Delta Electronics Thailand PCL: HOLD for now; sell into strength soon

  • Strong 1Q21 sales growth …
  • …but several factors look set to squeeze GM
  • 2Q21 earnings to drop YoY and QoQ

Proof of strong 1Q21 profit growth will drive DELTA’s stock price in the short run. However, earnings will decline YoY in 2Q-3Q21, due to the high base comparisons of 2Q-3Q20. We have a HOLD call for now, but suggest selling into strength once the firm announces hefty 1Q21 earnings late this month.

Strong 1Q21 sales growth …

DELTA should report strong overall order flows for 1Q21 of US$653m, up by 62% YoY and 10% QoQ and a record high, led by EV-related products and DC fans. Historically, sales have normally fallen QoQ in the first-quarter, but for 1Q21 the firm beat seasonality because of demand for EV-related products (particularly from US-based clients). Moreover, some customers made heavy orders in Mar before a run of public holidays in Apr. The semiconductor shortage hasn’t materially affected business yet, according to management. Although, it has forced some automakers to halt or slow vehicle output, EV makers are now priority clients of chip foundries.

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