focus on ivd

8/2/2019 Focus on iVD

1/37

Woori Investment & Securities does not have a stake greater than or equal to 1% in companies mentioned in this material as of the preparation date. Woori I&S has not provided this material to an institutional investor or other third party in advance. The Korean version of this material was distributed on January 5, 2010. The analyst and his/her spouse do not own any securities of companies mentioned in this material as of the preparation date. Woori I&S is an issuer and LP (liquidity provider) of ELW taking Samsung Techwin as an underlying asset. Macrogen, Bionia, and Infopia are not under coverage at Woori I&S. Thus, Woori I&S does not present a rating and target price on the counter. This report correctly reflects the analysts opinion and was written without any external influence or intervention.

Domestic healthcare players go abroad

Global players such as Roche, J&J, and Siemens have entered the medical

equipment business, where operating margins exceed 20%.

We advise focusing on companies doing in-vitro diagnostics (IVD; large

overlap with equipment), given: 1) high operating margins; 2) strong growth

for the healthcare market (2008~2013 CAGR of 13.2%); and 3) an expected

surge in the medical equipment and diagnosis markets triggered by UShealthcare reform, which supports medical expenditures for the elderly.

Korean group companies to lead domestic healthcare market

The Samsung Group and SK Chemical have started to focus on healthcare

and biotech for three reasons. First, global healthcare expenditures continue

to grow. In particular, we expect 2010 total healthcare spending-to-GDP

ratios of 18.0% in the US, 10.6% in Germany, and 5.5% in Korea. Second,

demand for medical equipment grows as a population ages. Third,

technological improvement will likely lead to the creation of new markets.

Top picks: Samsung Techwin, SD

We recommend Samsung Techwin and Standard Diagnostics (SD) as our top

picks. We also expect rapid growth for Macrogen, which has core

competencies in personalized medicine.

Industry Analysis January 8, 2010

Bio/Healthcare Foc us on in-v i t ro d iagnost ic s

Rating and investment indices (Unit: won, %, x)

Op margin P/E P/B ROETicker Rating

Target price(12M)

Price(1/4) 2009E 2010F 2009E 2010F 2009E 2010F 2009E 2010F

SamsungTechwin

012450.KSBuy

(Maintain)120,000

(Maintain)91,000 8.1 7.9 26.6 17.4 4.5 3.6 17.3 22.6

SD 066930.KQBuy

(Initiate)38,000

(Initiate)32,300 45.3 42.2 8.3 6.9 3.3 2.3 47.9 39.1

Macrogen 038290.KQ NR NR 12,900 5.0 7.1 21.5 16.1 - - - -

Bionia 064550.KQ NR NR 5,900 25.0 25.8 10.8 9.2 - - - -

Infopia 036220.KQ NR NR 14,700 25.6 26.9 12.3 9.0 - - - -

Source: Woori I&S research center estimates

Analyst

Irene Kim822)768-7977, [email protected]

Susie Lee (RA)822)768-7646, [email protected]

Positive (Initiate)


2/37

2

Bio/Healthcare www.wooriwm.com

Table of contents

I. Investment Summary ...................................................................................................

II. Valuation.......................................................................................................................

III. Healthcare to show high growth compared to other industries ............................

1. Healthcare market to post 2008~2013 CAGR of 13.2%

2. Focus on growth of IVD

3. Samsung and SK Chemical enter bio/healthcare

IV. Changing domestic and global diagnostics market ...............................................

1. Developed markets such as US, Europe leading global diagnostics industry

2. Domestic diagnostics overview

3. FDA approval to begin with 510k clearance

[Company Analysis]Samsung Techwin (012450.KS, Buy, TP W120,000) ...................................................

SD (066930.KQ, Buy, TP W38,000) ...............................................................................

Macrogen (038290.KQ, Not Rated) ...............................................................................

Bioneer (064550.KQ, Not Rated) ..................................................................................

Infopia (036220.KQ, Not Rated) ....................................................................................

3

5

10

16

22

28

33

35

36


3/37

3


I. Investment summary

The biotech industry, particularly healthcare, is expected to attract investor attention in 2010.

In particular, traditional pharmaceutical companies focusing on synthetic drugs face limited

growth due to lower chances of new drug development. Moreover, it has become more

difficult to gain FDA approval for new drugs. Thus, drug makers are shifting focus tobiodrugs instead of synthetic drugs.

Within the healthcare industry, investors have been less interested up to now in the non-

pharmaceutical sectors. But while pharmaceutical companies have enjoyed lofty operating

margins, structural changes are underway in the market amid the absence of new drug

development and intensifying competition.

Diagnosis market to

grow on US

healthcare reform

In addition to traditional pharmaceuticals, we note that medical equipment is also profitable.

Roche, J&J, GE, Siemens, and Abbott have diversified into the medical equipment market,

where operating margins are over 20%.

Healthcare reform has been a major political issue in the US, and we expect reform to drive

the growth of the global medical equipment and diagnostic markets. In particular, the US is

stressing the need for government intervention in the healthcare industry, with policy

measures including promoting the use of generic drugs and nurturing the medical

equipment/diagnostic markets to reduce chronic diseases in the elderly. In addition, because

of the lack of public healthcare coverage, 16% of the US population (46.60mn) is not covered

by health insurance.

Focus on companies

with biodrug

pipelines, medicalequipment plays

Of the many biotech companies, only a few have both technology and marketing capability.

New drug development is almost impossible for them without licensing-out due to the

massive capital needed. As such, we recommend screening biotech companies for playsboasting competitive drugs and equipment protected by patents.

Top picks: Samsung

Techwin, SD

Biotech/healthcare companies look attractive. The value chain of the healthcare industry is

prevention diagnosis treatment management, and we see promising companies

in each link of the chain. For biodrug makers, we note that it is critical to select the right sales

partner. Once biotech companies succeed in developing new drugs and/or biodrugs, the

markets interest tends to shift interest to the distribution partner. For biotech companies, the

selection of distribution partner is important, as this decision can affect sales growth and

market share. In this regard, we recommend Samsung Techwin and Standard Diagnostics

(SD) as our top picks, partly due to their successful track records in selecting partners. In

addition, we also maintain a positive view on Macrogen, which should also grow rapidly

based on its core competencies in individualized prescription.


4/37

4


Samsung Techwin:

transforming into a

healthcare play

Samsung Techwin has a traditional cash cow (defense business) and has recently secured a

new growth driver in its security equipment business. However, 4Q09 earnings are believed

to be disappointing due to performance bonus payments and a higher-than-expected

acquisition price for its CCTV division. On the upside, Techwin has prepared entry into new

growth businesses, such as robotics, biotech, and healthcare, and these new businesses are

expected to generate meaningful sales from 2010. Key investment points for Techwin are asfollows: 1) it should be the primary beneficiary of the Samsung Groups biotech and

healthcare business initiatives; 2) it is expected to take over Samsung Electronics security

equipment division; and 3) it boasts stable cash cows, such as its power system and defense

businesses.

SD: strong player in

rapid testing

Standard Diagnostics (SD) is a specialized virus diagnostics company, and its core business is

rapid test kits based on blood samples. The companys rapid test kit diagnoses antibodies or

antigens, which are markers of specific diseases. Currently, it sells rapid test kits for AIDS,

malaria, and hepatitis B. SD is capable of producing the antibodies and antigens used for the

rapid test kits internally, which not only shows its technological prowess but also gives it a

competitive edge in pricing. Key investment points for SD are: 1) it is the leading player in

rapid test kits; 2) it is expected to advance into developed markets following the expiry ofInverness patent; and 3) it has been successful in R&D in biochips and molecule diagnostics.

Macrogen: leader in

consumer genomics

Macrogen, a genetic diagnostics company, was listed in 2000. Following completion of the

Human Genome Project in 2007, the company set a new paradigm in information medicine,

and is expected to emerge as a leader in the personalized medicine market based on its

strength in genetics. In 2000, when genomic medicine was just getting started, genome

analysis per person would have cost more than US$3bn, but the cost has plummeted and

should reach US$1,000/person in 2010 thanks to advancing gene sequencing technology. The

drop in cost should lead to explosive growth in personalized medicine business. Currently, the

personalized medicine market is estimated at US$232bn, but should grow more than 11% per

annum going forward. Key investment points for Macrogen are as follows: 1) it is a leader in

consumer genomics; 2) it is the only downstream company in Korea in the personalizedmedicine business; and 3) it has made investments in a global sequencing equipment

company to better position itself in the personalized medicine market.

Recommendations (Units: won, %, x)

OP margin P/E P/B ROECode Rating

Target price(12M)

Currentprice(1/4) 2009E 2010F 2009E 2010F 2009E 2010F 2009E 2010F

SamsungTechwin

012450.KSBuy

(Maintain)120,000

( Maintain )91,000 8.1 7.9 26.6 17.4 4.5 3.6 17.3 22.6

SD 066930.KQ Buy(Initiate) 38,000( Initiate ) 32,300 45.3 42.2 8.3 6.9 3.3 2.3 47.9 39.1

Macrogen 038290.KQ Not Rated Not Rated 12,900 5.0 7.1 21.5 16.1 - - - -

Bioneer 064550.KQ Not Rated Not Rated 5,900 25.0 25.8 10.8 9.2 - - - -

Infopia 036220.KQ Not Rated Not Rated 14,700 25.6 26.9 12.3 9.0 - - - -

Source: Woori I&S Research Center estimates


5/37

5


II. Valuation

We initiate coverage on SD with a Buy rating and target price of W38,000. Meanwhile, we

note that Samsung Techwin is already under our coverage under its traditional categorization

as a tech stock, but in this report, we take a closer look at Techwins prospects in healthcare.

Mindray enjoying

45% premium to

sector average

Our target was derived via RIM valuation.

For comparison purposes, we note that there is no suitable comparable for SD or Techwin in

Korea due to the healthcare industrys short history. Looking overseas, we think Mindray

(China) is a good comparable for Samsung Techwins healthcare business model. Following

the financial crisis, the healthcare sector has traded at a 16% discount to the MSCI US

market, while Mindray has enjoyed a 45% premium to the sector thanks to its pronounced

top- and bottom-line growth.

We believe Techwin is a similar case, boasting stable operations, strong margins, and growth

potential. Currently, shares are trading at a 2010 P/E of 17x, vs the Kospi of 10x. We believe

it merits a premium given: 1) a three-year-forward EPS CAGR of 37.1%, higher than peers;

2) synergy with the robotics division following the acquisition of its security & imaging

business; and 3) the growth potential of the robotics and healthcare businesses.

Similarly, SD also boasts strong margins. The company sells rapid diagnostic kits at 200

agencies in 105 countries worldwide, and is set to tap into advanced markets in 2010. Shares

are trading at a 2010 P/E of only 6.9x (EPS of W4,713), and thus, offer strong upside, in our

view.


6/37

6


US healthcare relative to MSCI US

60

70

80

90

100

110

120

'06.1 '07.1 '08.1 '09.1

-60

-45

-30

-15

0

15

30

MSCI US Healthcare (LHS)

Relative return to MSCI US (RHS)

(2006.1 =100)

Source: Datastream, Woori I&S Research Center

Mindray enjoys 45% premium to sector average

0

10

20

30

40

50

'06 '07 '08 '09

MSCI US - P/E

MSCI US. Healthcare - P/E

Mindray- P/E

(x )

Source: Datastream, Woori I&S Research Center


7/37

7


Investment indicators for domestic healthcare playersSamsungTechwin

SD Macrogen Bioneer Infopia Nano EnTek

Core biz Electronics Pharma Pharma Pharma Pharma Pharma

Rating Buy Buy Not Rated Not Rated Not Rated Not RatedCode 012450.KS 066930.KQ 038290.KQ 064550.KQ 036220.KQ 039860.KQ

Current price (Jan 4, won) 91,000 32,300 12,900 5,900 14,700 5,240

Market cap (Wbn) 4,384.8 258.4 64.6 67.0 109.3 92.5

Beta (2-yr weekly) 0.93 0.91 0.99 1.18 1.39 1.15

Sales 2008 2,339.6 40.3 16.5 14.9 37.2 6.4

(Wbn) 2009E 2,652.0 64.3 - - - -

2010F 3,237.0 82.4 - - - -

Op prof 2008 146.9 14.2 -1.1 -0.3 11.2 -1.6

(Wbn) 2009E 214.1 29.1 - - - -

2010F 254.6 34.8 - - - -

EPS 2008 956 1,091 35 -314 747 -311

(won) 2009E 3,553 3,828 - - - -

2010F 5,232 4,713 - - - -EPS growth 2008 -63.8 3.5 TTP RR -41.2 RR

(% y-y) 2009E 271.6 250.8 - - - -

2010F 47.3 23.1 - - - -

Op margin 2008 6.3 35.2 -6.5 -2.3 30.2 -24.9

(%) 2009E 8.1 45.3 - - - -

2010F 7.9 42.2 - - - -

Net margin 2008 3.1 21.6 1.1 -23.9 14.9 -85.0

(%) 2009E 7.1 47.7 - - - -

2010F 8.6 45.7 - - - -

ROE 2008 7.0 18.3 0.5 -10.1 12.0 -24.9

(%) 2009E 17.3 47.9 - - - -

2010F 22.6 39.1 - - - -

P/E 2008 35.8 8.3 268.2 NA 15.1 NA(x) 2009E 26.6 8.3 - - - -

2010F 17.4 6.9 - - - -

P/B 2008 2.5 1.5 1.5 0.8 1.9 2.0

(x) 2009E 4.5 3.3 - - - -

2010F 3.6 2.3 - - - -

Source: annual reports, , Woori I&S Research Center estimates

Investment indicators for domestic healthcare players (1): 2010 P/E and EPS growth

SD

Samsung Techwin

Roche SiemensJ&J

Beckman CoulterBio Merieux

BayerInverness

Becton Dickinson

Abbott

5

10

15

20

25

0 10 20 30 40 50

(EPS growth, %)

(PER, x)

Source: Bloomberg, Woori I&S Research Center estimates


8/37

8


Investment indicators for overseas healthcare playersRoche Siemens Abbott J&J

BeckmanCoulter

Bio Merieux BayerBecton

DickinsonInverness

Country Switzerland Germany US US US France Germany US US

Ticker (Bloomberg) RO SW SIE GY ABT US JNJ US BEC US BIM FP BAYN GY BDX US IMA USCurrent price (Jan 4, $) 174.5 91.8 54.0 64.4 65.4 116.7 80.0 78.9 41.5

Market cap ($mn) 146,987.9 83,880.8 83,508.4 177,713.6 4,537.0 4,604.9 66,126.1 18,699.2 3,454.2

Beta (2 weekly) 0.85 1.09 0.62 0.68 0.76 0.68 0.81 0.65 1.02

Sales 2008 39,494.6 103,865.1 29,622.8 64,469.5 3,097.8 1,428.2 41,336.6 7,160.9 1,660.3

($mn) 2009E 47,928.6 104,827.6 30,524.5 61,096.1 3,237.5 1,762.9 45,030.3 7,593.5 1,983.8

2010F 48,709.1 108,691.2 33,083.5 64,040.3 3,766.4 1,894.2 46,995.5 8,053.3 2,210.3

Op prof 2008 12,529.2 7,768.4 6,361.1 16,467.9 341.7 226.2 5,334.2 1,650.4 329.8

($mn) 2009E 13,774.3 7,586.0 7,205.0 16,767.9 406.3 298.5 5,298.6 1,709.1 464.2

2010F 15,934.4 9,515.1 7,978.1 17,888.2 515.9 328.0 6,555.7 1,845.8 539.0

EPS 2008 10.0 3.6 3.3 4.5 3.6 3.9 4.9 5.1 2.0

($) 2009E 11.6 5.9 3.7 4.6 3.9 5.2 4.8 5.1 2.6

2010F 13.0 7.6 4.2 4.9 4.5 5.8 5.7 5.6 3.0

EPS growth 2008 -8.2 -58.7 35.0 25.9 -8.9 32.7 -62.0 11.1 -(% y-y) 2009E 16.0 63.9 12.1 2.2 8.3 33.3 -2.0 0.0 30.0

2010F 12.1 28.8 13.5 6.5 15.4 11.5 18.8 9.8 15.4

Op margin 2008 31.7 7.5 21.5 25.5 11.0 15.8 12.9 23.0 19.9

(%) 2009E 28.7 7.2 23.6 27.4 12.5 16.9 11.8 22.5 23.4

2010F 32.7 8.8 24.1 27.9 13.7 17.3 13.9 22.9 24.4

Net margin 2008 21.7 3.0 17.5 19.9 7.1 10.9 7.7 17.2 9.6

(%) 2009E 20.2 4.6 18.9 20.9 8.0 11.6 7.1 16.2 12.2

2010F 23.1 6.0 19.4 21.3 8.5 12.0 8.6 16.6 12.8

ROE 2008 20.8 8.6 26.1 28.1 14.6 18.5 14.3 24.4 0.1

(%) 2009E 36.8 11.8 30.3 27.3 14.6 19.2 13.0 22.2 7.1

2010F 127.8 14.7 28.6 27.0 14.5 18.5 15.0 20.6 8.4

P/E 2008 17.5 24.5 16.2 14.2 18.3 29.7 16.4 14.1 21.2

(x) 2009E 15.0 15.6 14.5 14.1 17.0 22.5 16.6 15.5 16.0 2010F 13.4 12.1 13.0 13.1 14.5 20.3 14.1 14.2 13.9

P/B 2008 3.5 2.1 4.0 3.9 2.6 5.3 2.9 3.2 1.2

(x) 2009E 32.1 1.9 4.0 3.7 2.2 4.1 2.5 3.2 1.0

2010F 13.7 1.7 3.4 3.2 1.9 3.6 2.3 2.8 1.0

Source: Bloomberg, Woori I&S Research Center

Investment indicators for overseas healthcare players (1): 2010 P/B and ROE

Roche (13.7, 127.8)

Siemens

Abbott

J&J

Beckman Coulter

Becton Dickinson

Inverness

Bio MerieuxBayer

0

6

12

18

24

30

0.0 0.8 1.6 2.4 3.2 4.0

(ROE, %)

(PBR, x)

Source: Bloomberg, Woori I&S Research Center estimates


9/37

9


Peer analysis domestic healthcare share performanceSamsungTechwin

SD Macrogen Bioneer Infopia Nano EnTek

Current price (Jan 4, won) 91,000 32,300 12,900 5,900 14,700 5,240

Market cap (Wbn) 4,384.8 258.4 64.6 67.0 109.3 92.51 week -3.2 1.1 11.2 4.9 1.0 6.2

1 month -13.2 7.2 14.9 27.2 8.2 29.2

3 month -6.6 11.9 -0.3 25.0 14.7 0.7

6 month 10.2 17.5 -43.8 23.1 -34.2 -23.8

1 year 86.9 141.0 12.1 166.8 -14.9 63.2

Relative (%)

Ytd -2.2 0.6 16.5 5.0 0.6 7.5

1 week 2.9 2.7 4.0 5.4 5.0 -3.7

1 month -7.9 11.8 9.8 27.0 15.7 26.7

3 month -11.5 26.9 -3.7 21.3 24.1 -0.9

6 month -18.4 40.1 -38.6 40.6 -19.5 -14.5

1 year 12.6 250.3 50.2 268.8 26.8 132.9

Absolute (%)

Ytd 0.2 1.3 7.5 1.2 3.9 1.7


Global peer analysis overseas healthcare share performanceRoche Siemens Abbott J&J

BeckmanCoulter

Bio Merieux BayerBecton

DickinsonInverness

Current price (Jan 4, $) 174.5 91.8 54.0 64.4 65.4 116.7 80.0 78.9 41.5

Market cap ($mn) 146,987.9 83,880.8 83,508.4 177,713.6 4,537.0 4,604.9 66,126.1 18,699.2 3,454.2

1 week 1.5 1.9 0.1 -0.5 1.1 0.0 1.0 -1.2 -2.4

1 month 5.3 -0.8 -1.1 -1.9 -1.7 -2.4 1.0 -1.7 -1.9

3 month 0.7 -1.5 -0.6 -0.7 -8.0 2.2 10.9 7.3 -1.9

6 month -3.7 7.6 -6.9 -8.6 -4.0 2.3 17.4 -9.9 -1.2

1 year -6.1 -1.7 -15.3 -11.8 24.4 12.8 8.5 -6.9 63.1

Relative (%)

Ytd 0.7 0.4 -0.7 -1.2 1.3 0.3 -0.7 -1.9 0.2

1 week 2.2 2.6 0.6 0.0 1.5 1.7 1.8 -0.8 -2.0

1 month 7.4 3.1 1.3 0.5 0.7 1.9 5.0 1.2 0.5

3 month 8.7 8.8 10.2 9.1 1.3 12.1 24.0 17.3 9.1

6 month 19.6 38.2 19.7 17.4 21.9 31.7 50.8 14.9 24.8

1 year 13.1 22.0 5.1 10.2 52.2 34.1 36.7 14.7 105.0

Absolute (%)

Ytd 2.0 2.0 0.9 0.4 2.9 2.2 0.8 -0.3 1.8


Global peer analysis market valuation (Units: x, %) Kospi Dow Jones Shanghai Taiwan FTSE CAC

2008 10.0 13.9 17.6 22.5 24.7 9.0

2009 10.35 16.46 19.26 24.83 15.24 12.38P/E

2010 9.12 11.80 16.07 17.16 12.21 10.30

P/S 2010 0.69 1.17 1.65 - 1.02 0.79

P/B 2010 1.14 2.27 2.47 2.15 1.78 1.27

P/cash 2010 5.90 7.83 6.02 2.44 6.45 5.59

EV/EBITDA 2010 7.08 7.37 6.38 - 10.29 16.62

Div yield 2010 1.73 2.95 2.00 7.58 4.05 4.37



10/37

10


III. Healthcare to show high growth compared to other industriesHealthcare

outperforms other

sectors

Since 1990, the S&P500s cumulative returns by sector break down as follows: healthcare

290%, IT 272%, energy 271%, and the overall S&P500 126%, clearly indicating healthcares

exceptional return. But though the pharmaceutical industry has driven growth up to now,

public health insurance is financially strapped due to the growth of chronic illnesses resultingfrom an aging population, coupled with increased medical spending by the elderly.

Accordingly, we believe investors should focus more on prevention and diagnosis than

treatment.

Overall, we believe the healthcare industry will continue to expand thanks to: 1) the growth

of chronic illnesses in line with the aging of the population; and 2) rising per-capita medical

spending. In addition, we note that along with pharmaceuticals, medical equipment is also

enjoying high margins, and has already seen the entry of several large global players.

Moreover, the diagnostic industry should show high growth given the following:

- the healthcare market is expected to post a 2008~2013 CAGR of 13.2%;

- increasing demand for in-vitro diagnostics (IVD), which can has many applications;

- Samsung and SK Chemical will likely accelerate their entries into new growth industries,

including biotech and healthcare.

Healthcare outperformed other sectors (in terms of cumulative returns)

0 100 200 300 400

Healthcare

IT

Energy

Cons.

S&P 500

Cons. Disc.

Industrials

Materials

Financials

UtilitesTelecom

(% )

0 2 4 6 8

Healthcare

IT

Energy

Cons.

S&P 500

Cons. Disc.

Industrials

Materials

Financials

UtilitesTelecom

(% )

Note: Dec 31, 1989~Mar 31, 2009Source: Industry data, Woori I&S Research Center Note: Dec 31, 1989~Mar 31, 2009Source: Industry data, Woori I&S Research Center


11/37

11


1. Healthcare market to post 2008~2013 CAGR of 13.2%

Healthcare market to

post 2008~2013

CAGR of 13.2%

Global healthcare market has expanded sharply, from US$306.5bn (W368tn) in 2000 to an

estimated US$928.2bn (W1,114tn) in 2009, for a CAGR of 13.2%. The global healthcare

market is steadily growing on rising demand for medical services in line population aging in

many major markets. We believe the biotech/healthcare market has brighter growth prospectsthan the traditional pharmaceutical market (growth estimated in the 5% range).

The healthcare industry includes drugs, medical equipment, medical services, and other

medical goods. In Korea, the healthcare industry comprises only 1.6% of total stock market

capitalization, vs 20% in the US and 13% in Japan. Although Koreas medical service market

is in its fledgling stages, it is expected to grow when life insurers go public. In particular, we

expect the Korean healthcare industrys market cap to increase following the listing of life

insurers such as Tongyang Life (2009), Samsung Life (2010), and Korea Life in (2010).

US healthcare spending rising sharply

0

500

1000

1500

2000

2500

3000

3500

4000

4500

5000

1965 1969 1973 1977 1981 1985 1989 1993 1997 2001 2005 2009E 2013E 2017E

National Health Expenditures

($bn)

Healthcare spending up sharply following inflation

2008 ~2013 CAGR estimated at 6.2%

Source: Woori I&S Research Center

Healthcare spending to steadily increase

0

2,000

4,000

6,000

8,000

10,000

12,000

1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015

China Germany

India Korea

Switzerland UK

US

Health

expenditure

percapital

(US$)

It's time for Korea seek to

increase healthcare spending

US seeks to reduce healthcare spending

Source: Datamonitor, Woori I&S Research Center


12/37

12


2. Focus on growth of IVD

Medical equipment

boasts lofty

operating margins

In the healthcare industry, medical equipment boasts the second-highest operating margins,

following pharmaceutical products. Given that the medical equipment business requires R&D

and massive capital, global leaders maintain oligopolies in developed markets such as the US

and Europe.

We expect the genetic diagnosis market (which overlaps substantially with the equipment

market) to grow in line with the expansion of personalized medicine. In particular, the genetic

diagnostic market is enjoying rapid growth amid rising demand for PCR (polymerase chain

reaction) equipment. For example, global leaders are accelerating their R&D efforts for the

diagnosis of critical illnesses.

Genetic diagnosis

growing rapidly

Diagnosis is largely based on tests using urine, blood, or genetic material (PCR). Sensitivity

and accuracy are lower for urine- and blood-based tests than genetic tests, and sensitivity of

rapid diagnostic kits is far lower than that of traditional PCR. Thus, we believe there would

strong demand for a fast PCR-based kit.

Going forward, when mass production of biochips and DNA chips becomes possible, we

expect the diagnostics market to show explosive growth. One shortcoming of biochip kits is

low sensitivity because of difficulty in protein amplification. The key features of a diagnostic

kit should be high sensitivity, accuracy, price competitiveness, reproducibility, automatability,

and short response time.

Medical equipment market classification: Korean companies competitive in IVD, imaging diagnostics, and dental equipment

PI&D SI&S EMI R&I IVD Other Dental

Definition

Medical equipmade forspecific purpose

Surgery equipand commoditiesused in alldivisions

Electronic medicalequipment usedfor treatment/surgery

Imaging devicesused fordiagnosingdisease

Diagnose diseaseby using bodilyfluid or cells

Aid for bodilyfunctions; simpletesters

Dental equipment

Major

products

Stent, catheter Artificial knee/joint

Bandage, thread Surgical knife,

needle Syringe, surgical

gloves

Hemodialyzer Patient monitoring

system

X-Ray, CT, MRI, Ultrasound

Blood sugar tester Immune tester Nucleic acid

tester

Wheelchair, bed Hearing aid Apnea monitoring

device

Chair Electric hand

piece Artificial tooth

Note: Global 2008 medical equipment market US$280bn



13/37

13


IVD market to grow at CAGR of 7% from US$40bn in 2008

0

10

20

30

40

50

60

2003 2004 2005 2006 2007 2008 2009E 2010F 2011F 2012F 2013F

MDx market

IVD market

($bn)

IVD market to grow to US$52bn by 2013 (2009 ~13 CAGR of, 5%);

gene teic diagnostics to reach US$5.9bn (2009~1 3 CAGR of 15%)


Gene diagnostics market to expand at 2009~2013 CAGR of 15%

Blood cell calculatorBlood clotting tester

Example

Analyze number/shape of red &white blood cells, platelets

Definition

Blood analysis

Blood sugar testerUrine tester

Example

Analyze chemical compoundsof small molecules for bloodsugar, PH, and drug levels

Definition

Clinical chemistry

Incubator

Example

Analyze drug sensitivity viagerms and parasites, for

epidemics

Definition

Micro-organismanalysis

Automatic immune analyzer

Example

Diagnose hormone balance ordisease using antigen-antibodyreaction test on biopolymer (eg,

hormone or phatogen)

Definition

Immune analysis

MicroarrayPCR

Example

Diagnose disease (inclepidemic, cancer) or diseaseprogress by decoding target

chromosome/nucleic acid rank

Definition

Gene analysis

New IVDTraditional IVDs

Blood cell calculatorBlood clotting tester

Example

Analyze number/shape of red &white blood cells, platelets

Definition

Blood analysis

Blood sugar testerUrine tester

Example

Analyze chemical compoundsof small molecules for bloodsugar, PH, and drug levels

Definition

Clinical chemistry

Incubator

Example

Analyze drug sensitivity viagerms and parasites, for

epidemics

Definition

Micro-organismanalysis

Automatic immune analyzer

Example

Diagnose hormone balance ordisease using antigen-antibodyreaction test on biopolymer (eg,

hormone or phatogen)

Definition

Immune analysis

MicroarrayPCR

Example

Diagnose disease (inclepidemic, cancer) or diseaseprogress by decoding target

chromosome/nucleic acid rank

Definition

Gene analysis

New IVDTraditional IVDs


Diagnostic chip overview

Used for diagnosing disease by detecting RNA from a cell by fixing DNA

Application Detect RNA (from blood) related to a specific diseaseDNA chip

Technology DNA chip used for gene expression or reagent development research

Used for confirming disease or screening reagentApplication

Detect protein or biopolymer that interacts with a certain protein by fixing proteinProtein chip

Technology Protein chips can detect protein using small sample, but commercialization hindered by difficulties in amplifying protein

Application Detect and trigger diverse chemical reactions by forming a circuit on a chip

Applicable to diverse fields, including diagnosis, environmental monitoring, and food testing

LOC has more diverse applications than DNA chip, but suffers issues in production (plastic injection)

Lab-on-a-chip(LOC) Technology

If technology becomes fully developed, LOC likely to beat DNA chips



14/37

14


3. Samsung and SK Chemical enter bio/healthcareSamsung and SK

Chemical enter

healthcare business

Large players, including the Samsung Group and SK Chemical, are diversifying into the

healthcare/bio business. We expect rapid growth for the domestic healthcare industry.

In Oct 2007, the Samsung Group selected bio/healthcare (including medical equipment) as

one of its six new growth drivers, and mid- to long-term investment is underway. Samsung is

likely to enter the personalized medicine market to cure terminal illnesses, including cancer.

Personalized medicine is expected to grow at more than 11% per annum (up from

US$232.0bn in 2009. The Samsung Medical Center will do R&D and the Samsung Cancer

Research Institute will develop treatments for terminal illnesses. The Institute appointed Dr

Sun-myung Paek, who successfully commercialized a breast cancer diagnosis kit (Oncotype

DX), as head of the institute, and development of cancer targeting therapy is underway.

Meanwhile, SK Chems entry into the healthcare business began in 2008 with the takeover of

Ubicare, and its pharmaceutical division has been attracting attention since 2007 due to its

operating profit contribution. However, sales dropped in 2008 as the divisions flagship drugswere excluded from insurance coverage and sales of new drug Mvix disappointed. The

company was able to offset sluggish sales with the licensing-out of new drug projects. We

believe SK Chem will be able to pay down debt using cash from the disposal of its stake in

SK E&C (40%) and land in Suwon. While cash flow should improve from the disposal of the

stake in the construction affiliate, it is likely to hurt asset value.

We expect SK Chems green chemical division to enter new businesses such as biodiesel.

In addition, the pharmaceutical division aims to diversify into vaccines and healthcare. The

company may adjust its strategic approach in line with the Samsung Groups progress in

entering the biotech and healthcare businesses.


15/37

15


Diagnostics business essential for personalized medicine market growth

Pre-disease

/disease developmentHealth outcome

Primary riskassessment

Diagnosis Prognosis Drug selec tion Disease monitoring/management

Personalized medicine = using diagnostic tools for drug selectionand disease monitoring/management

Pre-disease

/disease developmentHealth outcome

Primary riskassessment

Diagnosis Prognosis Drug selec tion Disease monitoring/management

Personalized medicine = using diagnostic tools for drug selectionand disease monitoring/management


Samsungs biotech & healthcare push, led by SEC, Techwin, Samsung Medical Center

Overview

- Samsung Medical Ctr system launches Aug 1, 2008- SMC becomes control tower for Samsung Groups

medical/bio-tech-related companies

Background

Focus on healthcare, a next-generation growth driverOrganic combination of medical treatment, research,

and education to maximize synergies in clinical testing

and medical business

Constituents

- Medical treatmentSamsung Seoul Hospital, Gangbuk Samsung

Hospital, Masan Samsung Hospital

- ResearchSamsung Biomedical Research Institute, Samsung

Cancer Research Center, IN-SUNG Foundation For

Medical Research, Samsung Mental health institute

- EducationSungkyungkwanUniversity School of Medicine

Medical commoditiesMedical commodities

Samsung Medical Center

Policyholders: 18.6mn Sales: W25tn

Eight hospitals (in Korea,overseas) including SMC

Hospitals

Construction

5 hospital groups(composed of 26 hospitals)

40 general hospitals

Biosimilar government projectsubmitted (Jun 2009)

SEC consortium SEC andother companies

Digital X-ray Detectormass production (2007)

Blood test equipmentdevelopment (2007)

Gene analysis equipmentdevelopment (2007)

Medical equipmentMedical equipment

MedicineMedicine

IT InfraIT Infra

InsuranceInsurance

Medical

expense

Products

Infra

SamsungSDI

Samsung Medical

Center

SEC

SECSamsung Techwin

Samsung

C&T

SamsungLife



16/37

16


IV. Changing domestic and global diagnostics market

1. Developed markets such as US, Europe leading global diagnostics industry

1.1. Diagnostics becomes new growth driver for global healthcare companies

MDx market to

expand at 2009~2013

CAGR of 15%

In 2008, the global IVD (in-vitro diagnostic) market grew more than 9.5% y-y to US$40bn.

In particular, the molecular diagnostic (MDx) market expanded from US$1bn in 2001 to

US$3bn in 2008. We expect the explosive growth of the global IVD market to continue as

technology advancesin 2013, we forecast that global IVD will reach US$53bn.

The major global players in IVD are Siemens, Roche Diagnostics, and Abbott Diagnostics,

and these three account for two thirds of the global market. In particular, Roche Diagnostics

is a leading player in genetic diagnostics, with a market share of more than 20%. While the

genetic diagnosis kit market is still small, we expect it to grow more than 15% per annum

going forward. In 2007, Roches IVD business generated US$7.8bn in sales, US$984mn of

which came from genetic diagnostic kits.

M&As to drive

growth of IVD

The big three in global IVD have grown through active M&As. For instance, Siemens

purchased Bayer Diagnostics for US$5.3bn, Dade Behring for US$6bn, and Diagnostic

Product Corporation for US$2bn, and these aggressive M&As helped Siemens emerge as a

strong player in IVD (with 35% market share). Meanwhile, Abbott added a strategic alliance

strategy to its M&A tactics to become a global IVD player. Abbott first entered the genetic

diagnostic market (breast cancer, colorectal cancer) by taking over Vysis for US$55mn in

2001. The technology and products secured via this M&A helped accelerate Abbotts growth

in diagnostics, as well as improve the IVD divisions operating margins (average 20%).


17/37

17


1.2. Direction of Techwins healthcare business: learn from Mindrays growth

Techwin should learn

from Mindrays

growth

Mindray is Chinas largest medical equipment maker and is listed on the Nasdaq. Since

listing, Mindray has received a premium relative to the market, and although the premium

narrowed from Oct 2008 amid the financial crisis, it has returned recently, with shares

Mindray shares outperforming the market.

Mindray makes patient-monitoring devices, IVD equipment, diagnostic kits, and visual

equipment at its China-based plant. The company has more than 1,500 R&D personnel and

six global R&D centers. It has been able to grow faster than competitors thanks to strong

price competitiveness, and showed steep growth in 2008 with the rollout of 10 new products.

Mindrays 2008 sales grew 87% y-y to US$548mn (up from US$294mn in 2007), and

operating margin remains over 20%.

Mindray receives 45% premium since financial crisis

-30

0

30

60

90

120

150

180

210

240

'06 '07 '08 '09

MSCI US healthcare premium relative to market

Mindray premium relative to market

(%)

Mindray received premium of 102% since

listing and 45% since financial crisis

Source: Woori I&S Research CenterNote: Acquired Datascope PMB(patient monitoring business) in March 2008


18/37

18

Bio/Healthcare www.wooriwm.comPatient-monitor ing devices Hematology analyzers & reagents

Mindray

49%

Foreign

brands

34%

Other

domestic

17%

Mindray

39%

Otherdomestic

39%

Foreign

brands

22%

Source: Mindray, Woori I&S Research Center Source: Mindray, Woori I&S Research Center

Ultrasound systems Rapid growth in developed mkt: 15% in 2007 27% in 2008

Mindray

32%

Other

domestic

44%

Foreign

brands

24%

China

42 %

Developed

market

27 %

Emerging

market

19 %

Other

12 %

2008 sales: US$550mn

Source: Mindray, Woori I&S Research Center Source: Mindray, Woori I&S Research Center

Mindrays sales and net profit

0

20

40

60

80

100

120

140

2003 2004 2005 2006 2007 2008

0

7

14

21

28

35NP (LHS)

NP marg in (RHS)

($mn) (%)

CAGR 59.2%

Source: Mindray, Woori I&S Research Center


19/37

19


2. Domestic diagnostics overviewDomestic diagnostics

market boasts bright

growth prospects

There are only a few diagnostics makers in Korea. We believe the diagnostics market will

grow rapidly when life insurers go public.

Samsung Techwin should become the Samsung Groups medical equipment and diagnostics

arm. We expect it to enter the genetic diagnostics business in 2010 with the rollout of a blood

analysis device, polymerase chain reaction (PCR) device/reagent, and diagnostics kits (HBV,

HCV, AIDS). The company also has cancer diagnostic kits (breast, colon cancer) in its R&D

pipeline.

The method and application of diagnostics differ depending on the kind of sample used (eg,

urine, blood, genetic material). In terms of technology, genetic diagnostics requires more

advanced technology than urine diagnostics. Genetic diagnostics is classified into PCR/RT-

PCR (real-time PCR), sequencing, MS spectrometry, and microarray.

Classification by diagnostic method

Method Urine Blood Gene

Company SDSDInfopiaNanoen Tek

PCR/RT-PCR (Techwin, Bioneer)Sequencing (Macrogen)MS Spectrometry (GeneMatrix)Microarray



20/37

20


3. FDA approval to begin with 510k clearance

The US classifies medical devices according to potential risk to the human body, given the

wide range of devices and their close relationship to health.

In the US, several measures have been taken to improve safety. For example, under the FDAs

differentiated approval system (1976), medical devices are classified into three quality

categories, and good manufacturing practices (GMP) were implemented to control the quality

of medical devices. We also note that US accounts for 50% of the global medical equipment

market.

510k clearance key to

US exports

Exports of medical devices to the US require FDA approval, which is largely divisible into

two processes. Class I and II medical devices are subject to 510k clearance, while class III

(newly developed) must obtain premarket approval (PMA). Most medical devices

manufactured in Korea are subject to 510k clearance.

The FDA does not require clinical test data for 510k clearance (except in the cases of some

life-support devices) and focuses on whether imported devices are compatible with other

devices in use in the nation. In addition, it requires all medical device makers to follow GMP.

With the medical device industry emerging as one of the most promising high-end markets

for the 21st century, we believe Korean players will have to focus on product quality, in

addition to product development.


21/37

21


510k clearance process

Class 3

510k process

Sales

Existing medicaldevice maker

Salescontinued

Medical device makerdifferent from existing ones

New medical device makersimilar to existing ones

Potential medicaldevice maker

Sales continueduntil FDA asks for

PMA

510k applicationSales prohibited until

FDA approvalSales prohibited until

FDA approval

Sales continued untilFDA asks for PMA

Submission to FDA

PMS process

Class 1 & 2

Class 3Class 1 & 2

FDA

Sales (continued)



22/37

Woori I&S does not have a stake greater than or equal to 1% in Samsung Techwin as of the preparation date. Woori I&S has not provided this material to an institutional investor or other third party in advance. The Korean version of this material was distributed on January 5, 2010. The analyst and his/her spouse do not own any securities of companies mentioned in this material as of the preparation date. Woori I&S is an issuer and LP (liquidity provider) of ELW taking Samsung Techwin as an underlying asset. This report correctly reflects the analysts opinion and was written without any external influence or intervention.

Maintain Buy with TP of W120,000

Our target is based on RIM (assuming market risk premium of 6.0%, risk-free

rate 4.0%, beta 1.0, COE 10.1%) and implies 31.9% upside (as of Jan 4).

Shares currently trade at a 2010 P/E of 17x, vs the Kospi average of 10x, but we

believe Techwin deserves a premium due to the following: 1) three-year EPS

growth of 37.1%, higher than peers; 2) takeover of SECs CCTV unit and

synergy with robotics; and 3) growth potential from robotics and healthcare.

2009 results: to miss consensus, but expected to turn around

2009 sales and operating profit estimated at W2,652.0bn (+13.3% y-y) andW214.0bn (+45.6% y-y), respectively. In particular, 4Q09 sales and operating

profit likely reached W715.0bn (TTP y-y) and W36.0bn (-26.0% y-y),

respectively, far below market consensus, due to:

1) bonus payments (additional W30bn);

2) shipment and ASP fall at the phone camera module business; and

3) excessive hopes for margin improvement from takeover of CCTV unit

(W185.7bn)

2010 sales and operating profit estimated at W3,237.0bn (+22.1% y-y) and

W255.0bn (+18.9% y-y), respectively

Entry into healthcare business promising

Large players such as the Samsung Group and SK Chemical are diversifyinginto healthcare/biotech. We expect domestic healthcare market to grow rapidly

Samsung likely to focus on medical equipment and genetic diagnostics

1) Samsung plans to launch blood analysis equipment in 2010 as well as

genetic diagnostics (PCR)/agent and diagnostic kits (HBV, HCV, AIDS)

2) Global IVD kit market to grow to US$52.0bn in 2013. PCR equipment

key to genetic diagnosis/diagnostic kitshas many applications, including

testing for diseases/food poisoning, and determining specific breeds.

Samsung Techwin(012450.KS)

Pr ime benef ic ia r y o f hea l thc areindus t r y g row th

Sales Chg OP Pre-tax NP EPS Chg P/E P/B EV/EBITDA ROE Debt/equity Net debtYE-Dec

(Wbn) (%) (Wbn) (Wbn) (Wbn) (won) (%) (x) (x) (x) (%) (%) (Wbn)

2007 3,243 13.1 170 232 203 2,638 28.7 19.2 3.9 12.8 21.7 85.1 -74

2008 2,340 -27.9 147 166 74 956 -63.8 35.8 2.5 9.5 7.0 121.0 -50

2009E 2,652 13.4 214 274 189 3,414 257.1 26.6 4.5 15.8 17.3 124.8 -96

2010F 3,237 22.1 255 316 278 5,232 53.2 17.4 3.6 13.2 22.6 119.0 -362

2011F 4,095 26.5 404 481 424 7,974 52.4 11.4 2.8 8.5 27.4 110.0 -677

Source: Woori I&S Research Center estimates

Buy(Maintain)

TP W120,000 (Maintain)

Sector Pharmaceutical/bio

Current price (01/04/10) W91,000

KOSPI 1,696.14

KOSDAQ 528.09

Market cap (common) $4,257.86mn

Outstanding shares (common) 53.1mn

Par value W5,000120DA trading vol 689,820 shrs

120DA share price W86,893

52W high (09/25/09) W104,500

Low (01/28/09) W30,250

Dividend yield (2008) 0.44%

Free float rate

Foreign ownership 16.7%

Major shareholders

SEC 25.5%

Mirae Asset Investment 11.0%

Stock performance (%)

3M 6M 12M

Absolute -11.5 -18.4 12.6

Relative -24.6 -43.6 -0.5

Analyst


Young Park822)768-7585, [email protected]


23/37

23

Samsung Techwin www.wooriwm.com

RIM valuation (Units: Wbn, won)

2009E 2010F 2011F 2012F 2013F 2014F 2015F 2016F 2017F 2018F 2019F 2020FNet profit 189 278 424 522 648 727 810 912 1,026 1,154 1,298 1,460

Shareholders equity 1,100 1,356 1,740 2,209 2,778 3,399 4,046 4,755 5,533 6,384 7,316 8,336

Forecast ROE (FROE) 17.3% 22.6% 27.4% 26.4% 26.0% 23.5% 21.8% 20.7% 19.9% 19.4% 18.9% 18.7%

Spread (FROE-COE) 7.2% 12.6% 17.3% 16.4% 15.9% 13.5% 11.7% 10.7% 9.9% 9.3% 8.9% 8.6%

Residual income 79 154 268 323 397 416 436 469 508 554 609 673

Cost of equity (COE) 10.1%

Beta 1.0

Market risk premium (Rm-Rf) 6.0%

Risk-free rate (Rf) 4.0%

Beginning shareholders equity 1,081.3

PV of forecast period RI 2,637.2

PV of continuing value 1,907.1

Equity value (C+P) 5,625.6

No of shares (common, mn) 53.1

12m TP

Fair price (C) 116,535

Current price (C) 91,000

Upside (-downside) 28.1%

Implied P/B (x) 4.6

Implied P/E (x) 22.3

Note: RIM (Residual Income Model) is a cash flow approach that yields a fair shareholder value (value of equity) by adding shareholders equity and present value of residualincome (meaning income excluding cost of equity).

Value of equity = shareholders equity + sum of present value of future residual income* Residual income (RIt) = NP (t) shareholders equity(t-1) * cost of equit y (t)= shareholders equity (t-1) * (ROEt - COEt)

Woori I&S uses RIM as our primary valuation model as RIM is an objective model that minimizes subjectivity of valuation indicators while producing same results as DDM(dividend discount model) and DCF.

Market risk premium assessment guidelines

Mega cap Large cap Mid cap Small cap

CriteriaMarket cap of W10tn or higher

+ credit rating of 'AAA' or higherMarket cap of W1~10tn

+ credit rating of 'A0' or higherMarket cap of W200bn-1tn

+ credit rating of 'BBB+' or higherMarket cap of less than W200bn+ credit rating of 'BBB-' or higher

Risk premium 5.2% 6.0% 7.0% 8.0%

* Risk Free Rate = 4.0%( standardized)


24/37

24


Samsung Techwin: P/E band Samsung Techwin: Premium to the Kospi

0

20,000

40,000

60,000

80,000

100,000

'05.1 '06.1 '07.1 '08.1 '09.1 '10.1 '11.1

(Won) Price 17.0x

21.0x 24.0x

27.0x 33.0x

-100

0

100

200

300

400500

600

'04 '05 '06 '07 '08 '09 '10

Premium to the Kospi

305% premium since 2009on: 1) entry into heatlhcare;

2) takeover of CCTV unit; and

3) stable sales of defense unit

Source: Dataguide Pro, Woori I&S Research Center Source: Datastream, Woori I&S Research Center

Samsung Techwin: P/B band Diagnostics division earnings estimates

0

20,000

40,000

60,000

80,000

100,000

120,000

'05.1 '06.1 '07.1 '08.1 '09.1 '10.1 '11.1

(Won) Price 1.0x

2.5x 5.0x

6.0x 6.5x

0

10 0

20 0

30 0

40 0

50 0

60 0

70 0

80 0

90 0

3Q10F 4Q10F 1Q11F 2Q11F 3Q11F 4Q11F

0%

5%

10 %

15 %

20 %

25 %Sales

OP margin

(W100mn)

Source: Dataguide Pro, Woori I&S Research Center Source: Woori I&S Research Center


25/37

25


Entry into diagnostics market

Prime beneficiary of

Samsung Groups

entry into

bio/healthcare

Techwin is likely to be the prime beneficiary of the Samsung Groups entry into

bio/healthcare business.

We believe the closest comparable for Techwin is Mindray. Established in 1991, Mindray

sells patient-monitoring equipment, IVD equipment, diagnostics kits, and imaging equipment.

It is Chinas largest medical equipment producer and has traded at lofty premiums to the

market since its listing on the Nasdaq. The company has more than 5,000 employees, with

more than 1,500 in R&D. The company operates six R&D centers worldwide.

We believe Samsung Techwin deserves a premium to the market for its entry into diagnostics

and medical equipment. Shares currently trade at a 2010 P/E of 17x. Valuations may look

burdensome given its heavy dependence on the defense and machinery divisions, however,

the company is making efforts to strengthen growth potential by entering the robotics and

healthcare industries. As an important part of the Samsung Groups healthcare business value

chain, we expect Techwin to enjoy synergies with group affiliates. In addition, the company islikely to enter overseas diagnostics markets, which offer lofty margins.

Samsung Techwin: medical equipmentdiagnostics

Life scienceIn-vitro

diagnosticsPharma

Genomics

Microarray Sequencing PCR

Development

Improve labefficiency

Develop new tests

Become pharmaplay via biodrugs

Biomarker expertise Develop new

bio drug

SMCSamsungTechwin

SEC/SMC

Increasingmedical value

to patients& physicians



26/37

26


Investment points: maintain Buy with target price of W120,000

Prime beneficiary of

Samsung Groups

entry into healthcare

business

First, prime beneficiary of Samsung Groups entry into bio/healthcare business

Samsung Techwin is entering the healthcare industry in 2010 with the launch of itsdiagnostics business. In addition, we expect cash inflow of more than W300bn per annum

from 2010 thanks to stable results at the defense division. Techwin plans to pour cash into

new growth business such as healthcare, robotics, and FPSO (floating production, storage,

and offloading).

Security business

expansion

Second, takeover of SECs CCTV unit

Techwin announced in Oct 2009 that it would take over Samsung Electronics CCTV division

to strengthen Techwins security division. Going forward, we expect to see demand for

CCTVs from a variety of sources, including military applications. For example, Techwin

completed development of monitoring robot systems in a project for the Ministry of

Knowledge Economy in Nov 2008, and automated monitoring devices are slated to be used at

national borders and guard posts. Export is also a possibility, as there are currently no

monitoring systems with the range of features offered by Techwins products. In addition,

sales should see further demand for Koreas planned U-cities (ubiquitous city).

Stable revenue

sources

Third, stable revenue sources (power system and defense)

The power system and defense divisions bring in steady sales and profits regardless of

economic conditions.


27/37


28/37


29/37

29

SD www.wooriwm.com

RIM valuation (Units: Wbn, won)

2009E 2010F 2011F 2012F 2013F 2014F 2015F 2016F 2017F 2018F 2019F 2020FNet profi t 31 38 43 49 56 65 71 79 88 97 107 119

Shareholders equity 78 115 156 203 258 321 390 464 544 631 725 827

Forecast ROE (FROE) 47.9% 39.1% 31.5% 27.5% 24.5% 22.3% 20.1% 18.5% 17.4% 16.5% 15.8% 15.3%

Spread (FROE-COE) 35.9% 27.1% 19.5% 15.5% 12.5% 10.3% 8.1% 6.5% 5.4% 4.5% 3.8% 3.3%

Residual income 23 26 26 28 29 30 29 28 27 27 26 26

Cost of equity (COE) 12.0%

Beta 1.0

Market risk premium (Rm-Rf) 8.0%

Risk-free rate (Rf) 4.0%

Beginning shareholders equity 49.4

PV of forecast period RI 186.0

PV of continuing value 35.2

Equity value (C+P) 270.7

No of shares (common, mn) 8.012m TP

Fair price (C) 37,896

Current price (C) 32,300

Upside (-downside) 17.3%

Implied P/B (x) 2.7

Implied P/E (x) 8.0

Note: RIM (Residual Income Model) is a cash flow approach that yields a fair shareholder value (value of equity) by adding shareholders equity and present value of residualincome (meaning income excluding cost of equity).

Value of equity = shareholders equity + sum of present value of future residual income* Residual income (RIt) = NP (t) shareholders equity(t-1) * cost of equity (t)= shareholders equity (t-1) * (ROEt - COEt)

Woori I&S uses RIM as our primary valuation model as RIM is an objective model that minimizes subjectivity of valuation indicators while producing same results as DDM(dividend discount model) and DCF.

Market risk premium assessment guidelinesMega cap Large cap Mid cap Small cap

CriteriaMarket cap of W10tn or higher

+ credit rating of 'AAA' or higherMarket cap of W1~10tn

+ credit rating of 'A0' or higherMarket cap of W200bn-1tn

+ credit rating of 'BBB+' or higherMarket cap of less than W200bn+ credit rating of 'BBB-' or higher

Risk premium 5.2% 6.0% 7.0% 8.0%

* Risk Free Rate = 4.0%( standardized)

P/E band P/B band

0

10,000

20,000

30,000

40,000

50,000

'05.1 '06.1 '07.1 '08.1 '09.1 '10.1 '11.1

(Won) Price 7.0x

14.0x 21.0x

28.0x 35.0x

0

10,000

20,000

30,000

40,000

50,000

'05.1 '06.1 '07.1 '08.1 '09.1 '10.1 '11.1

(Won)

Price 1.5x

3.0x 4.5x

5.0x 6.0x

Source: Dataguide Pro, Woori I&S Research Center Source: Dataguide Pro, Woori I&S Research Center


30/37

30

SD www.wooriwm.com

Likely to rol l out rapid test kits in developed marketsSD to roll out rapid

test kits in developed

markets

SD is a specialized virus diagnostics company, with a flagship business of blood-based rapid

test kits. Rapid test kits detect antigens and antibodies related to certain illnesses, and are

used in diagnosing AIDS, malaria, and hepatitis. The company is capable of manufacturing

antigens and antibodies (the raw materials for test kits) internally, demonstrating itstechnological prowess and giving it an edge in pricing. SD posted 2005~2008 sales and

operating profit CAGRs of 49% and 72%, respectively.

The companys 2008 sales broke down as: rapid test kits 76.5%, urine chemical analysis

3.9%, ELISA 2.2%, and bio sensors 4.6%. We expect the sales contribution of new bio

sensors to increases, diversifying the companys earnings sources, as rapid test kits and bio

sensors are expected to become major businesses. Going forward, we believe SD will emerge

as a major player in POCT (point-of-care testing).

Operating profit and

margin to improvesharply

We believe the rapid test kit divisions 2009 sales surged 79.4% y-y to W51.0bn. We estimate

2009 sales and operating profit at W64.3bn (+59.3% y-y) and W29.1bn (+105.2% y-y),respectively, showing a sharp improvement in margins. We believe 2009 earnings will

substantially beat company guidance (sales W60.0bn, operating profit W21.0bn) on: 1)

growing export of new malaria and dengue fever diagnostic kits; and 2) a sharp increase in

domestic AH1N1 diagnostic kit sales, leading to growing sales of rapid test kits and

subsequently stronger margins. Meanwhile, we estimate 2010 sales and operating profit at

W82.4bn (+28.3% y-y) and W34.8bn (+19.3% y-y), respectively, on the entry of flagship

AIDS test kits into developed markets and the high growth of Indias rapid-test-kit market.

Sales and operating profit to sustain high growth on entry into developed market

0

20

40

60

80

100

2006 2007 2008 2009 2010F 2011F

(Wbn)

0

10

20

30

40

50

(%)Sales (LHS)

OP (LHS)

OP marg in (RHS)

79.5%

80.0%83.7%76.6%

86.2%

0

20

40

60

80

100

2007 2008 2009 2010 2011

(Wbn)

Rapid ELISA

Urine Bio sensor

Raw material and other

Source: SD, Woori I&S Research Center Source: SD, Woori I&S Research Center


31/37

31

SD www.wooriwm.com

Investment points: initiate coverage at Buy with target price of W38,000Leading player in

rapid test kits

First, SD is a leading player in rapid test kits.

SD is a specialized virus diagnostics company, with a flagship business of blood-based rapid

test kits. Rapid test kits detect antigens and antibodies related to certain illnesses, and areused in diagnosing AIDS, malaria, and hepatitis. The company is capable of manufacturing

antigens and antibodies (the raw materials for test kits) internally, demonstrating its

technological prowess and giving it an edge in pricing. SD posted 2005~2008 sales and

operating profit CAGRs of 49% and 72%, respectively.

Likely to enter

developed markets

Second, SD to enter developed market following expiry of Inverness patent.

SD has been unable to enter the AIDS test kit market in US, Europe, and Japan due to

competition with Inverness. However, Inverness patent will expire in 2010, and we believe

this will allow SD to sell its rapid test kits in developed markets (eg, Japan and Europe).

Plans to entermolecular

diagnostics

Third, R&D to yield tangible results, easing entry into biochips, molecular diagnostics

SD plans to enter the biochip and molecular diagnostic markets, which are rapidly growing

segments of the IVD industry. Existing rapid test kits have qualitative limitations, as they are

only able to determine whether a virus/target exists. In contrast, biochips and gene

diagnostics offer quantitative analysis, allowing the measurement of the progress of a disease

and monitoring of post-operative condition. SD is making efforts to roll out diagnostic chips

that can detect five major cancers and cardiovascular disease, by investing in new businesses.

Inverness flagship business: diagnostics reagent and kit

Diagnostics

63%

Other

37%

Diagnostics unit contribute 63% of 2008 sales

(totaling US$1.7bn). Inverness' patent for AIDS test

kits expired in Europe and Japan in 2 009.

SD likely to en ter develope d markets

Source: Bloomberg, Woori I&S Research CenterNote: Inverness asked SD for tender offer in 2009


32/37

32

SD www.wooriwm.com

INCOME STATEMENT VALUATION INDEX

(Wbn) 2009/12E 2010/12F 2011/12F 2012/12F 2009/12E 2010/12F 2011/12F 2012/12FSales 64.3 82.4 89.4 99.8 EV/ EBITDA (X) 7.0 5.3 3.9 2.5

Growth (%) 59.3 28.3 8.5 11.6 EV/ EBIT (X) 7.6 5.6 4.2 2.7

Cost of sales 21.7 27.3 29.6 33.0 Price/ Earning (FD) (X) 8.3 6.9 6.1 5.2

Gross prof it 42.6 55.2 59.8 66.8 Adjusted PER (X) 8.3 6.9 6.1 5.2

Gross margin (%) 66.3 66.9 66.9 66.9 Price/ Gross Cash Flow (X) 7.7 6.4 5.7 5.0

SG&A 13.5 20.4 22.1 24.6 Price/ Book Value (X) 3.3 2.3 1.7 1.3

EBITDA 31.6 37.3 40.3 44.9 Price/ Sales (X) 4.0 3.1 2.9 2.6

EBITDA margin (%) 49.2 45.2 45.0 45.0 PER/ EPS growth (X) 0.5 0.5 0.4 na

Depr & amort 2.5 2.5 2.6 2.7 PER/ EBITPS growth (X) 0.6 0.7 0.5 na

Operating profit 29.1 34.8 37.7 42.2 PER/ EBITDAPS growth (X) 0.7 0.7 0.6 na

OP margin (%) 45.3 42.2 42.2 42.3 Enterprise Value (Wbn) 222.6 195.8 157.4 113.6

Non-operating Income 1.2 2.6 4.5 6.7 EPS CAGR (3-Yr, FD) (%) 17.2 14.4 14.9 na

Non-operating Expenses 0.0 0.0 0.0 0.0 EBITPS CAGR (3-Yr, FD) (%) 13.1 10.3 11.1 na

Net interest inc/ (exp) 1.2 2.6 4.4 6.7 EBITDAPS CAGR (3-Yr, FD) (%) 12.4 9.9 10.8 na

Pre-tax Profit from Continuing Operations 30.3 37.3 42.1 48.8 EBITPS (FD) (W) 3,642 4,345 4,714 5,273

Pretax margin (%) 47.2 45.3 47.1 49.0 EBITDAPS (FD) (W) 3,951 4,658 5,035 5,607

Tax -0.3 -0.4 -0.4 -0.5 Fully diluted EPS (W) 3,828 4,713 5,319 6,165

Profit from Continuing Operations 30.6 37.7 42.6 49.3 Adjusted EPS (FD) (W) 3,828 4,713 5,319 6,165

Net profit 30.6 37.7 42.6 49.3 CFPS (W) 4,139 5,027 5,641 6,499

Net margin (%) 47.7 45.7 47.6 49.4 BVPS (W) 9,601 14,146 19,294 25,287

Adjusted Net Profi t 30.6 37.7 42.6 49.3 Sales PS (W) 8,033 10,304 11,178 12,471

CASH FLOW STATEMENT RIM & EVA

(Wbn) 2009/12E 2010/12F 2011/12F 2012/12F 2009/12E 2010/12F 2011/12F 2012/12FOperating Cash Flow 21.8 31.6 41.8 47.1 RIM

Net profit 30.6 37.7 42.6 49.3 Spread (FROE-COE) (%) 35.9 27.1 19.5 15.5

+ Depr & amort 2.5 2.5 2.6 2.7 Residual Income 23.0 26.1 26.3 27.8

+ Associates loss (-profits) 0.0 0.0 0.0 0.0 12M RIM-based Target Price(W) 37,848

+ FC translation loss (-profit) 0.0 0.0 0.0 0.0 Economic Value Added

+ Loss (-gain) on tangible asset disp 0.0 0.0 0.0 0.0 Invested capital 42.3 48.7 51.4 55.4

Gross Cash Flow 33.1 40.2 45.1 52.0 NOPAT 29.4 35.1 38.1 42.6

- Incr (+dec) in working capital -11.3 -8.6 -3.3 -4.9 ROIC (%) 76.7 77.2 76.2 79.8

Invest ing Cash Flow -3.0 -3.4 -3.1 -3.6 ROIC - WACC (%) 68.5 68.8 67.8 71.4

Decr. in Tangible Assets 0.0 0.0 0.0 0.0 EVA 29.0 33.5 34.8 39.6Incr. in Tangible Assets (CAPEX) -2.1 -2.6 -2.9 -3.2 Discounted Cash Flow

+ Disp (-acq) of inv assets 0.0 0.0 0.0 0.0 EBIT 29.1 34.8 37.7 42.2

Free Cash Flow 19.7 29.0 39.0 43.9 + Depreciation 2.5 2.5 2.6 2.7

Net Cash Flow 18.8 28.2 38.7 43.5 - CAPEX 2.1 2.6 2.9 3.2

Financing Cash Flow 2.5 1.5 1.5 -1.5 Free cash flow for DCF valuation 22.3 29.2 35.6 38.8

Equity financing 0.0 0.0 0.0 0.0 Weighted Average Cost of Capital (%)

Debt financing 2.5 1.5 1.5 -1.5 Cost of debt (tax adjusted) 4.4 4.1 4.0 3.9

+ Inc (-dec) in Cash & St. financial goods 21.2 29.7 40.1 42.0 Cost of equity (COE) 12.0 12.6 12.7 12.8

Net debt/(cash) end -32.6 -62.6 -101.0 -144.8 WACC 8.2 8.4 8.3 8.4

BALANCE SHEET PROFITABILI TY & STABIL ITY

(Wbn) 2009/12E 2010/12F 2011/12F 2012/12F 2009/12E 2010/12F 2011/12F 2012/12FCash & St. Financial Goods 33.1 63.0 101.4 145.1 ROE (%) 47.9 39.1 31.5 27.5

Accounts Receivable 28.3 36.3 39.4 44.0 ROA (%) 38.3 31.8 26.4 23.7

Total current assets 71.9 112.7 155.2 205.2 ROIC (%) 76.7 77.2 76.2 79.8Tangible Assets 18.8 19.1 19.5 20.2 EBITDA/ equity (%) 40.3 32.5 25.9 22.1

Investment assets 5.2 5.6 5.8 6.0 EBITDA/ asset (%) 32.3 26.7 22.1 19.2

Non-cur rent Assets 26.1 26.7 27.2 28.0 Dividend Yield (%) 0.6 0.6 0.6 0.6

Total Asset 97.9 139.4 182.4 233.2 Cash dividends(Wbn) 1.5 1.5 1.5 1.5

Short-term debt 0.3 0.3 0.3 0.3 Cash DPS (W) 200 200 200 200

Accounts Payable 5.7 7.3 7.9 8.8 Net debt(cash)/ equity (%) -41.6 -54.6 -64.9 -71.2

Total current Liabili ties 18.6 23.8 25.8 28.8 Debt/ equity (%) 24.9 21.7 17.3 14.7

Long-term debt 0.6 0.6 0.6 0.6 Net interest exp/ sales (%) -1.9 -3.1 -5.0 -6.7

Long-term allowance 0.0 0.0 0.0 0.0 Interest coverage (X) -24.5 -13.5 -8.5 -6.3

Non-current Liabili ties 0.9 1.0 1.0 1.1 Current Ratio (%) 385.4 472.5 600.7 712.5

Total Liabi li ties 19.5 24.8 26.9 29.9 Quick Ratio (%) 343.9 430.9 559.0 670.8

Paid-in Capital 4.0 4.0 4.0 4.0 Total shares (mn) 8 8 8 8

Capital surplus 18.8 18.8 18.8 18.8 Par value (W) 500 500 500 500

Retained earnings 58.8 95.0 136.0 183.8 Share price (W) 31,900 32,300 32,300 32,300

Total shareho lder s Equity 78.4 114.6 155.6 203.4 Market cap (Wbn) 255 258 258 258


33/37

Woori I&S does not have a stake greater than or equal to 1% in Macrogen as of the preparation date. Woori I&S has not provided this material to an institutional investor or other third party in advance. The Korean version of this material was distributed on January 5, 2010. The analyst and his/her spouse do not own any securities of companies mentioned in this material as of the preparation date. Macrogen is not under coverage at Woori I&S. Thus, Woori I&S does not present a rating and target price on the counter. This report correctly reflects the analysts opinion and was written without any external influence or intervention.

Competitive in genetic analysis

Leader in genomics-based preventive medicine.

Completion of Human Genome Project in 2007 offers new paradigm for

information medicine.

2QFY09 earnings to be in line with 1QFY09

We expect 2QFY09 sales (October~December, fiscal year ends June) of

W5.8bn (down 6.4% y-y, up 0.1% q-q) and operating profit of W300mn (up

2.4% y-y and 0.5% q-q).

Sales break down as: gene analysis 84%, biochips 11%, and transgenic mice

(5%). Exports account for 65% of sales.

Despite the steady rise in the sequencing business, sales slowed due to:

1) falling won/dollar rates (although sales volume increased)

2) stiff competition in sequencing overseas amid rise in personalized medicine

Leader in consumer genomics

Genomic medicine is the fundamental basis for personalized medicine.

Although the price tag for a personal genome analysis in 2000 would have

come to more than US$3bn, we expect the price to fall to only US$1,000 in

2010 thanks to improvements in sequencing devices.

Macrogen is the largest shareholder of US-based sequencing device developerLightSpeed, with a 25% stake (including stakes held by Macrogen subsidiaries)

The personalized medicine market should grow at a 2008~2013 CAGR of

more than 11% (up from US$232bn in 2009)

Since investing in LightSpeed, Macrogen has become more competitive in

personalized preventive medicine. Share price will likely rise further as

personalized medicine grows.

Macrogen(038290.KQ) Leader in consumer genomic s

Sales Chg OP Pre-tax NP EPS Chg P/E P/B EV/EBITDA ROE Debt/equity Net debtYE-Jun


2008 16.5 31.1 -1.1 0.2 0.2 35 TTP 268.2 1.5 18.0 0.5 10.0 -10.0

2009 22.5 36.0 1.6 3.3 3.3 653 1763.9 27.8 2.7 19.1 9.7 14.0 -7.1

2010E 25.9 15.1 1.3 - 3.0 600 -8.1 21.5 - - - - -

2011F 33.7 30.1 2.4 - 4.0 800 33.3 16.2 - - - - -

Source: Macrogen, Woori I&S Research Center estimates

Not RatedAnalyst



Sector Pharma/bio


KOSPI 1,696.14

KOSDAQ 528.09

Market cap (common) $56.89mn


Par value W500

120DA trading vol 62,848 shrs

120DA share price W14,38552W high (09/04/27) W22,700

Low (09/01/21) W8,560

Dividend yield (2008) 0.0%

Free float


Major shareholders

Jungsun Seo 8.0%

Hanmi Gross Equity Investment Union 4.6%

Share performance (%)

3M 6M 12M

Absolute -3.7 -38.6 50.2Relative -8.8 -43.8 -5.3


34/37

34

Macrogen www.wooriwm.com

Leader in consumer genomics

Cheaper genetic

analysis to help

bolster personalized

medicine

Listed in 2000, Macrogen is a genetic analysis specialist and exports to 60 countries. The

completion of the Human Genome Project in 2007 offered a new paradigm for information

medicine, and Macrogen should be able to take the lead in personalized medicine.

Genomic medicine is the fundamental basis for personalized medicine. Macrogen provides

personalized services (including genetic database services), and makes bio diagnostic chips.

Although the price tag for a personal genome analysis in 2000 would have been more than

US$3bn, we expect the price to fall to only US$1,000 in 2010 thanks to improvements in

sequencing devices. Cheaper genetic analysis should help grow the personalized medicine

market at a 2008~2013 CAGR of more than 11% (up from the current market size of

US$232bn in 2009).

Macrogen is the largest shareholder of US-based sequencing device developer LightSpeed,with a 25% stake (including stakes held by Macrogen subsidiaries). Since investing in

LightSpeed, Macrogen has become more competitive in personalized preventive medicine.

Share price will likely rise further as personalized medicine grows.


35/37

Woori I&S does not have a stake greater than or equal to 1% in Bioneer as of the preparation date. Woori I&S has not provided this material to an institutional investor or other third party in advance. The Korean version of this material was distributed on January 5, 2010. The analyst and his/her spouse do not own any securities of companies mentioned in this material as of the preparation date. Bioneer is not under coverage at Woori I&S. Thus, Woori I&S does not present a rating and target price on the counter. This report correctly reflects the analysts opinion and was written without any external influence or intervention.

Genetic diagnostics business growing rapidly

Bioneer specializes in the production of genetic diagnostic equipment and kits,

and research diagnosis equipment

Since the breakout of AH1N1 in 2009, there has been strong demand for

genetic diagnostic tools, which have been distributed to major general hospitals

and public clinics in Korea. Bionner has sold 30 units of gene diagnosis

equipment (totaling W2.6bn) to the Seoul metropolitan government.

2009 preview: operating profit to turn positive

We expect Bioneer to post 2009 sales of W28.8bn (up 93.2% y-y) and operating

profit of W7.2bn (TTP, y-y). In particular, we believe 4Q09 sales were a

record-high (since listing) thanks to growing sales of diagnosis equipment and

test kits related to the AH1N1 virus.

Strong sales and operating profit are attributed to:

1) large-scale margin improvement on diagnostic equipment and kit sales

(W9bn) related to AH1N1; and

2) falling cost-to-sales ratio on growing sales contribution from high-margin

genetic diagnostic kits and equipment, and even distribution of fixed costs.

Advancing into overseas markets

The global IVD kit market expected to grow to US$5.2bn in 2013 (2003~2013

CAGR of 9%). PCR equipmentkey to genetic diagnosis/diagnostic kitshas

many applications, including testing for diseases and food poisoning and

determining the specific breed of a species

Rapid change expected in domestic healthcare market in 2010, triggered by the

entry of the Samsung Group, led by Samsung Techwin

We expect Bioneer to grow, driven by the rapidly expanding genetic and other

diagnostic kit businesses. Excluding the temporary sales spike from AH1N1 in

2009, 2010 sales and operating profit should rise 14.6% and 61.1% y-y,

respectively, to W33bn and W11.6bn

Major share price catalysts for Bioneer are sales growth of diagnostic tests and

kits (given the expansion of the diagnostic test market in the aftermath of the

AH1N1 virus breakout) and diagnostic divisions entry into overseas markets

Bioneer(064550.KQ)

Foc us on h igh mar g ins ind iagnos t i cs

Sales Chg OP Pre-tax NP EPS Chg P/E P/B EV/EBITDA ROE Debt/equity Net debtsYE-Dec


2007 12.5 7.7 -2.3 -6.3 -6.3 -559 RR NA 1.4 136.0 -16.3 52.1 7

2008 14.9 19.3 -0.3 -3.6 -3.6 -314 RR NA 0.8 11.8 -10.1 73.5 13

2009E 28.8 93.3 7.2 - 6.2 564 TTP 10.8 - - - - -

2010F 33.0 14.6 8.5 - 7.3 664 17.7 9.2 - - - - -

Source: Bioneer, Woori I&S Research Center estimates

Analyst



Sector Pharm/bio-tech


KOSPI 1,696.14

KOSDAQ 528.09

Market cap (common) $59mn


Par value W500

120DA trading vol. 414,790shrs


52W high (08/28/09) W7,910

Low (01/15/09) W1,500

Foreign ownership (2008) 0.00%

Free float rate


Major shareholders

Han-oh Park 25.2%

Dae-sil Lee 5.2%


3M 6M 12M

Absolute 21.3 40.6 268.8

Relative 16.2 35.4 213.3

Not Rated


36/37

Woori I&S does not have a stake greater than or equal to 1% in Infopia as of the preparation date. Woori I&S has not provided this material to an institutional investor or other third party in advance. The Korean version of this material was distributed on January 5, 2010. The analyst and his/her spouse do not own any securities of companies mentioned in this material as of the preparation date. Infopia is not under coverage at Woori I&S. Thus, Woori I&S does not present a rating and target price on the counter. This report correctly reflects the analysts opinion and was written without any external influence or intervention.

Core product is blood glucose bio sensor kit (diabetes)

Infopias core product is a blood-glucose bio sensor kit for diabetes diagnosis.

In line with the aging society, diagnostic kit market becoming increasingly

important within healthcare industry. However, Infopias global market share

has not risen much yet due to weak overseas marketing capability.

2009 preview: results likely to fall short of market consensus

Infopia is expected to post 2009 sales of W41bn (up 10.2% y-y) and net profit

of W8.9bn (up 58.9% y-y), falling far short of company guidance (sales of

W55bn, net profit of W14.4bn).

Disappointing earnings are attributed to: 1) weak sales of HbA1C equipment

(sales originally estimated at W10bn or more) due to defects; and 2) delayed

sales in US to improve accounts receivable turnover in US market

Time to move aggressively overseas

Given increasing number of diabetes patients worldwide (170mn in 2000 to

370mn in 2030, according to WHO), the global market for blood-glucose

diagnosis kits is expected to surge. In addition, the listing of life insurers should

increase demand for blood-glucose test kit and bio sensors, which are simple,

cost-effective ways for individuals to monitor their condition

Infopia has made efforts to diversify its product portfolio to lower its

dependence on one item (blood-glucose test biosensor), but in the process, its

HbA1C equipment (blood glucose test equipment for hospitals) was found to

have defects. However, its efforts to diversify its product portfolio (cholesterol/

liver disease diagnosis sensor, heart disease diagnosis sensor) will continue in

line with efforts to strengthen future growth potential.

While Infopia is known to have both earnings stability and sound growth

potential, potential investors should keep a close eye on intensifying

competition in the domestic market and its weakness in overseas markets.

Infopia(036220.KQ) Qual i ty h igh , bu t m arket ing w eak

Sales Chg OP Pre-tax NP EPS Chg P/E P/B EV/EBITDA ROE Debt/equity Net debtsYE-Dec


2007 31.2 50.5 8.4 10.8 8.8 1,271 36.5 32.3 6.8 30.1 30.3 14.0 -11.8

2008 37.2 19.4 11.2 7.6 5.6 747 -41.2 15.1 1.9 6.6 12.0 24.9 1.6

2009E 41.0 10.2 10.5 - 8.9 1,271 70.1 12.3 - - - - -

2010F 53.5 30.5 14.4 - 12.2 1,743 37.1 9.0 - - - - -

Source: Infopia, Woori I&S Research Center estimates

Analyst



Not Rated

Sector Pharm/bio-tech


KOSPI 1,696.14

KOSDAQ 528.09

Market cap (common) $96.26mn


Par value W500

120DA trading vol. 162,446shrs


52W high (05/19/09) W22,305

Low (11/03/09) W10,041Dividend yield (2008) 0.68%

Free float rate


Major shareholders

Byung-woo Bae 12.9%

Sei Asset Korea 4.6%


3M 6M 12M

Absolute 24.1 -19.5 26.8

Relative 19.0 -24.7 -28.6


37/37


Rating and Target Price Update

Company Code Date Company Code

Samsung Techwin 012450.KS 2009.11.02 Buy W120,000 (12M)

2009.09.14 Buy W110,000 (12M)

2009.05.25 Buy W89,000 (12M)

2009.04.20 Buy W65,000 (12M)2009.03.17 Buy W46,000 (12M)

2009.02.23 Buy W42,000 (12M)

2008.11.11 Buy W42,000 (12M)

2008.10.21 Buy W33,000 (12M)

0

50,000

100,000

150,000

'08.1 '08.4 '08.7 '08.10 '09.1 '09.4 '09.7 '09.10

Closing price

Target price (12M)

(won)

Company Code Date Company Code

SD 066930.KS 2010.01.05 Buy W38,000 (12M)

010,000

20,000

30,000

40,000

50,000

'08.1 '08.4 '08.7 '08.10 '09.1 '09.4 '09.7 '09.10

Closing price

Target price (12M)

(won)

WOORI Investment & Securities s tock ratings

1. Period: Uniform 12-month2. Rating System: Based on a stocks absolute return from the date of publication,

Strong Buy: high conviction Buy rated stocks Buy: greater than +15% Hold: 0% and +15% Reduce: less than 0%

The research is based on current public information that Woori I&S considers reliable, but Woori I&S does not represent it asaccurate or complete and it should not be relied on as such. Furthermore, the research does not take into account particularinvestment objectives, financial situations or individual client needs, and Woori I&S is in no way legally responsible for futurereturns or loss of original capital. All materials in this report are the intellectual property of Woori I&S. Copying, distributing,transmitting, transforming or lending of this material without Woori I&S' consent is prohibited.

focus on ivd

Documents