Delta Electronics

Profit strong as promised BUY

Delta Electronics Plc (DELTA)

- 3Q14 net profit grows 30.6%qoq as projected

DELTA posted 3Q14 net profit at B1.9bn, close to our projection,

marking a historical high by quarter with the growth of 30.6%qoq and

18.5%yoy. Total sales in the quarter increased 4.5%qoq and 1.6%yoy

to B11bn (5.7% lower than estimated) due to a high season of the

electronics industry worldwide that has boosted demands for power

supply in data center and computer business. Moreover, the

telecommunication infrastructure investments in India have been

resumed, boosting sales. Gross margin has increased to 28.5% (higher

than projected) from 26.9% in 2Q14, thanks to better product mix.

Moreover, the company has a non-recurring income of B195m from

selling of its subsidiaries, Delta Greentech SGP and Delta Electronics

Europe Ltd. SG&A/sales stayed flat from the prior quarter at 14.1%.

Overall, 9M14 net profit is B4.8bn, rising 12.0%yoy and accounting for

77.9% of our FY2014 forecast.

- Data center, automotive products are main drivers

We maintain FY2014-2015 earnings forecast. FY2015 profit is estimated

to grow by 16.4%yoy to B7.2bn, continuously making a new high,

under an assumption for income growth of 13.5%yoy from higher sales

of power chargers (hybrid cars) and data center products and a solid

recovery of telecommunication infrastructure investments in India.

However, earnings in 4Q14 would weaken from 3Q14 as the high

season has passed and overseas orders have declined.

- Dividend yield of over 5% p.a.

We reiterate BUY. 2015 fair value (DCF, 11.58% WACC) is B78.00,

providing a 33.3% upside (dividend yield included).