Market Review Woongjin Coway News

IR Webzine 2019. Apr.

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This material includes quarterly development of stock markets, stock prices and related data of Woongjin Coway, financial status, operating results, and other major issues related to IR. This is aimed to provide a variety of information that could be a reference to shareholders and investors. Therefore, it cannot be the evidential material for legal responsibility regarding investment results of shareholders and investors in any case.

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Market Review_ Stock Market

The KOSPI rose 2.94% from the previous month to 2,203.59 points at the end of April 2019, giving an indication of another rally after two-month technical decline. In the technical aspect, the KOSPI rebounded on the long-term moving average line with the increase of trading volume, which seems to make a rally.

The KOSPI surpassed the previous high by continuing increase for 13 consecutive days, the longest record since 2006, since the beginning of month. However, it showed a technical decline in the latter half of April due to unfavorable causes such as lower-than-expected export in April and GDP

in 1Q, strong US dollar, hikes of international oil prices, and underachieved economic stimulation of China. Medical & precision, textile & clothes, and transportation sectors were strong while electricity & gas, pharmaceuticals, and food & beverage sectors were weak.

In May 2019, the stock market seems to continue a pulseless movement instead of large fluctuation because concerns about economic recession and expectations on turnaround of export and corporate earnings in the second half of the year are confused.

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The stock price of Woongjin Coway decreased 7.09% from the previous month to KRW 87,800 at the end of April 2019, continuing technical decline for two months in a row. In the technical aspect, future stock price trend depends on whether it can make an active rally on the long-term moving average line or not.

Market Review_ Stock Price

Classification% change of COWAY %change of

Stock Price vs. KOSPI vs. KOSPI200 KOSPI KOSPI200

5 Days -1.35 -0.59 -0.81 -0.76 -0.54

20 Days -5.49 -6.70 -6.63 1.21 1.14

60 Days 3.91 4.02 4.50 -0.12 -0.59

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Market Review_ Stock Price

Woongjin Coway achieved record high quarterly operating profit in 1Q on the strength of rental and lump-sum sales of air purifiers and remaining uptrend of overseas sales. This favorable operating performance trend will continue going forward on the basis of its differentiated competitiveness. In addition, current stock price is considered to fully reflect the takeover issue. Therefore, it is expected that the stock price will make another rally regardless of a slight decline.

During April, the number of shares held by foreigners decreased 1,308,815 shares, or 2.88%, compared with the prior month. As of the end of April, they maintained 59.78% ownership. Domestic institutional investors marked net selling of 24,872 shares during the same period.

44,116,714 Shares (59.78%)

(as of April 30, 2019)

Changes in Stock Price in April

-1,305,815 shares

(-2.88%)

Changes in Shares Held by Foreigners in April

Net Changes in Shares Held by Institutional Investors in April

-7.09% -24,872 shares

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Conduct an exclusive online exhibition of air purifiers for two weeks in April

Woongjin Coway announced that it would open an exclusive exhibition of air purifiers through online shopping mall channels including 11th District, WeMakePrice, and G Market for two weeks from April 3 to help consumers pur-chase air purifiers more easily.

Four kinds of air purifiers – multi-action air purifier AP-1516D, triple power air purifier AP-2318D, AP-1018F, and AP-1019F – will be showcased through the channels.

Particularly, in a bit to inform consumers of the importance of product main-tenance, the company decided to offer free maintenance service for a year to buyers.

Air purifiers of Woongjin Coway have tailored filters that differentiate them-selves from competitors, making it possible to deliver space-optimized air care service. This feature is the key to its popularity.

Multi-action air purifier, boasting the largest units sold this year, is a smart product that enables tailored air care in accordance with space conditions through 4 air circulation functions. Triple power air purifier purifies both pol-lutants and dust on the floor very quickly by operating filters located left side, right side, and bottom of the product.

Hyung-kwon, Kim, the head of Marketing Strategy Division, said, “We prepared the exclusive online exhibition to improve consumer convenience in purchas-

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ing products and their satisfaction. Going forward, we will continue marketing communication activities meeting consumer needs.

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Rank top in the water purifier and bidet sectors at the “2019 KPEI”

Woongjin Coway ranked top in the water purifier and bidet sectors at the “2019 KEPI (Korea Purchase Ease Index)” hosted by Korea Marketing Association, proving solid consumer trust.

The KPEI is an index to measure unstable factors considered by consumers when they purchase products, including safety level, quality, after service, and so on.

Woongjin Coway has ranked top in the water purifier and bidet sectors top for four years and six years in a row, respectively. The company was highly recog-nized for its efforts to enhance consumer satisfaction based on customer-cen-tric service quality control.

To improve regular water purifier maintenance service, Woongjin Coway ini-tiated the “Cody Service Kit” system. It sterilizes the inside of water purifier with purified clean water and shows maintenance process through sound and screen, contributing to the visualization and standardization of service. The most popular product “CIROO Tankless Water Purifier” was praised for its innovativeness in that tankless water purification is possible despite RO mem-brane filter boasting the best performance in eliminating pollutants.

The i-wave system of Woongjin Coway bidet is recognized as an innovative technology that provides optimum water jet courses by scientifically com-bining water pressure, air, cleaning scope, and time based on users’ body conditions. Our bidets also demonstrate high hygiene by operating the 3-step

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self-sterilization system. These advantages have gained positive response.

Hae-sun Lee, the CEO of Woongjin Coway, said, “Our company focuses on differentiating product quality and service competitiveness to help customers experience the value of clean and healthy life. We will continue to promote in-novation with the aim of solidifying customer trust and proposing a new stan-dard of customer value.”

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Sign an agreement to create “Clean Campus” with Chungang University

Woongjin Coway signed an agreement to create “Clean Campus” with Chun-gang University on April 3, in which Hae-sun Lee, the CEO, and Chang-soo, the University President, participated.

According to the agreement, Woongjin Coway plans to provide 400 wall-mounted air purifiers (model: AP-2510EH) to the university for free.

Demonstrating excellent space efficiency despite strong air purification ca-pability based on the dual filter system, this product is suitable for multi-use facilities.

Hae-sun Lee, the CEO, said, “Today, corporate social responsibility is very crit-ical in business operation. Woongjin Coway will be proactive in conducting activities that can contribute to social development and environmental pres-ervation going forward.”

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Sign an MOU for water purifier support project for local peopleOn April 9, Woongjin Coway signed an MOU for water purifier support project for local people with Chuncheon City, K-Water, and Shinhan Bank at the Chuncheon City Hall.

This agreement was prepared to improve water welfare for local people with poor water environment, in which Sun-yong Lee, the head of Woongjin Coway’s Environmental Technology Research Institute, Jae-soo Lee, the Mayor of Chuncheon City, Hyung-joon Kwon, the head of K-Water’s Soyanggang Local Subsidiary, and Take-soo Nam, the head of Shinhan Bank’s Chuncheon Local Business Group, participated.

According to the MOU, Woongjin Coway will provide water purifiers equipped with CIROO filter system and bimonthly maintenance service for free to households who have consumed underground water unsuitable for drinking within areas with no water supply facilities for the next five years.

Jae-soo Lee, the Mayor of Chuncheon City, said, “Some isolated rural areas without water supply facilities still use underground water. However, a lot of households have been disapproved by water quality test for drinking. This agreement will pave the way to provide them with clean and healthy water.”

Sun-yong Lee, the head of Woongjin Coway’s Environmental Technology Research Institute, said, “Water is directly connected to human health. We prepared this project with the aim of supplying clean and healthy water to the underprivileged. We will continue to fulfill our social responsibility as Korea’s leading water company.”

- Providing water purif iers and maintenance services for free to the underprivileged

- Creating clean and healthy water environment as Korea’s leading water company

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Prior to this, Woongjin Coway had supported more than 500 water purifiers for free to people living in rural areas with underqualified water environment by signing an agreement with the Ministry of Environment in 2015. The company has also provided 100 water purifiers and 5-year maintenance service for free to people living in Chungcheongnam-do with underqualified water environment every year since 2015.

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- Ranked 31st in brand value and selected as the Top Growing Brand

- Thanks to expanding overseas business and actively introducing new technologies

Recognize as the “Top Growing Brand”Woongjin Coway was selected as the Top Growing Brand at the “Best Korea Brands 2019” hosted by the Inter Brand, a world’s largest brand consulting firm, on April 11.

The winners are selected on the basis of the Inter Brand’s independent brand value evaluation model which emphasizes three core factors – financial analysis, brand role analysis, and brand strength analysis.

Woongjin Coway has ranked 38th in 2015, 32nd in 2016, and 31st in 2019 in the brand value evaluation, continuing an upward trend. The company’s brand value was estimated as KRW 887.5 billion, an increase of 15.3% over the previous year.

Particularly, Woongjin Coway was selected as the Top Growing Brand which was granted to companies with remarkably high brand value growth compared with the previous year among 50 brands. Only six companies including Woongjin Coway, SK hynix, Kakao, and Shinsegae Department Store were recognized as the Top Growing Brand.

The Inter Brand explained that the success of top six brands resulted mainly from actively responding to intensifying market competition and changing consumption trends, securing competitiveness through specific services, and developing growth opportunities through wider partnerships.

Woongjin Coway achieved record high sales, operating profit, and net profit last year on the strength of remarkable growth at home and abroad. Moreover, the company is proactive in introducing technologies with regard to the 4th Industrial Revolution, thereby providing customers with new brand experiences and values.

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- Slim size of 26 cm in width which enables easy installation even in a small space

- Adopted the CIROO filter system demonstrating Woongjin Coway’s distinctive technology

- D e t a c h a b l e w i d e t r a y a n d transparent faucet to ensure better user convenience

Launch a new product named “Slim Stand Water Purifier”Woongjin Coway launches a new product named “Slim Stand Water Purifier (CHP-5710L)” on April 15. Despite the slim size of 26 cm in width which is 6 cm shorter than competitors’ products, it demonstrates abundant water purification competence and better user convenience as well as easy installation even in a small space.

Having large-capacity water tanks (6 litters for purified water, 3 liters for cold & hot water), this product is suitable for households, offices, and restaurants with large water consumption.

The CIROO (Coway Intensive Reverse Osmosis) filter system is adopted to this product. The CIROO filter system consists of CIROO filter and C9 carbon block filter. The CIROO filter demonstrates more compact structure of intensive membrane materials which can eliminate even ionic substances less than one-in-ten thousand of human hair by maximum 24% compared with existing RO membrane filter, which ensures purifying plenty of water despite high purification performance. The C9 carbon block filter equipped with three-layered structure developed by Woongjin Coway’s independent technologies ensures higher water purification performance.

Moreover, detachable wide tray and transparent faucet provide users with more convenience and higher hygiene.

Hyung-kwon Kim, the head of Marketing Strategy Division, said, “We have designed and developed this product in consideration of product size, water purification capacity, and user convenience to meet needs of households, offices, and restaurants with large water consumption. We will make best effort to provide better products and services with the responsibility as Korea’s representative water company.”

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Sign an MOU aimed at improving indoor air quality of an elementary schoolOn April 16, Woongjin Coway signed an MOU with Dongdap Elementary School located in Dongdaemun-gu, Seoul and Daesang Techroll Co., Ltd. with the purpose of researching indoor air quality improvement of the school.

This agreement was prepared to create indoor air quality control solutions optimized for elementary schools. To this end, Woongjin Coway will install air purifiers and fine dust filters in classrooms for free and efficiently manage indoor air quality for two years. Moreover, the company will analyze the indoor air quality improvement effects from the operation of air purifiers in classrooms.

Jae-kwang Choi, the Principle of the school, said, “It is very important to improve indoor air quality of classroom where students and teachers spend much time in the aspects of both health and educational environment.

Therefore, we will cooperate with Woongjin Coway to create clean and convenient educational environment.”

Sun-yong Lee, the head of Environmental Technology Research Institute, said, “This research will contribute to analyzing both pollution trends of indoor air at public facilities including classroom and air purification effects.

We will continue to take the lead in improving air quality based on our differentiated air purification technology and big data analysis competence in terms of air quality.”

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- More than 4,000 part ic ipants including Ki-ryong Choi, the head of local subsidiary, and staff

- Various programs including award-winning and musical performance

Hold an event to celebrate the 10th anniversary of Malaysia subsidiary’s Cody systemWoongjin Coway’s Malaysia subsidiary held an event to celebrate the 10th anniversary of introducing the Cody system on April 17 in Kuala Lumpur, Malaysia, in which more than 4,000 persons including Ki-ryong Choi, the head of local subsidiary, staff, and local Cody members participated.

At the event, participants looked back upon hardships and successes of Cody members and shared the vision toward better future under the theme of “One Love, One Heart, One Family.” Other programs included a musical performance based on Cody members’ episodes and awards presentation to Cody members who have service 10 years.

Rokiah Binti Zali (age of 39) who received 10-year service award said “For a decade, I have met a lot of customers and grown into a professional service provider. It’s very fantastic to make a success within Woongjin Coway and I will make a concerted effort to become a Cody who can deliver better services to customers.”

Malaysia subsidiary has been demonstrating remarkable growth since the establishment in 2006. It achieved record high KRW 353.4 billion, up 70.3% year-on-year, in sales in 2018. The number of customer accounts also reached one million.

Currently, Woongjin Coway holds the largest market share in the Malaysian water purifier market. The first introduction of rental sales system and Korean-style Cody service program to Malaysia has shifted the paradigm in local water purifier market, which contributed to Woongjin Coway creating a new market and becoming the leader.

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More than 12 thousand persons are working at Malaysia subsidiary, including 4.3 thousand Cody members and 8 thousand salespersons. Particularly, Malaysia subsidiary won the Minister Prize for “Excellent Company in CSR” from the Ministry of International Trade and Industry of Malaysia in recognition for creating jobs for local females in 2013.

Ki-ryong Choi, the head of Malaysia subsidiary, said, “Our success in Malaysia is attributable to Cody members’ efforts for and commitment to customer value creation. We will spare no efforts for supporting them to be dedicated to their jobs.”

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Selected as the “excellent carbon management company” for 10 consecutive yearsWoongjin Coway was recognized for its world-class eco-friendly management leadership by being selected as the excellent carbon management company at the “2018 CDP Climate Change Response Evaluation” hosted by the CDP Korea. Woongjin Coway and Samsung Electronics are only two companies which have been selected as the excellent carbon management company for 10 consecutive years in Korea.

The CDP (Carbon Disclosure Project) is a global institution engaging in evaluating climate change response strategies of major listed companies in the world. The CDP along with the DJSI is recognized as an indicator with public confidence in assessing corporate sustainability and utilized as an investment guide as well.

Woongjin Coway entered the “Honors in the Carbon Management Sector” in recognition for expanding the consumption of new and renewable energy sources and reducing GHG emissions by operating solar power generation system and introducing LED lights in plants.

With the goal of reducing GHG emissions intensity by 50% until 2020 to join global-level climate change response initiative, Woongjin Coway has been disclosing its environmental data voluntarily. Moreover, the company has made the carbon partnership with 24 suppliers and identified improvements through energy consumption diagnosis every year, thereby enhancing their energy competence.

Hae-sun Lee, the CEO, said, “This achievement proved our leadership in environmental management and efforts for minimizing environmental

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impacts in entire value chain. We will spare no effort for improving energy efficiency and fulfilling our social responsibility as a leader in sustainability management.”

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- The fastest-selling premium massage chair to achieve KRW 5.0 billion sales

- Thanks to innovativeness that adopted traditional oriental medical care and detailed massage programs

Surpass KRW 5 billion in sales of oriental blood-warming massage chairWoongjin Coway announced on April 29 that sales of “oriental blood-warming massage chair (MC-SO1)” exceeded KRW 5.0 billion just in two months after launch.

This product, launched in mid-February, became the fastest-selling premium massage chair exceeding KRW 5.0 billion among similar products of Woongjin Coway. Compared with the “backbone blood-warming massage chare 2 (MC-PO2) launched in June 2018, this product achieved KRW 5.0 billion in sales one month faster.

Key features of the oriental blood-warming massage chair are innovativeness that adopted traditional oriental medical care and user convenience guided by tailored massage programs.

This product helps relax body and improve sleep by stimulating major acupoints. It was verified for the effectiveness through clinical test at the Dongguk University Ilsan Oriental Hospital. The oriental blood-warming massage chair also won the “2019 CES Innovation Award” in recognition for a new-concept product which combined oriental medicine with massage chair.

Woongjin Coway’s patent technology “Thermal Therapy Tool” is adopted to this product. It operates two thermal therapy balls in the product to stimulate major acupoints, thereby making users feel warm and convenient.

Moreover, a total of 13 kinds of massage courses that help relaxation, convenient sleeping, blood circulation, pain relief are offered.

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Seung-joon Han, the leader of Living Care Team, said, “The oriental blood-warming massage chair is an innovative product which have pursued completely distinguishing itself from competitors’ products from the planning stage. Its innovativeness that enables users to experience traditional oriental care contributes to gaining high popularity.”

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- Achieved 531 thousand rental unit sales, the largest-ever quarterly record

- KRW 709.3 billion in sales, the highest 1Q record, KRW 100.4 billion in net profit, quarterly record

- Increases of 9.5%, 2.9%, and 5.5% YoY in sales, operating profit, and net profit, respectively

Attain quarterly record high KRW 135.2 billion in 1Q operating profitWoongjin Coway announced that its sales, operating profit, and net profit in 1Q increased 9.5%, 2.9%, and 5.5% year-on-year to KRW 709.3 billion, KRW 135.2 billion, and KRW 100.4 billion, respectively. Sales were the highest among 1Q results and operating profit and net profit were record high on a quarterly basis. (based on K-IFRS consolidated financial statements)

The company considered quarterly highest rental sales and net adds of accounts at home and abroad, continuous growth of overseas business, and stable churn rate control as driving forces of outstanding operating performance.

▲ Quarterly highest rental sales and net adds of accounts at home and abroad

Rental sales in 1Q at home and abroad reached 531 thousand units, up 15.4% YoY, the highest quarterly record. Domestic sales growth was attributable to sales increase of air purifiers, water purifiers, and FWSS and launch of innovative products such as CIROO tankless water purifier. Overseas sales growth resulted from sharp rental sales increase in Malaysia and the U.S. The number of net accounts adds was 205 thousand, the largest quarterly record. As a result, the number of total accounts reached 7.19 million (5.99 million in Korea and 1.20 million in overseas markets). The company expects to accomplish more than 7.60 million accounts this year.

▲ Continuous growth of overseas business

Overseas sales in 1Q increased 41.6% YoY to KRW 159.0 billion on the strength of steady growth of Malaysia subsidiary and the U.S. subsidiary.

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Malaysia subsidiary realized quarterly sales of KRW 112.5 billion, up 71.1% YoY, and 1.06 million accounts, up 49.5% YoY. 1Q sales of the U.S. subsidiary also soared 19.2% YoY to KRW 20.9 billion on the back of remarkable door-to-door sales and retail sales of air purifiers. The number of accounts reached 115 thousand, up 3.6% YoY.

▲ Stable churn rate control

Woongjin Coway has been stably controlling churn rate through strengthening CRM and service competence. 1Q churn rate was 1.01%, a decrease of 0.01%p YoY, which contributed to reducing rental asset disposal loss by 13.8% YoY to KRW 8.7 billion in 1Q. The amount marked 2.3% of rental sales, down 0.4%p from 2.7% in 1Q 2018. Stable churn rate control significantly contributed to enhancing profitability.

The company intends to maintain current favorable growth trend by launching strategic products including the “1.5 generation FWSS” in 2Q, securing wider sales workforce, and expanding overseas business.

Ji-yong Ahn, the CFO, said, “We attained record high operating performances on a quarterly basis in 1Q on the strength of firm rental sales growth and net accounts adds. We will continue this growth trend in the second quarter by launching innovative products, recruiting more salespersons, and accelerating overseas business.”

IR Webzine 2019. Apr.