The company, having reported record-high revenue of US$160.8 million for its 1QFY2023, up 20.8% y-o-y, is seen to maintain its growth momentum for the full year.
The growth was driven by strong double-digit sales growth from its two key business lines, products sold under Delfi's own brands, and those it makes for others, which were up 17.6% and 26.7% yoy respectively.
Cheong and Mo expect growth in Indonesia, Delfi's key market, to continue strongly, given how the country's GDP is seen to increase by 5% this year.
The analysts note that price of cocoa - Delfi's key ingredient - has recently surged because of limited supply. Yet, they are confident that forward contracts entered by the company, plus its strong pricing power, should help alleviate such concerns.
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Despite the higher costs, Delfi's gross margins increased 5ppt y-o-y in 2016 and remained stable above 28% since.
The analysts attribute this to Delfi's implementation of successful strategies, such as product resizing.
"Additionally, Delfi actively manages cost with forward hedges of up to 18 months, helping the group secure its raw material requirements while locking in purchase prices," they add.
Cheong and Mo note that Delfi has maintained a consistent dividend payout ratio of 50% for years and is expected to give a yield of 5% this year.
"Given its strong net cash position of US$73.1m, we expect payout ratio to be maintained at least 50% in 2023-25," the analysts state.
Delfi is now trading at 12x 2023F PE, a 40% discount to Indonesia-based peers’ 2023 estimated PE average of 21x.
Their target price of $1.71 is based on 17x estimated FY2023 earnings, which is its long-term mean.
As at 3.21pm, Delfi changed hands at $1.30, up 0.78% for the day, and up 66.67% year to date.
