Delta Electronics

Delta Electronics Plc (DELTA)  

 

- 2Q15 profit to grow remarkably 

We estimate DELTA's 2Q15 net profit at B1.6bn, growing 4.8%qoq and 

9.6%yoy. Total income is expected at B11bn, growing 4.1%qoq and 4.1%yoy mainly from data center products and the infrastructure investments in India. Gross margin is projected to rise from 27.7% in 1Q15 to 27.9% in 2Q15 thanks to high-margin product mix and weak THB (depreciating 1.9%qoq and 2.5%yoy to B33.26/US$). SG&A/Sales is expected to drop to 13.5% in 2Q15 as total income would rise, overseas sales offices has started to generate profit, and investment expense would decrease. 

- Revise down forecast. Limited growth from now on 

We revise down DELTA's earnings forecast by 12.1% in 2015 and 11.6% in 2016 to reflect down revision of our assumptions, e.g. total income, SG&A/Sales, and THB/EUR exchange rate; we revise up projections on gross margin and other income though. Under the new forecast, DELTA's net profit would grow by only 6.6%yoy to B6.4bn in 2015 and rise by 8.9%yoy in 2016. Excluding extraordinary items, FY2015 normalized profit is expected at B6.3bn, growing 13.9%yoy. DELTA's profit is expected to make the year's peak in 3Q15 as total income would rise by 10%qoq and 6%yoy due to worldwide high season of electronic part export and increasing overseas orders. 

- Not a good entry point yet 

Although the share price has dropped significantly, the fair value (DCF, 11.58% WACC) is revised down from B78 to B75, thus implying over 5% downside. We recommend holding for 4-5% p.a dividend yield (paid annually).