According to a report by KGI Securities, Delta Electronics (Thailand) Public Company Limited (SET: DELTA) is set to deliver a solid sales performance in the second quarter of 2025, yet profit margins may come under pressure.
KGI anticipates DELTA will report a core profit of 5.2 billion baht for 2Q25, representing a 12% year-on-year decline but a 5% increase from the previous quarter, driven by resilient revenue streams. This would bring DELTA’s core profit for the first half of the year to 10.2 billion baht, up 5% from the comparable period in 2024 and accounting for roughly 56% of KGI’s full-year projection.
Sales for 2Q25 are expected to reach 45 billion baht, up 8% year-on-year and 5% quarter-on-quarter. Excluding impacts from currency movements, sales are projected at $1.33 billion—an 18% jump year-on-year and a 7% increase quarter-on-quarter—bolstered by robust demand from data centers and the acceleration of some customer orders. First-half 2025 sales, at $2.57 billion, would be 18% higher year-on-year and account for 51% of the analyst’s full-year forecast.
Despite the advantage of a beneficial product mix skewed towards higher-margin items, DELTA’s profitability is likely to be impacted by a stronger baht—averaging 33.1 per dollar QTD versus 36.3 in the same period last year and 33.6 in the previous quarter—as well as adjustments in raw material costs and higher inventory provisions due to softness in the automotive sector.
As a result, KGI expects DELTA’s gross margin to narrow to 25.4% in the second quarter, down 1.5 percentage points year-on-year and 0.2 points from the prior quarter, while the first-half margin should be 25.5%, compared with a company target of 25.0%.
The selling, general and administrative (SG&A) expenses as a proportion of sales are projected to remain steady at 12.3%, compared to 12.9% seen in 2Q24. However, legal and compensation expenses related to a patent dispute with Vicor Corporation—resolved through a settlement shared between DELTA Thailand and its Taiwanese affiliate—will likely exert downward pressure on 2Q earnings.
While these costs will weigh on DELTA’s near-term profit, KGI notes the conclusion of the dispute eliminates a persistent overhang on the company’s outlook.
Following these developments, KGI Securities reiterated an ‘Underperform’ rating on DELTA, setting a target price of 67.00 baht for year-end 2025.
