Investment merits
DELTA’s 3QFY26 profit is expected to reach Bt8,319mn, up y-y and q-q,
supported by accelerated deliveries of AI-and data center-related products following
the resolution of raw material issues, compared with the previous quarter. GPM is also
projected to improve, supported by a better product mix. Clear q-q earnings growth is
expected for 3Q, which should provide a short-term catalyst. However, the global raw
material shortage remains in place, which could push up costs in 4QFY26. We roll
forward our target price to FY27 at Bt330.00 per share. Our recommendation was
upgraded to a ‘BUY’ for DELTA.
3QFY26 earnings forecast to rise y-y and q-q
DELTA’s 3QFY26 net profit is estimated at Bt8,319mn, up 11.8% y-y and 37.0% q-q.
The strong q-q recovery is partly due to the low base in 2QFY26, while shipments of
AI and data center products are expected to accelerate from 2QFY26. Meanwhile,
shipments of new liquid-cooling products are expected to ramp up gradually.
Revenue is estimated at US$2,287mn, up 38.5% y-y and 13.7% q-q. DELTA should
also benefit from the weaker baht, averaging Bt33.3/US$, resulting in baht
denominated revenue of Bt77bn, up 45.2% y-y and 18.6% q-q. GPM is expected at
29.4%, improving both y-y and q-q. The GPM outlook could be affected by higher
provisions amid the ongoing global material shortage. However, the company has
secured new suppliers and improved its ability to source raw materials, supporting
higher shipments compared with the previous quarter. Higher shipments should also
lead to reversals of some provisions previously booked. The main driver of GPM
improvement should be a better product mix, as most AI-related products are in the
power electronics segment, which carries relatively high margins. Meanwhile, the
SG&A-to-sales ratio is expected at 17.4%, remaining above last year’s level, partly
due to the 8.25% royalty fee, which should increase in line with higher shipments of AI
and data center products. We also expect the R&D-to-sales ratio to rise to 3.4% from
3.36% in the previous quarter, moving closer to the company’s target of 3.5%.
Higher costs are concern for 4QFY26
In the short term, a strong recovery in DELTA’s 3Q earnings should provide a catalyst.
Sentiment toward electronics stocks is also beginning to improve as the US technology
sector enters its earnings season in Oct. The AI theme continues to support demand
for power solutions, while expectations for a Fed rate hike in Oct have declined.
However, we are more cautious on 4QFY26 as DELTA is due to hold its annual
negotiations with suppliers, which could result in higher input costs. The company may
be able to pass only part of these higher costs on to customers.
FY27 target price of Bt330.00 per share
DELTA has recently traded at an average P/E of around 100-110x, pressured by weak
market sentiment and concerns surrounding its convertible bonds. We expect
DELTA’s share price to recover and have raised our applied P/E multiple to 120.0x.
We roll forward our target price to FY27 and raise it to Bt330.00, while upgrading our
recommendation to ‘BUY.’
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