Delfi - DBS Research 2022-08-12: Bouncing Back Strongly, 1H22 Performance Surpassing Pre-COVID

Delfi - Bouncing Back Strongly, 1H22 Performance Surpassing Pre-COVID

  • Delfi (SGX:P34) reported a strong set of 1H22 results, surpassing its pre-COVID performance in 2019. Net profit surged by 57.6% y-o-y to US$19.4m on the back of a 17% revenue growth to US$246.3m. The growth in revenue was driven by both its Indonesia and regional markets, on the back of easing COVID-19 restrictions and improving consumer sentiment.
  • Despite worries of rising raw material costs, Delfi’s gross margin improved by 40bps to 29.4%, driven by the sales of its premium products along with “price actions” taken, which, we believe, meant product right-sizing. We also noted that inventories written off fell by US$1.8m from the same period last year, which, we estimate, helped to improve margins by an estimated 70bps.
  • Delfi’s Indonesia operations performed well, achieving revenue of US$167.2m (+16.1% y-o-y), accounting for 68% of total revenue, similar to 1H21. Growth was seen in its own brands across its product categories, especially in its premium brands such as SilverQueen and Cha Cha. Its agency business grew by a smaller 7.2%, helped by its snack and consumer categories. Indonesia EBITDA grew by 30.4% y-o-y to US$32.2m, with margins improving to 19.2% in 1H22, from 17.1% a year ago.
  • Albeit smaller, Delfi's regional markets’ performance was also stellar, registering revenue growth of 18.9% to US$79.1m, while EBITDA was at US$2.4m (+31.5%). This was driven by its operations in Malaysia, with strong performance in its consumer and healthcare categories. Over in the Philippines, operations benefitted from the easing of restrictions as well as Delfi’s earlier investments in the market.
  • Along with its positive operating performance as well as its control of costs, cash flow, and capital spending, Delfi’s cash increased further to US$94.6m, up from US$86.2m as of 31 Dec 2021. This implies that Delfi’s net cash as of 30 Jun 2022 accounts for about 25% of its current market capitalisation. We believe there lies an opportunity for the board/management to deploy the cash and/or to return it to shareholders to enhance value for the counter.
  • An interim dividend of 2.18 cents was declared, making it the highest interim dividend since Delfi’s divestment of its cocoa business in 2014. See Delfi's dividend history. The dividend equates to a payout ratio of 50%.

Delfi - Valuations and forecasts

  • On the back of its better-than-expected top-line growth and the improvement in Indonesia’s Consumer Confidence Index, we revisited our assumptions and raised our FY22F/23F forecasts for Delfi by 23%/16%. We expect margins to remain relatively stable going into 2H22, given Delfi’s cost hedging strategies; sales mix, which is likely to be similar to 1H22; and a lower level of inventory write-offs compared to the same period last year.
  • Maintain BUY recommendation on Delfi with target price S$1.31. The strong 1H22 results highlight Delfi’s recovery, along with the easing of COVID restrictions. While inflationary pressures and uncertainties remain, we believe Delfi should be able to navigate these, given its brand and distribution strength, along with its strong balance sheet.
  • Delfi's share price is trading at 10.4x FY22F P/E based on our revised earnings estimates, and along with its healthy net cash accounting for 25% of its market cap, it seems like a steal for a branded consumer company.
  • The strong operational performance can be a catalyst for Delfi's share price to re-rate. We believe a further re-rating could arise if and when the board/management decides to leverage on its strong balance sheet to enhance further value for shareholders either through inorganic growth opportunities, higher dividend payout/capital reduction, and/or a share buyback programme.

Above is the excerpt from report by DBS Group Research.
Clients of DBS may access the full report in PDF @

Singapore Research Team DBS Group Research | 2022-08-12
SGX Stock Analyst Report BUY MAINTAIN BUY 1.31 UP 1.10

Previous report by DBS Research:
2021-02-26 Delfi - Redesigned & Rejuvenated

Check out the most recent target prices at Delfi Target Prices. Listing of analyst research reports at Delfi Analyst Report.

Relevant links:
Delfi Share Price History,
Delfi Announcements,
Delfi Dividends & Corp Actions,
Delfi News Articles


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