Kiatnakin Phatra Securities (KKPS) maintains an UNDERPERFORM rating on Delta Electronics (Thailand) (SET: DELTA) with a target price of THB 50.00. The firm highlights weak 2Q25 results, noting that pre-extraordinary profit missed KKPS’ and consensus forecasts by 18% and 8%, respectively. This miss was primarily attributed to lower-than-expected sales growth of 6% YoY (compared to their 15% forecast) and higher-than-expected SG&A to sales at 13.5% (versus their 12.3% forecast). KKP believes litigation-related expenses were booked under SG&A.
Two significant negative surprises were identified: reciprocal tariff expenses of US$10 million paid in advance by DELTA on behalf of US customers (with expectation of reimbursement) and a doubtful receivables provision of US$2.6 million due to a US auto customer’s bankruptcy. While the latter is seen as a one-off, KKPS believes reciprocal tariffs are likely to be recurring, posing a risk if Thailand cannot secure a trade deal with the US, potentially leading to tariffs as high as 36%.
Key drivers for 2Q25 included a 7% YoY increase in total revenue, driven by Power Electronics (+9%), Infra (+33%), and Automation (+19%), though Mobility revenue declined by 15%. Gross margin contracted to 25.0% (from 26.9% in 2Q24) due to a weaker USD/THB rate and a 2Q24 inventory provision reversal. SG&A to sales rose to 13.5%, mainly due to a 42% YoY increase in R&D expenses. The effective tax rate also increased to 14.2% due to the GMT impact.
Citi maintains a SELL rating on DELTA, raising its target price to THB 90 (from THB 72). The firm noted that DELTA’s 2Q25 earnings of THB 4.6 billion missed consensus by 15%, mainly due to three extra costs: export duty, doubtful accounts receivable provision, and dispute settlement expenses. Citi expects the export duty expense to remain and likely increase in 2H25E, potentially leading to a slowdown in earnings momentum.
Citi reiterates its SELL rating, viewing DELTA’s valuation as “too rich” (trading at 76x 2026E EPS) compared to an “unexcited” earnings CAGR of 9% p.a. for 2025E–27E. Despite potentially strong top-line growth in 2H, driven by AI servers, Citi believes this will be neutralised by rising expenses.
DBS Vickers maintains a FULLY VALUED rating on DELTA, with a target price revised to THB 88, based on 54x 2025F PE. The firm reported that DELTA’s 2Q25 net profit fell 30% YoY due to lower gross margin, a strong THB, higher expenses, and OECD tax impacts.
Despite the profit decline, DBS Vickers noted that the top line surged 18% YoY in USD terms, driven by strong demand in Power Electronics and ICT Infrastructure. Consequently, DBS Vickers has raised its earnings forecast by 8–13% for 2025–2026 to reflect revised revenue guidance in the high teens.
