However, in the nearer term, given higher energy costs and weaker rupiah, the company’s earnings is likely to soften. As such, Yeo has cut his target price from $1.33 to $1.21.
In his June 15 note, Yeo says Delfi will see lower margins, no thanks to higher energy prices, even though cocoa prices remain favourable.
"The Middle East conflict has led to higher oil prices, which in turn could impact Delfi's operating costs," he reasons, noting that oil prices surged from a low of US$56 per barrel in early 2026 to US$70-113 in March, representing an increase of more than 25%.
"We believe persistently high energy costs will impact Delfi's margins in two ways – higher opex and lower gross margins.
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"Lower gross margins should come from higher upstream cocoa processing costs including energy and freight, while its downstream manufacturing processes should also be impacted by higher fuel costs – both of which should translate to higher input costs, opex, and lower margins," says Yeo.
In addition, Delfi is likely to see some impact from a weakening rupiah, which has dropped to a record low versus the US dollar.
Based on Delfi's rupiah vs USD sensitivity, a 5% depreciation of the rupiah against the US dollar would result in marginal 0.3% impact on the company's earnings.
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As such, Yeo has cut his estimates for the current FY2026 earnings by 10%, and for the coming FY2027 and FY2028 by 8%.
By applying the same blended 15x FY2026 and FY2027 earnings, this has led to Yeo lowering his target price by 9%.
For Yeo, key risks to his earnings estimates are lower-than-expected consumption of chocolate-based products in Indonesia, an increase in raw material prices such as cocoa beans, sugar, and the negative effect of changes in the USD vs the rupiah.
Delfi shares, as at 9.41 am, is down 1.07% to 93 cents. It is up 15.63% year to date.
