Delta Electronics (Thailand)
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2Q12 high as projected, 2H12 even better. 1H12 dividend yield at 6% BUY Current price (B) 23.70 Fair Value (B) 28.00 Market cap (B bn) 29.56
2Q12 net profit bright as projected… gross margin
managed well despite pressuring wage
2H12 profit projected to grow from 1H12… Data center
and solar businesses constantly shine
Recommend “BUY”, choosing DELTA as top pick
CGR
2Q12 net profit bright as projected… gross margin
managed well despite pressuring wage
DELTA’s 2Q12 net profit stands at B899m or growth of 26% QoQ as
projected due to the following reasons. 1) Gross profit in 2Q12 has
grown by 15% as projected as a result of data center business
(46% from the total sales) that still grows continuously and the
solar inverter business (8% from the total sales) that has increased
significantly from the previous quarter. Although there’s a pressure
from the increased wage policy, it is in the company’s capability to
handle and therefore there’s not much of a negative effect. 2)
SG&A/sales has declined to 15.4% (from 18.4% in 1Q12) which is
higher than projected as a result of the company’s policy to control
the operating cost. However, DELTA has recognized restructuring
cost by B182m for business reconstruction in solar inverter business
and the team of product development staff. Due to the
abovementioned factors, 2Q12 net profit still shines. Overall, 1H12
net profit stands at B1.6bn or an increase of 10% from the same
period of last year, considering 46% from FY2012 net profit
forecast.
2H12 profit projected to grow from 1H12… Data center
and solar businesses constantly shine
Although the dullness of global economic outlook might suppress
orders of DELTA in 2H12, the company’s earnings result in 2H12
tends to grow continuously from 1H12 due to the high season of
electronics parts export. DELTA will benefit from the growth of data
center business that grows along with the global cloud computing
business and an aggressive growth strategy of solar inverter
business that aims to expand its market to many continents
worldwide. The company has a policy of controlling
operating cost especially selling and administrative cost, aiming for
SG&A/sale at not over 15% in the next 3 years. All these are
positive factors to boost net profit since 2013 onward. Overall, we
maintain 2012 net profit forecast of DELTA that will grow by 23%
QoQ and 9% YoY in 2013.
Recommend “BUY”, choosing DELTA as top pick
We reiterate our recommendation of “BUY”, choosing DELTA as a
top pick of the sector. 2012 fair value, using DCF, is B28. The
current share price is still lower than average PER in the past 10
years which is against the profit in 2H12 that tends to grow.
Accordingly, we’re convinced that DELTA will return to outperform
the market once again.
