Equity Analysis /
Thailand

Delta Electronics Thailand PCL: Record high 1Q22 core earnings expected

  • Record high 1Q22 core earnings expected …

  • … but followed by weaken 2Q22 core earnings

  • 20% scope for earnings upside under best-case scenario

Napon Jaisan
Napon Jaisan

Equity Research Analyst

Bualuang Securities
22 April 2022

DELTA’s growth outlook is solid, driven by technology trends—EVs, data centers, and the IOT. Moreover, we expect the firm to post strong 1Q22 core earnings growth, which should generate a positive sentiment to DELTA’s short-term stock price movement. However, its 2Q22 core earnings will be pressured by several factors.  And the stock is expensive—a 2022 PER of 48x and a PEG ratio of 1x. Our HOLD call stands.

Record high 1Q22 core earnings expected …

We expect the company to realize 1Q22 sales of US$757m, up by 14% YoY and 4% QoQ (up by 22% YoY and 5% QoQ in baht terms to Bt25bn), due to better hi-end data center (high GM) and DC fan sales outweighing lower EV sales (low GM). The impact of chip shortages and clients’ wire harness shortages affected EV sales for the quarter. Its three auto clients in Europe have temporally paused their production lines, due to shortages of raw materials supplied from Ukraine. Therefore, DELTA’s EV sales should not increase from 4Q21.  For the US market, there are signs of slower spending by its clients due to high inflation. However, sales of hi-end data center remained strong. Moreover, its DC fan sales rose, led by the capacity expansion.