 5,798 6,378
Jonathan Hwang OP margin (%) 3.5 -2.2 23.9 29.8 30.9 32.2
+822-768-4140 NP (Wbn) -57 -159 2,872 4,195 4,678 5,266
j.hwang@dwsec.com EPS (W) -96 -233 4,099 5,841 6,426 7,233
ROE (%) -0.7 -1.8 25.2 27.1 23.1 21.0
Joon-ho Jang
+822-768-3241 P/E (x) - - 9.0 8.2 7.7 6.8
joonho.jang@dwsec.com P/B (x) 1.7 1.8 2.0 1.9 1.6 1.3
Notes: All figures are based on consolidated K-IFRS; NP refers to net profit attributable to controlling interests
Source: Company data, KDB Daewoo Securities Research estimates

Analysts who prepared this report are registered as research analysts in Korea but not in any other jurisdiction, including the
the U.S.
PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES & DISCLAIMERS IN APPENDIX 1 AT THE END OF REPORT.
January 29, 2015 SK Hynix

Table 1. 4Q14P review (Wbn, %)

4Q14P Growth
4Q13 3Q14
Preliminary KDB Daewoo Consensus YoY QoQ
Revenue 3,368 4,312 5,148 5,152 5,082 52.9 19.4
Operating profit 785 1,301 1,667 1,656 1,608 112.4 28.1
OP margin 23.3 30.2 32.4 32.2 31.6 9.1 2.2
Pretax profit 834 1,315 1,905 1,590 1,551 128.4 44.9
Net profit 789 1,095 1,624 1,272 1,254 105.9 48.3
Source: KDB Daewoo Securities Research, WISEfn Consensus

Table 2. Earnings forecasts revisions (Wbn, %)

Previous Revised % chg
Notes
Notes
14P
14P 15F 16F 14P
14P 15F 16F 14P
14P 15F 16F
Key assumptions
DRAM (1Gb eq)
- 2Znm process expansion in
Shipments (mn units) 13,937 17,562 22,121 14,099 16,989 20,805 1.2 -3.3 -6.0
2016
ASP (US$) 0.9 0.8 0.7 0.9 0.8 0.7 -0.4 -1.2 1.1
Operating costs (US$) 0.6 0.5 0.4 0.5 0.5 0.4 -1.0 -3.0 -2.6
NAND (16Gb eq)
Shipments (mn units) 3,116 4,391 6,157 3,170 4,483 6,126 1.8 2.1 -0.5 - 2D Tech-migration slowdown
ASP (US$) 1.0 0.8 0.6 1.0 0.8 0.6 -2.0 -3.3 2.4
Operating costs (US$) 1.0 0.8 0.5 1.0 0.7 0.5 -1.5 -2.2 6.4
US$/W rate 1,053 1,081 1,078 1,053 1,081 1,078 0.0 0.0 0.0
Earnings forecasts
forecasts
Revenue 17,129 19,399 20,261 17,126 18,776 19,777 0.0 -3.2 -2.4
Operating profit 5,141 5,924 6,404 5,109 5,798 6,378 -0.6 -2.1 -0.4
Net profit 3,843 4,653 5,214 4,195 4,678 5,266 9.2 0.5 1.0 -
EPS (W) 5,352 6,391 7,162 5,841 6,426 7,233 9.2 0.5 1.0
OP margin 30.0 30.5 31.6 29.8 30.9 32.2 - - -
Net margin 22.4 24.0 25.7 24.5 24.9 26.6 - - -
Source: KDB Daewoo Securities Research

Figure 1. Global DRAM market supply and demand Figure 2. DRAM (DDR3 4Gb;
4Gb; 1,600MHz) price trends

(1Gb eq., bn units) (%) (US$) Spread (R) Spot price (L) Contract price (L) (%)
25 Supply (L) 15 5 60
Demand (L) KDB Daewoo estimates
50
Oversupply ratio (R) Tight supply and demand to continue
20 10
4
40

15 5 30
3
20
10 0
10
2
5 -5
0
SK Hynix fire ↑↑
0 -10 1 -10
1Q09 1Q10 1Q11 1Q12 1Q13 1Q14 1Q15F 1Q16F 2012 2013 2014 2015

Source: Gartner, IDC, WSTS, KDB Daewoo Securities Research Source: DRAMeXchange, KDB Daewoo Securities Research

KDB Daewoo Securities Research 2

January 29, 2015 SK Hynix

Table 3. Quarterly and annual earnings (Wbn)

1Q14 2Q14 3Q14 4Q14P 1Q15F 2Q15F 3Q15F 4Q15F 2013
2013 2014P
2014P 2015F
2015F 2016F
2016F
Revenue 3,743 3,923 4,312 5,148 4,702 4,623 4,809 4,643 14,165 17,126 18,776 19,777
DRAM 2,992 3,065 3,277 3,936 3,602 3,565 3,743 3,596 10,246 13,269 14,507 15,117
NAND 618 738 907 1,083 973 926 918 908 3,392 3,346 3,726 4,071
Revenue contribution 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
DRAM 80% 78% 76% 76% 77% 77% 78% 77% 72% 77% 77% 76%
NAND 17% 19% 21% 21% 21% 20% 19% 20% 24% 20% 20% 21%
Operating profit 1,057 1,084 1,301 1,667 1,441 1,382 1,498 1,477 3,380 5,109 5,798 6,378
DRAM 1,066 1,165 1,298 1,627 1,404 1,357 1,459 1,371 2,819 5,156 5,590 5,788
NAND -20 -90 -6 27 31 13 24 93 523 -89 160 538
OP margin 28.2% 27.6% 30.2% 32.4% 30.6% 29.9% 31.1% 31.8% 23.9% 29.8% 30.9% 32.2%
DRAM 35.6% 38.0% 39.6% 41.3% 39.0% 38.1% 39.0% 38.1% 27.5% 38.9% 38.5% 38.3%
NAND -3.2% -12.2% -0.7% 2.5% 3.1% 1.4% 2.6% 10.2% 15.4% -2.7% 4.3% 13.2%
Net profit 802 674 1,095 1,624 1,127 1,110 1,217 1,206 2,873 4,195 4,660 5,246
Net margin 21.4% 17.2% 25.4% 31.5% 24.0% 24.0% 25.3% 26.0% 20.3% 24.5% 24.8% 26.5%
EBITDA 1,882 1,917 2,175 2,579 2,392 2,375 2,510 2,509 6,458 8,553 9,786 10,719
EBITDA margin 50.3% 48.9% 50.4% 50.1% 50.9% 51.4% 52.2% 54.0% 45.6% 49.9% 52.1% 54.2%
QoQ growth
Revenue 11% 5% 10% 19% -9% -2% 4% -3%
DRAM 22% 2% 7% 20% -8% -1% 5% -4%
NAND -20% 20% 23% 19% -10% -5% -1% -1%
Operating profit 35% 3% 20% 28% -14% -4% 8% -1%
DRAM 51% 9% 11% 25% -14% -3% 8% -6%
NAND TTR RR RR TTB 11% -59% 93% 281%
Net profit 2% -16% 63% 48% -31% -1% 10% -1%
EBITDA 20% 2% 13% 19% -7% -1% 6% 0%
YoY growth
Revenue 35% 0% 6% 53% 26% 18% 12% -10% 39% 21% 10% 5%
DRAM 51% 7% 11% 60% 20% 16% 14% -9% 44% 30% 9% 4%
NAND -11% -22% -7% 40% 58% 25% 1% -16% 33% -1% 11% 9%
Operating profit 233% -3% 12% 112% 36% 28% 15% -11% TTB 51% 13% 10%
DRAM 336% 28% 36% 130% 32% 16% 12% -16% TTB 83% 8% 4%
NAND TTR TTR TTR -61% TTB TTB TTB 237% 6,539% TTR TTB 236%
Net profit 349% -29% 14% 106% 40% 65% 11% -26% TTB 46% 11% 13%
EBITDA 73% 2% 13% 64% 27% 24% 15% -3% 117% 32% 14% 10%
Source: KDB Daewoo Securities Research

Table 4. Key metrics and assumptions

DRAM (1Gb eq.
eq.) 1Q14
1Q14 2Q14
2Q14 3Q14
3Q14 4Q14P
4Q14P 1Q15F
1Q15F 2Q15F
2Q15F 3Q15
3Q15F 4Q15
4Q15F 13 14P
14P 15F 16F
Shipments (mn units) 2,965 3,337 3,576 4,221 3,968 4,080 4,463 4,478 10,572 14,099 16,989 20,805
QoQ 20% 13% 7% 18% -6% 3% 9% 0% 34% 33% 20% 22%
ASP (US$) 0.9 0.9 0.9 0.9 0.8 0.8 0.8 0.8 0.9 0.9 0.8 0.7
QoQ 0% -5% 0% -3% -4% -3% -2% -4% 10% 1% -12% -15%
Operating cost (US$) 0.6 0.6 0.5 0.5 0.5 0.5 0.5 0.5 0.6 0.5 0.5 0.4
QoQ -9% -9% -3% -7% 1% -2% -4% -3% -23% -15% -11% -14%
NAND (16Gb eq.
eq.)
Shipment (mn units) 453 698 879 1,139 1,057 1,075 1,133 1,217 1,990 3,170 4,483 6,126
QoQ -8% 54% 26% 30% -7% 2% 5% 7% 43% 59% 41% 37%
ASP (US$) 1.3 1.0 1.0 0.9 0.8 0.8 0.8 0.7 1.6 1.0 0.8 0.6
QoQ -14% -19% -2% -8% -9% -6% -4% -8% -4% -34% -25% -20%
Operating cost (US$) 1.3 1.2 1.0 0.9 0.8 0.8 0.7 0.6 1.3 1.0 0.7 0.5
QoQ -2% -12% -12% -16% -4% -4% -5% -15% -19% -22% -29% -27%
US$/W 1,069 1,028 1,026 1,087 1,095 1,090 1,070 1,070 1,095 1,053 1,081 1,078
Source: KDB Daewoo Securities Research

KDB Daewoo Securities Research 3

January 29, 2015 SK Hynix

Table 5. Global peer valuation comparison (Wbn, %, x)

Revenue OP OP margin P/B P/E ROE EPS growth EV/EBITDA
Market cap
15F
15F 16 15F
15F 16 15F
15F 16 15F
15F 16 15F
15F 16 15F
15F 16 15F
15F 16 15F
15F 16
SK Hynix 35,818 18,776 19,777 5,798 6,378 30.9 32.2 1.6 1.3 7.7 6.8 23.1 21.0 11.5 12.6 3.2 2.7
SEC 202,978 207,043 214,078 26,248 27,347 12.7 12.8 1.2 1.1 10.0 9.5 13.6 12.6 5.9 4.7 3.6 3.1
Micron 34,584 19,445 21,285 4,397 5,005 22.6 23.5 2.4 1.9 8.2 7.3 31.2 26.7 32.0 16.7 4.8 4.4
SanDisk 18,873 7,287 7,836 1,740 1,967 23.9 25.1 2.5 2.4 14.7 12.9 15.9 16.7 -2.4 6.5 6.8 6.0
Toshiba 18,483 63,433 64,794 3,824 4,111 6.0 6.3 1.3 1.2 10.7 9.5 13.0 13.3 33.6 14.0 6.0 5.7
Inotera 10,790 2,927 3,202 1,430 1,439 48.9 44.9 2.1 1.7 7.9 7.8 29.8 22.7 -22.8 0.4 4.9 4.5
Nanya 6,441 1,737 1,610 670 532 38.6 33.1 2.7 1.9 6.6 6.6 53.0 33.1 4.6 -5.3 - -
Average 26.2 25.4 2.1 1.7 9.3 8.5 25.7 20.9 8.9 7.1 5.1 4.7
Source: Bloomberg. KDB Daewoo Securities Research

Figure 3. 12-
12-month forward P/B trend and historical average Figure 4. 12-
12-month forward P/B band

(x) 12-month forward P/B 2003-14 avg. (W) 2.7x 2.2x 1.7x
3.5 +1 SD -1 SD 60,000

3.0 50,000 1.2x

2.5
40,000
2.0
30,000 0.7x
1.5
20,000
1.0

0.5 10,000 0.2x

0.0 0
03 05 07 09 11 13 15 03 05 07 09 11 13 15F
15
Source: KDB Daewoo Securities Research Source: KDB Daewoo Securities Research

Figure 5. 12-
12-month forward BPS and share price Figure 6. Global peer P/B-
P/B-ROE (2015) comparison

(Won) (W) (P/B, x)

60,000 Share price (L) 12-month forward BPS (R) 30,000 3.0
SanDisk
Micron
50,000 25,000 2.5
Inotera
40,000 20,000 2.0

30,000 15,000 1.5 Toshiba

SKHynix

20,000 10,000 1.0 SEC

10,000 5,000 0.5

(ROE, %)
0 0 0.0
04 06 08 10 12 14F
14 0 5 10 15 20 25 30 35

Source: KDB Daewoo Securities Research Source: Bloomberg, KDB Daewoo Securities Research

KDB Daewoo Securities Research 4

January 29, 2015 SK Hynix

SK Hynix (000660 KS/Buy/TP: W64,000)

Comprehensive Income Statement (Summarized) Statement of Financial Condition (Summarized)

(Wbn) 12/13 12/14F 12/15F 12/16F (Wbn) 12/13 12/14F 12/15F 12/16F
Revenue 14,165 17,126 18,776 19,777 Current Assets 6,653 10,415 13,293 16,459
Cost of Sales 8,865 9,462 10,039 10,456 Cash and Cash Equivalents 632 1,211 4,992 7,214
Gross Profit 5,300 7,664 8,737 9,321 AR & Other Receivables 2,249 3,438 3,101 3,453
SG&A Expenses 1,921 2,554 2,940 2,943 Inventories 1,178 1,801 1,624 1,809
Operating Profit (Adj) 3,380 5,109 5,798 6,378 Other Current Assets 2,594 3,965 3,576 3,983
Operating Profit 3,380 5,109 5,798 6,378 Non--Current Assets
Non 14,144 16,119 17,379 19,475
Non-
Non-Operating Profit -305 -62 -155 -36 Investments in Associates 107 164 148 164
Net Financial Income -190 -126 -60 -18 Property, Plant and Equipment 12,130 13,835 15,281 17,461
Net Gain from Inv in Associates 19 23 24 25 Intangible Assets 1,110 1,217 1,072 945
Pretax Profit 3,075 5,047 5,643 6,342 Total Assets 20,797 26,535 30,672 35,934
Income Tax 202 852 965 1,076 Current Liabilities 3,078 4,968 4,657 4,982
Profit from Continuing Operations 2,873 4,195 4,678 5,266 AP & Other Payables 1,437 1,988 1,793 1,997
Profit from Discontinued Operations 0 0 0 0 Short-Term Financial Liabilities 873 1,805 1,804 1,805
Net Profit 2,873 4,195 4,678 5,266 Other Current Liabilities 768 1,175 1,060 1,180
Controlling Interests 2,872 4,195 4,678 5,266 Non--Current Liabilities
Non 4,652 3,653 3,423 3,459
Non-Controlling Interests 0 0 0 0 Long-Term Financial Liabilities 3,787 2,330 2,230 2,130
Total Comprehensive Profit 2,895 4,091 4,678 5,266 Other Non-Current Liabilities 865 1,323 1,193 1,329
Controlling Interests 2,895 4,091 4,678 5,266 Total Liabilities 7,730 8,621 8,080 8,441
Non-Controlling Interests 0 0 0 0 Controlling Interests 13,067 17,914 22,592 27,494
EBITDA 6,458 8,592 9,931 10,846 Capital Stock 3,569 3,650 3,650 3,650
FCF (Free Cash Flow) 3,166 2,055 3,479 3,106 Capital Surplus 3,406 4,081 4,081 4,081
EBITDA Margin (%) 45.6 50.2 52.9 54.8 Retained Earnings 6,201 10,396 15,074 19,976
Operating Profit Margin (%) 23.9 29.8 30.9 32.2 Non--Controlling Interests
Non 0 0 0 0
Net Profit Margin (%) 20.3 24.5 24.9 26.6 Stockholders' Equity 13,067 17,914 22,592 27,494

Cash Flows (Summarized) Forecasts/Valuations (Summarized)

(Wbn) 12/13 12/14F 12/15F 12/16F 12/13 12/14F 12/15F 12/16F
Cash Flows from Op Activities 6,372 7,230 8,914 9,627 P/E (x) 9.0 8.2 7.7 6.8
Net Profit 2,873 4,195 4,678 5,266 P/CF (x) 4.0 3.9 3.6 3.3
Non-Cash Income and Expense 3,515 4,693 5,159 5,562 P/B (x) 2.0 1.9 1.6 1.3
Depreciation 2,922 3,318 3,989 4,341 EV/EBITDA (x) 4.3 4.0 3.2 2.7
Amortization 156 165 144 127 EPS (W) 4,099 5,841 6,426 7,233
Others 437 1,210 1,026 1,094 CFPS (W) 9,115 12,376 13,512 14,874
Chg in Working Capital -69 -1,118 103 -107 BPS (W) 18,399 24,608 31,033 37,767
Chg in AR & Other Receivables -278 -955 291 -304 DPS (W) 0 0 500 500
Chg in Inventories 333 -630 177 -185 Payout ratio (%) 0.0 0.0 7.8 6.9
Chg in AP & Other Payables 188 249 -97 102 Dividend Yield (%) 0.0 0.0 1.0 1.0
Income Tax Paid -26 -450 -965 -1,076 Revenue Growth (%) 39.4 20.9 9.6 5.3
Cash Flows from Inv Activities -4,892 -6,563 -5,049 -6,924 EBITDA Growth (%) 117.0 33.0 15.6 9.2
Chg in PP&E -3,190 -5,039 -5,434 -6,521 Operating Profit Growth (%) - 51.2 13.5 10.0
Chg in Intangible Assets -301 0 0 0 EPS Growth (%) - 42.5 10.0 12.6
Chg in Financial Assets -1,391 -1,359 386 -403 Accounts Receivable Turnover (x) 7.7 7.0 6.7 7.0
Others -10 -165 -1 0 Inventory Turnover (x) 10.5 11.5 11.0 11.5
Cash Flows from Fin Activities -1,500 -7 -100 -464 Accounts Payable Turnover (x) 14.3 11.5 10.6 11.1
Chg in Financial Liabilities -1,831 -525 -100 -100 ROA (%) 14.6 17.7 16.4 15.8
Chg in Equity 432 756 0 0 ROE (%) 25.2 27.1 23.1 21.0
Dividends Paid 0 0 0 -364 ROIC (%) 21.0 25.7 26.1 26.3
Others -101 -238 0 0 Liability to Equity Ratio (%) 59.2 48.1 35.8 30.7
Increase (Decrease) in Cash -27 579 3,781 2,223 Current Ratio (%) 216.1 209.6 285.4 330.4
Beginning Balance 658 632 1,211 4,992 Net Debt to Equity Ratio (%) 12.4 -4.2 -18.9 -25.3
Ending Balance 632 1,211 4,992 7,214 Interest Coverage Ratio (x) 13.2 28.2 37.8 42.6
Source: Company data, KDB Daewoo Securities Research estimates

KDB Daewoo Securities Research 5

January 29, 2015 SK Hynix

APPENDIX 1

Important Disclosures & Disclaimers

2-Year Rating and Target Price History
Company (Code) Date Rating Target Price
(W) SK Hynix
SK Hynix (000660) 01/22/2015 Buy 64,000 80,000
No Coverage
06/15/2014 Buy 57,000 60,000
05/14/2014 Buy 52,000
40,000
No Coverage
01/29/2014 Buy 46,000
20,000
10/30/2013 Buy 43,000
09/12/2013 Buy 38,000 0
Jan 13 Jan 14 Jan 15
07/26/2013 Buy 35,000
06/23/2013 Buy 37,000
05/20/2013 Buy 42,000
04/25/2013 Buy 38,000
03/17/2013 Buy 36,000
01/08/2013 Buy 33,000

Stock Ratings Industry Ratings

Buy : Relative performance of 20% or greater Overweight : Fundamentals are favorable or improving
Trading Buy : Relative performance of 10% or greater, but with volatility Neutral : Fundamentals are steady without any material changes
Hold : Relative performance of -10% and 10% Underweight : Fundamentals are unfavorable or worsening
Sell : Relative performance of -10%
Ratings and Target Price History (Share price (─), Target price (▬), Not covered (■), Buy (▲), Trading Buy (■), Hold (●), Sell (◆))
* Our investment rating is a guide to the relative return of the stock versus the market over the next 12 months.
* Although it is not part of the official ratings at Daewoo Securities, we may call a trading opportunity in case there is a technical or short-term material
development.
* The target price was determined by the research analyst through valuation methods discussed in this report, in part based on the analyst’s estimate of
future earnings.
* The achievement of the target price may be impeded by risks related to the subject securities and companies, as well as general market and economic
conditions.

Disclosures
As of the publication date, Daewoo Securities Co., Ltd and/or its affiliates do not have any special interest with the subject company and do not own 1% or
more of the subject company's shares outstanding.

Analyst Certification
The research analysts who prepared this report (the “Analysts”) are registered with the Korea Financial Investment Association and are subject to Korean
securities regulations. They are neither registered as research analysts in any other jurisdiction nor subject to the laws and regulations thereof. Opinions
expressed in this publication about the subject securities and companies accurately reflect the personal views of the Analysts primarily responsible for this
report. Daewoo Securities Co., Ltd. policy prohibits its Analysts and members of their households from owning securities of any company in the Analyst’s
area of coverage, and the Analysts do not serve as an officer, director or advisory board member of the subject companies. Except as otherwise specified
herein, the Analysts have not received any compensation or any other benefits from the subject companies in the past 12 months and have not been
promised the same in connection with this report. No part of the compensation of the Analysts was, is, or will be directly or indirectly related to the specific
recommendations or views contained in this report but, like all employees of Daewoo Securities, the Analysts receive compensation that is impacted by
overall firm profitability, which includes revenues from, among other business units, the institutional equities, investment banking, proprietary trading and
private client division. At the time of publication of this report, the Analysts do not know or have reason to know of any actual, material conflict of interest of
the Analyst or Daewoo Securities Co., Ltd. except as otherwise stated herein.

Disclaimers
Disclaimers
This report is published by Daewoo Securities Co., Ltd. (“Daewoo”), a broker-dealer registered in the Republic of Korea and a member of the Korea Exchange.
Information and opinions contained herein have been compiled from sources believed to be reliable and in good faith, but such information has not been
independently verified and Daewoo makes no guarantee, representation or warranty, express or implied, as to the fairness, accuracy, completeness or
correctness of the information and opinions contained herein or of any translation into English from the Korean language. If this report is an English
translation of a report prepared in the Korean language, the original Korean language report may have been made available to investors in advance of this
report. Daewoo, its affiliates and their directors, officers, employees and agents do not accept any liability for any loss arising from the use hereof. This
report is for general information purposes only and it is not and should not be construed as an offer or a solicitation of an offer to effect transactions in any
securities or other financial instruments. The intended recipients of this report are sophisticated institutional investors who have substantial knowledge of
the local business environment, its common practices, laws and accounting principles and no person whose receipt or use of this report would violate any
laws and regulations or subject Daewoo and its affiliates to registration or licensing requirements in any jurisdiction should receive or make any use hereof.
Information and opinions contained herein are subject to change without notice and no part of this document may be copied or reproduced in any manner or
form or redistributed or published, in whole or in part, without the prior written consent of Daewoo. Daewoo, its affiliates and their directors, officers,
employees and agents may have long or short positions in any of the subject securities at any time and may make a purchase or sale, or offer to make a
purchase or sale, of any such securities or other financial instruments from time to time in the open market or otherwise, in each case either as principals or
agents. Daewoo and its affiliates may have had, or may be expecting to enter into, business relationships with the subject companies to provide investment
banking, market-making or other financial services as are permitted under applicable laws and regulations. The price and value of the investments referred to

KDB Daewoo Securities Research 6

January 29, 2015 SK Hynix

in this report and the income from them may go down as well as up, and investors may realize losses on any investments. Past performance is not a guide to
future performance. Future returns are not guaranteed, and a loss of original capital may occur.

Distribution
United Kingdom: This report is being distributed by Daewoo Securities (Europe) Ltd. in the United Kingdom only to (i) investment professionals falling within
Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the “Order”), and (ii) high net worth companies and other
persons to whom it may lawfully be 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 directed only at Relevant 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.S. persons that receive this document by their acceptance
thereof represent and warrant that they are a major institutional investor and have not received this report under any express or implied understanding that
they will direct commission income to Daewoo or its affiliates. Any U.S. recipient of this document wishing to effect a transaction in any securities discussed
herein should contact and place orders with Daewoo Securities (America) Inc., which accepts responsibility for the contents of this report in the U.S. The
securities described in this report may not have been registered under the U.S. Securities Act of 1933, as amended, and, in such case, may not be offered or
sold in the U.S. or to U.S. persons absent registration or an applicable exemption from the registration requirements.
Hong Kong: This document has been approved for distribution in Hong Kong by Daewoo Securities (Hong Kong) Ltd., which is regulated by the Hong Kong
Securities and Futures Commission. The contents of this report have not been reviewed by any regulatory authority in Hong Kong. This report is for
distribution only to professional investors within the meaning of Part I of Schedule 1 to the Securities and Futures Ordinance of Hong Kong (Cap. 571, Laws
of Hong Kong) and any rules made thereunder and may not be redistributed in whole or in part in Hong Kong to any person.
All Other Jurisdictions: Customers in all other countries who wish to effect a transaction in any securities referenced in this report should contact Daewoo or
its affiliates only if distribution to or use by such customer of this report would not violate applicable laws and regulations and not subject Daewoo and its
affiliates to any registration or licensing requirement within such jurisdiction.

KDB Daewoo Securities International Network

Daewoo Securities Co. Ltd. (Seoul) Daewoo Securities (Hong Kong) Ltd. Daewoo Securities (America) Inc.
Head Office Two International Finance Centre 320 Park Avenue
34-3 Yeouido-dong, Yeongdeungpo-gu Suites 2005-2012 31st Floor
Seoul 150-716 8 Finance Street, Central New York, NY 10022
Korea Hong Kong, China United States
Tel: 82-2-768-3026 Tel: 85-2-2845-6332 Tel: 1-212-407-1000
Daewoo Securities (Europe) Ltd. Daewoo Securities (Singapore) Pte. Ltd. Tokyo Branch
41st Floor, Tower 42 Six Battery Road #11-01 7th Floor, Yusen Building
25 Old Broad St. Singapore, 049909 2-3-2 Marunouchi, Chiyoda-ku
London EC2N 1HQ Tokyo 100-0005
United Kingdom Japan
Tel: 44-20-7982-8000 Tel: 65-6671-9845 Tel: 81-3- 3211-5511
Beijing Representative Office Shanghai Representative Office Ho Chi Minh Representative Office
2401A, 24th Floor, East Tower, Twin Towers Room 38T31, 38F SWFC Suite 2103, Saigon Trade Center
B-12 Jianguomenwai Avenue 100 Century Avenue 37 Ton Duc Thang St,
Chaoyang District, Beijing 100022 Pudong New Area, Shanghai 200120 Dist. 1, Ho Chi Minh City,
China China Vietnam
Tel: 86-10-6567-9299 Tel: 86-21-5013-6392 Tel: 84-8-3910-6000
Daewoo Investment Advisory (Beijing) Co., Ltd. Daewoo Securities (Mongolia) LLC PT. Daewoo Securities Indonesia
2401B, 24th Floor, East Tower, Twin Towers #406, Blue Sky Tower, Peace Avenue 17 Equity Tower Building Lt.50
B-12 Jianguomenwai Avenue, 1 Khoroo, Sukhbaatar District Sudirman Central Business District Jl.
Chaoyang District, Beijing 100022 Ulaanbaatar 14240 Jendral Sudirman Kav. 52-53, Jakarta Selatan
China Mongolia Indonesia 12190
Tel: 86-10-6567-9699 Tel: 976-7011-0807 Tel: 62-21-515-1140

KDB Daewoo Securities Research 7