Delfi - RHB Invest 2019-05-16: Premium Chocs At Great Value; Strong BUY

DELFI LIMITED (SGX:P34) | SGinvestors.io DELFI LIMITED (SGX:P34)

Delfi - Premium Chocs At Great Value; Strong BUY

  • Reiterate BUY on our consumer sector Top Pick. Our DCF-derived Target Price of SGD1.68 implies 24% upside with 2.5% dividend yield.
  • DELFI LIMITED (SGX:P34) delivered a strong core PATMI of SGD9.4m for 1Q19, up 22% y-o-y. This met 34% of our full-year estimate, in line with our expectation.



Earnings drivers.

  • DELFI LIMITED (SGX:P34) continued to see robust revenue growth of 19.5% y-o-y on the back of rising demand in Indonesia and regional markets. This was largely driven by successful marketing campaigns during Valentines’ day, launches of new products and shipment of products to trade agents in anticipation of the Lebaran festivities in early June.


Expect gross margin to remain at c.35% this year.

  • Delfi's initiatives to cull less-profitable stock keeping units (SKUs) and focus on the premium range have led to improved gross margins. In 1Q19, agency brand products have also raised prices. This, together with higher sales of premium products, brought its gross margin to 35.8% (+1.3ppt y-o-y), one of the highest in the past seven years.
  • Given that the IDR has been fairly stable YTD, we believe Delfi’s gross margin should be able to stay at around 35% this year.


Operating leverage to kick in this year.

  • We do not expect any significant jump in administrative costs, since the SAP system was fully implemented last year.
  • Management also guided that 1Q19 administrative expenses should be the normalised rate.


Premium chocolates at value price.






Juliana Cai CFA RHB Securities Research | https://www.rhbinvest.com.sg/ 2019-05-16
SGX Stock Analyst Report BUY MAINTAIN BUY 1.680 SAME 1.680



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