[Click eStock] "Daesang, Improving Q2 Earnings with Stability in Core Business"

[Asia Economy Reporter Eunmo Koo] DB Financial Investment expects that Daesang will show improved performance in the second quarter of this year due to stable results in its core business, turnaround of loss-making businesses, and continued growth of overseas subsidiaries.

DB Financial Investment estimates that Daesang's sales in the second quarter of this year will reach 760.3 billion KRW, a 3.9% increase compared to the same period last year, driven by increased sales of Home Meal Replacement (HMR) products, strong sales in B2C channels, and increased sales from subsidiaries in Indonesia and Vietnam. On a consolidated basis, operating profit is expected to grow 28.4% to 43.3 billion KRW, supported by stable profit generation in core sectors such as Miwon and starch syrup, a turnaround to profitability due to reduced promotional expenses in the kimchi and sauces division, a reduction in operating losses in HMR food products, and increased operating profit from expanded production facilities in Indonesia.

Researcher Jaehun Cha of DB Financial Investment stated in a report on the 25th, “The positive effects from COVID-19 are not issues that will disappear immediately in the third quarter,” and forecasted that “reduced promotions in large supermarkets and growth in the online food market will have a positive impact on Daesang’s HMR business profitability.”

Although there are concerns about performance volatility in the lysine segment within the materials division, considering recent trends such as corporatization of the Chinese pork market, rising pork prices in Asia, and increasing prices of feed additives like lysine, the downturn is not expected to last long. Researcher Cha said, “In the mid to long term, some oversupply factors will be resolved due to increased demand for lysine,” and predicted that “a positive performance recovery in the materials division is possible, contrary to market concerns.”

Additionally, from a financial structure perspective, cash inflows from the aspartame lawsuit victory, increased stable cash flow from operating activities, and reduced domestic and overseas investments are expected to strengthen stability.

The investment opinion and target stock price were maintained at “Buy” and 40,000 KRW, respectively. Researcher Cha explained, “Daesang’s stock price is trading at a price-to-earnings ratio (PER) of 9.4 times based on 2021 earnings estimates, reflecting the resolution of short-term COVID-19 impacts and normalization of one-time profits,” adding, “Although it has risen from the bottom, it remains significantly undervalued compared to the industry average (estimated 16 times).”

This content was produced with the assistance of AI translation services.