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Pi Securities PCL, Thailand

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Note: Effective on 1 March 2022, Country Group Securities PCL changed its name to Pi Securities

Equity Bottom-Up

Delta Electronics Thailand  / Equity Bottom-Up

<ul>
<li>We downgrade to SELL from HOLD and lower TP to Bt434 (-9% from previous TP) from Bt475, based on 38.6xPE’23E (average of 5-year trading).Analyst meeting came with a neutral tone. </li>
<li>Analyst meeting details Raw material shortage situation has improved,but some areas (MOSFETs,ICs, high-voltage materials) remain tight.The situation is unlikely to return to pre-Covid levels until at least end of 1H23</li>
<li>Factory 8, the new facility dedicated to support EV product segment growth, will likely be up and running by 2H23. In addition to more sales contribution DELTA’s gross margin</li>
</ul>


We downgrade to SELL from HOLD and lower TP to Bt434 (-9% from previous TP) from Bt475, based on 38.6xPE’23E (average of 5-year trading).Analyst meeting came with a neutral tone. 
Analyst meeting details Raw material shortage situation has improved,but some areas (MOSFETs,ICs, high-voltage materials) remain tight.The situation is unlikely to return to pre-Covid levels until at least end of 1H23
Factory 8, the new facility dedicated to support EV product segment growth, will likely be up and running by 2H23. In addition to more sales contribution DELTA’s gross margin


DELTA : Expensive Valuation and Recession Impact

<ul>
<li>We downgrade to HOLD from BUY and raise TP to Bt475, up 12% from previous TP, based on 38.6xPE’23E (average of 5-year trading). Analyst meeting came with a neutral tone. </li>
<li>2Q22 should be the highest of the year We believe its quarterly earnings already peaked in 2Q22 as the USD/THB will unlikely depreciate further, gains from FX will be limited </li>
<li>However, we believe the company will see significant earnings growth in 22E. 2H22 sales should contribute 53% of full-year 22E sales,due to the robust demand in EVs and data centers. </li>
</ul>


We downgrade to HOLD from BUY and raise TP to Bt475, up 12% from previous TP, based on 38.6xPE’23E (average of 5-year trading). Analyst meeting came with a neutral tone. 
2Q22 should be the highest of the year We believe its quarterly earnings already peaked in 2Q22 as the USD/THB will unlikely depreciate further, gains from FX will be limited 
However, we believe the company will see significant earnings growth in 22E. 2H22 sales should contribute 53% of full-year 22E sales,due to the robust demand in EVs and data centers. 


DELTA :  Growth Potential in 2022 Priced In

<ul>
<li>We maintain our BUY rating but roll-over our TP by 1%to Bt423 based on38.6xPE’23E (5-Year average trading).Our rating reflects neutral outlook on DELTA’s23Eearnings growth due to a high 22E base.</li>
<li>Outstanding 2Q22 earnings should be unsustainable Net profit in 2Q22 was at Bt4.3bn (+53% YoY, +158% QoQ), which was 60% above our forecast, as well as consensus. Copper dropping </li>
<li>Sales in 2Q22 was at Bt28bn (+36% YoY,+14% QoQ),driven QoQ and YoY by continued strong growth in EV power,thermal fan, and data center segments,which should be the trend going forward.</li>
</ul>


We maintain our BUY rating but roll-over our TP by 1%to Bt423 based on38.6xPE’23E (5-Year average trading).Our rating reflects neutral outlook on DELTA’s23Eearnings growth due to a high 22E base.
Outstanding 2Q22 earnings should be unsustainable Net profit in 2Q22 was at Bt4.3bn (+53% YoY, +158% QoQ), which was 60% above our forecast, as well as consensus. Copper dropping 
Sales in 2Q22 was at Bt28bn (+36% YoY,+14% QoQ),driven QoQ and YoY by continued strong growth in EV power,thermal fan, and data center segments,which should be the trend going forward.


DELTA : Outstanding 2Q22 Earnings Leads to High 22E Base and Limited Growth in 23E

<ul>
<li>We maintain our BUY rating and TP of Bt419 based on based on 51.7xPE’22E. Business update meeting last Friday came with positive news on improving shortage situation by 4Q22 </li>
<li>2Q22E earnings to decline QoQ: We believe that 2Q22E net profit will be at Bt2.7bn (+61% YoY, -4% QoQ).</li>
<li>We expect 2Q22E sales to be at Bt24bn (+15%YoY, -4% QoQ). QoQ decline is mainly due to lockdown issues in China and longer holidays during 2Q22.</li>
</ul>


We maintain our BUY rating and TP of Bt419 based on based on 51.7xPE’22E. Business update meeting last Friday came with positive news on improving shortage situation by 4Q22 
2Q22E earnings to decline QoQ: We believe that 2Q22E net profit will be at Bt2.7bn (+61% YoY, -4% QoQ).
We expect 2Q22E sales to be at Bt24bn (+15%YoY, -4% QoQ). QoQ decline is mainly due to lockdown issues in China and longer holidays during 2Q22.


DELTA: Shortage Issue Still Persists Despite Concerns on Weakening Demand in 2022

<ul>
<li>Starting from 1 January 2022, DELTA will be removed from the SET50 index calculation. We believe that a significant portion of investors will sell off, as the number of funds </li>
<li>We believe that there are no major changes in the company’s growth prospects. Therefore,the current valuation at 78xPE’22 is supported from SET-50 inclusion rather than a key change in fundamentals</li>
<li>We expect the company outlook in 2022-23 to benefit from growth in global ICT spending.Their Infrastructure segment will benefit from this as data center demand is driven by strong growth </li>
</ul>


Starting from 1 January 2022, DELTA will be removed from the SET50 index calculation. We believe that a significant portion of investors will sell off, as the number of funds 
We believe that there are no major changes in the company’s growth prospects. Therefore,the current valuation at 78xPE’22 is supported from SET-50 inclusion rather than a key change in fundamentals
We expect the company outlook in 2022-23 to benefit from growth in global ICT spending.Their Infrastructure segment will benefit from this as data center demand is driven by strong growth 


DELTA: Exclusion from SET50 Will Lead to Sell-Off

Thailand

Delta Electronics (Thailand) PCL designs and manufactures electronic equipment. The Company produces power systems for telecommunications, medical equipment, and industrial automation.  Delta also produces fans, electromagnetic interference filters, and solenoids.

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Delta Electronics Thailand (DELTA TB)

DELTA : Expensive Valuation and Recession Impact

We downgrade to SELL from HOLD and lower TP to Bt434 (-9% from previous TP) from Bt475, based on 38.6xPE’23E (average of 5-year trading). Analyst...

Pi Securities PCL, Thailand

DELTA : Growth Potential in 2022 Priced In

We downgrade to HOLD from BUY and raise TP to Bt475, up 12% from previous TP, based on 38.6xPE’23E (average of 5-year trading). Analyst meeting...

Pi Securities PCL, Thailand

DELTA : Outstanding 2Q22 Earnings Leads to High 22E Base and Limited Growth in 23E

We maintain our BUY rating but roll-over our TP by 1% to Bt423 based on 38.6xPE’23E (5-Year average trading). Our rating reflects neutral outlook...

Pi Securities PCL, Thailand

DELTA: Shortage Issue Still Persists Despite Concerns on Weakening Demand in 2022

We maintain our BUY rating and TP of Bt419 based on based on 51.7xPE’22E. Business update meeting last Friday came with positive news on improving...

Pi Securities PCL, Thailand

DELTA: Exclusion from SET50 Will Lead to Sell-Off

Starting from 1 January 2022, DELTA will be removed from the SET50 index calculation. We believe that a significant portion of investors will sell...

Pi Securities PCL, Thailand

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