Companies turning risk into opportunity
Global warming and resultant regulations on greenhouse gases (GHGs) are being perceived by
most companies as potential risks that will increase costs. However, some companies are turning
risks into opportunities: KC Cottrell (009440), Ecopro (086520), Foosung (093370), Huchems
(069260), Capro (006380), and Kenertec (062730).
CDM projects and carbon market offer opportunities
GHG regulations under the United Nations Framework Convention on Climate Change
(UNFCCC) are cost factors for companies, but they also present new opportunities. Since Korea is
not obligated under the Kyoto Protocol to reduce its GHG emissions, Korean companies that
voluntarily reduce their emissions will be rewarded with certified emission reductions (CERs)
under the Protocol’s clean development mechanism (CDM). They can utilize CERs as a source of
extra income. Other companies may generate revenues by supplying GHG reduction-related
materials and systems.
GHG reduction a global mandate
Global warming is caused by six major GHGs whose reduction is one of the most urgent tasks facing
the human race today. The Kyoto Protocol commits developed nations to reducing their GHG
emissions by a collective average of 5.2% below their 1990 levels during the first commitment
period of 2008-2012. Korea is not currently included in the list of these nations, called Annex I
Parties, but will most likely be from 2013. If the Korean government and corporations fail to
prepare for the post-Kyoto period, they will face a sharp surge in costs going forward.
CDM projects and carbon market to grow continuously
CDM encourages developed and developing nations to work together to reduce GHGs. When an
Annex I nation finances a non-Annex I nation’s CDM project, the former receives credits which it
can apply toward meeting their own emissions target. Propelled by the need of Annex I parties,
GHG reduction systems in developing nations should see sustainable market growth going forward.
Top picks:KC Cottrell,Ecopro
We present BUY and a fair value of W14,000 for KC Cottrell (009440) and W13,500 for Ecopro
(086520). As suppliers of GHG reduction systems and materials, they should show steady growth
for the next several years, fuelled by mounting demand. We believe the outlook is brighter for
companies that produce GHG reduction systems/materials rather than those that install such
systems in their own factories to earn CERs. First, the former targets a much greater potential
market. Moreover, revenue generation from CERs will be possible until end-2012, when the Kyoto
Protocol expires, while system/materials companies can enjoy growth for a longer period of time.

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Turning Risk into Opportunity:
KC Cottrell, Ecopro
GHG Reduction System/Material Makers Boast Strong Investment Merits
Efforts to Reduce GHGs
Spreading Globally
CDM Projects and
CER Trading
Top Picks: KC Cottrell and Ecopro
KC Cottrell (009440, BUY)
Ecopro (086520, BUY)
Kenertec (062730, Not Rated)
Capro (006380, Not Rated)
Foosung (093370, Not Rated)
Huchems (093370, Not Rated)
Appendix: Terms and Acronyms