[THE INVESTOR] Daesang has begun to enjoy returns from large investments, said Mirae Asset Daewoo on Sept. 6, maintaining a “buy” recommendation and raising the target price to 35,000 won (US$31.28) from 33,000 won.

Its operating profit in the second quarter hiked 47.9 percent on-year boosted by its heavy investments in lysine, Indonesian starch and Daesang Bestco. The figures will continue to rise 7.8 percent and 53.1 percent in the third and fourth quarter, respectively. As competitions in higher-margin sectors, such as fermented seasonings, condiments and processed meat, its profitability will improve, said analyst Baek Un-mok.

Due to low growth potential in these sectors, however, Daesang and its rivals are cutting back on marketing here and are focusing on home meal replacements instead. Although new home meal replacement products continue to be rolled out, losses will expand in tandem with sales as ingredient prices may rise, said the analyst. 

By Hwang You-mee (glamazon@heraldcorp.com)