20161026-辉立证券-Delta_Electronics_Thailand_3QFY16_profit_slightly_above_forecast_13页_1mb

Delta Electronics (Thailand) Summary

Core Content

Delta Electronics (Thailand) is a Thailand-based manufacturer and exporter of electronic components, primarily power supplies and DC-DC converters. The company has a presence in various segments, including automotive and solar, and has been expanding its operations through strategic acquisitions and subsidiaries in different regions.

Key Financial Performance

• 3QFY16 Results:

  • Net profit reached Bt1,405 million, slightly above forecast.
  • A 19% year-over-year (y-y) decline due to global economic slowdown and the adoption of cloud storage solutions.
  • 6% quarter-over-quarter (q-q) increase, attributed to the high season for electronic exports.
  • Gross margin at 26.51%, slightly lower than 3QFY15 but higher than 2QFY16.
  • SG&A expenses to sales ratio decreased to 15%, driven by lower R&D expenses than forecast.

• 9MFY16 Performance:

  • Net profit fell 20% y-y to Bt3,983 million.
  • Sales declined 1% y-y to Bt34,087 million.
  • SG&A expenses increased 16% y-y due to higher R&D costs for new product development.
  • Gross margin at 26.71%, slightly lower than 9M15.
  • Operating profit margin at 10.82%, down 19% from 9M15.

Financial Outlook

• FY16 Net Profit: Unchanged at Bt5,355 million, a 20% y-y decline.
• FY17 Forecast:
  • Sales (USD) expected to drop 5% from FY15 to US$1,301 million.
  • Sales (Bt) projected to decline 2% y-y to Bt45,900 million.
  • Full-year margins likely to be slightly softer than FY15.
  • SG&A expenses to sales ratio expected to rise 2% y-y due to increased R&D expenses.

Rating and Target Price

• Rating: Downgraded to 'NEUTRAL' from 'Accumulate'.
• Target Price: Bt79/share, with a 3.86% increase from the current closing price of Bt79.00.
• Valuation:
  • P/E ratio for FY17 at 16x.
  • P/B ratio for FY17 at 2.8x.
  • Dividend Yield at 3.9%.

Key Financial Ratios

• ROE: 17.13% for FY16, down from 23.26% in FY15.
• ROA: 12.34% for FY16, down from 16.41% in FY15.
• Debt/Equity: 0.35x for FY16, down from 0.43x in FY15.
• Net Debt/Cash: -20,416 million Bt for FY16, indicating strong cash position.

Business Development

• Key Developments:
  • In 2015: Acquired additional land in Bangalore and Tamil Nadu for expansion; established a subsidiary in Myanmar.
  • In 2013: Launched wind turbine converters.
  • In 2010: Launched automotive power chargers for hybrid vehicles and solar business.

Risk Factors

• Political unrest
• FX volatility
• Supply chain issues

Peer Comparison

• Delta Electronics Thailand PCL:

  • Market Cap: Bt98,543 million
  • P/E: 17.3
  • P/BV: 3.2
  • Dividend Yield: 3.9%

• Hana Microelectronics PCL:

  • Market Cap: Bt26,360 million
  • P/E: 12.8
  • P/BV: 1.4
  • Dividend Yield: 6.1%

• KCE Electronics PCL:

  • Market Cap: Bt67,109 million
  • P/E: 23.5
  • P/BV: 8.2
  • Dividend Yield: 1.7%

• SVI PCL:

  • Market Cap: Bt10,966 million
  • P/E: 9.1
  • P/BV: 1.9
  • Dividend Yield: 1.7%

Corporate Governance

• Survey Results: Conducted by the Thai Institute of Directors Association (IOD), the results are based on third-party information and are not an internal evaluation.
• Anti-Corruption Indicators:
  • Level 5 (Extended): Includes companies like BCP, CPN, GYT, etc.
  • Level 4 (Certified): Includes DCC, DTC, DRT, etc.
  • Level 3 (Established): Includes companies like ABC, ACAP, etc.
  • Level 3A: Declaration to join CAC, etc.
  • Level 3B: Organizations with statements but no CAC declaration.

Summary of Key Financial Metrics

• Sales: Expected to decline 2.21% in FY16, up 15.07% in FY17.
• EBITDA: Expected to decline 14.98% in FY16, up 13.64% in FY17.
• EBIT: Expected to decline 17.21% in FY16, up 15.36% in FY17.
• Net Income (adj.): Expected to decline 17.17% in FY16, up 15.56% in FY17.

Conclusion

Delta Electronics (Thailand) experienced a slight earnings beat in 3QFY16, driven by lower-than-forecast R&D expenses and a 6% q-q sales increase. However, year-over-year performance was weak due to the global economic slowdown and the negative impact of cloud storage solutions. The company's net profit outlook for FY16 remains unchanged, with a 20% y-y decline. The rating has been cut to 'NEUTRAL', and the target price remains at Bt79/share. Key financial ratios indicate a stable but declining performance, with a focus on R&D and strategic expansion. The company faces risks such as political instability, FX fluctuations, and supply chain issues, but continues to invest in growth opportunities.