Delfi - DBS Research 2021-02-26: Redesigned & Rejuvenated

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

Delfi - Redesigned & Rejuvenated

  • Delfi's 3Q20 sales recovery slower-than-anticipated but 4Q20 was close to pre-COVID levels.
  • Redesigned SilverQueen brand and launched two new products to target Gen-Z and Millennials.
  • Van Houten rejuvenation underway.
  • Maintain BUY on Delfi with a slightly lower target price of S$0.96.



Delfi's 4Q20 sales near pre-COVID levels


Delfi's FY20 net profit of US$17.5m was 11% below our estimate of US$19.6m.

  • Delfi’s FY20 earnings fell short mainly due to slower-than-expected recovery in 3Q20. Higher advertising and promotion (A&P) expenses booked in 3Q20 also impacted EBITDA margins.

Delfi's FY20 revenue declined 12.6% y-o-y to US$385.1m; 2H20 revenue declined 12.1% y-o-y to US$188.0m.

  • Delfi started positively in 1Q20, but the severe lockdowns in 2Q20 took a toll on sales. 3Q20 and 4Q20 saw gradual recoveries.
  • FY20 revenue from Indonesia declined 17.6% y-o-y mainly due to the impact from COVID-19, while sales in its Regional Markets remained flattish as Van Houten sales remained robust.

FY20 gross profit margin declined 1.6ppts to 28.6%; 2H20 gross profit margin dropped 2.9ppts to 26.9%.

  • Delfi's gross profit margins were impacted by lower sales volume, product mix, and a higher proportion of Agency Brands, which have lower margins. We believe rolling forward of higher priced cocoa inventory also contributed to the lower gross profit margins.

FY20 net profit fell 38.1% y-o-y to US$17.5m; 2H20 net profit declined 48.2% y-o-y to US$6.7m.

  • The decline was due to lower sales and lower margins. FY20 net profit margins fell 1.9ppts y-o-y to 4.5% due to lower gross profit margins, higher costs associated with COVID-19 related precautionary measures and operating deleverage.

Higher operating cash flows of US$42.4m (vs. US$32.1m in FY19).

  • Despite the lower net profit, Delfi registered higher operating cash flows in FY20 as net working capital declined. This was attributable to its efforts to focus on receivables, as well as an operating deleverage.

Proposing final dividend of US$0.0108 per share (S$0.0143 per share), unchanged from FY19.

  • Despite lower earnings, Delfi is keeping its FY20 full-year dividend unchanged due to higher operating cash flows in FY20 and confidence in future earnings. Delfi’s proposed dividend brings its FY20 full-year dividend to US$0.0235 share (S$0.0319 per share), unchanged from FY19.


Launched new healthier products and redesigned its packaging to target the younger population in Indonesia.

  • Delfi launched two new products, Very Berry Yoghurt and Green Tea Matcha, under its SilverQueen brand. These are healthier products aimed at the increasingly health-conscious Gen-Z and Millennials. In addition, Delfi has redesigned the packaging for its SilverQueen brand, adopting a “fresher” look to target these individuals.


Van Houten – strong sales momentum and possibly a new look.

  • Sales momentum from its Van Houten brand continues to remain strong in Indonesia as well as Regional Markets. Van Houten sales from its Regional Markets grew by 22% in FY20, and we estimate sales expanded by ~15-20% in Indonesia. Management also mentioned the upcoming launch of a “rejuvenated” look for its Van Houten brand.


Our Thoughts, Forecasts and Recommendation


Sales recovery underway; 4Q20 sales was near pre-COVID levels.

  • Delfi’s sales in 4Q20 was 25.0% higher q-o-q and only 3.7% lower y-o-y. The significant improvement in performance from 2Q20 and 3Q20 gives us confidence of Delfi’s recovery prospects in FY21.

Positive on Delfi’s efforts to target the younger population in Indonesia.

  • We are positive on the efforts that management has adopted to target Gen-Z and Millennials in Indonesia. We believe that Indonesia’s (mostly) millennial middle-class will drive spending on premium chocolates. These targeted efforts should enable Delfi to capitalise on Indonesia’s shift in demographic mix and economic growth.

Earnings forecast adjustment

  • Revise Delfi's FY21/22F earnings forecast by -1%/4% to account for higher sales and lower margins due to COVID-19 related costs and higher cocoa prices. We adjust our earnings slightly as we raise our revenue projections on the back of its redesigned SilverQueen brand and pending launch of a rejuvenated Van Houten. We have assumed that the increased revenue will be slightly offset by lower margins due to increased administrative costs for COVID-19 related costs as well as higher cocoa prices.
  • We are projecting record revenue and net profit in FY22 as we expect the impact from its redesigned packaging of SilverQueen and its rejuvenated Van Houten brand to continue driving growth.


Maintain BUY and with a slightly lower target price of S$0.96 (previously S$0.98).






Wei Le CHUNG DBS Group Research | Alfie YEO DBS Research | https://www.dbsvickers.com/ 2021-02-26
SGX Stock Analyst Report BUY MAINTAIN BUY 0.96 DOWN 0.980



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