Delta Electronics

Peak of 2014 BUY

Delta Electronics Plc (DELTA)

- 3Q14 profit to grow 27.8%qoq

We estimate 3Q14 profit at B1.9bn, growing 27.8%qoq and 16.0%yoy.

Total sales is projected to rise by 10.8%qoq to B12bn due to high

season for electronics sector. Orders of data center products are

projected to grow remarkably. The infrastructure (telecommunication)

investments in India has resumed after the general election is complete,

boosting sales. Gross margin is projected to rise from 26.9% in 2Q14 to

28.0% in 3Q14 after an improvement in product mix. Also, DELTA is

expected to recognize B219m profit from sales of Delta Greentech SGP.

SG&A/Sales is anticipated to stay at 14.2%. Overall, 9M14 net profit is

estimated at B4.8bn, growing 11.0%yoy, making up 77.3% of FY2014

earnings forecast.

- Maintain FY2014-2015 earnings forecast

We maintain FY2014-2015 earnings forecast. 4Q14 net profit is

expected to drop from 3Q14 after high season passed, which is usual

for the sector. FY2015 net profit is estimated to grow by 16.4%yoy to

B7.2bn, continuously making a new high. Total revenue is projected to

rise by 13.5%yoy thanks to higher sales of power chargers (hybrid cars)

and data center products and the infrastructure investments in India.

- FY2015 fair value is B78

We reiterate BUY. Fair value (DCF, 11.58% WACC) is B70.40 in 2014

and B78.00 in 2015; FY2015 fair value implies 37% upside (including

dividend yield).