UOB Kay Hian Date of Report: Thursday, 22 May 2025 Delfi (DELFI SP): Promotions and Cocoa Prices Weigh on Profitability, Maintain HOLD Company Overview Delfi is a manufacturer, marketer, and distributor of chocolate confectionery products. Offers a broad range of chocolate and sugar confectionery, including moulded chocolates, dragees, enrobed wafers, and biscuits, with a growing focus on healthy snacks. [[1]] Stock Data GICS Sector: Consumer Staples [[1]] Bloomberg Ticker: DELFI SP [[1]] Shares Issued (m): 611.2 [[1]] Market Cap (S\$m): 437.0 [[1]] Market Cap (US\$m): 338.5 [[1]] 3-mth Avg Daily Turnover (US\$m): 0.2 [[1]] 52-Week High/Low: S\$0.90/S\$0.65 [[1]] Price Performance (%) 1 Month: 1.4 [[1]] 3 Months: (7.1) [[1]] YTD: (8.3) [[1]] Major Shareholders (%) Aerodrome Int’l Ltd: 52.0 [[1]] First Pacific Advisors: 8.0 [[1]] Key Financials FY25 NAV/Share (S\$): 0.45 [[1]] FY25 Net Cash/Share (S\$): 0.04 [[1]] Analyst(s) Heidi Mo: +65 6590 6630, heidimo@uobkayhian.com [[1]] John Cheong: +65 6590 6623, johncheong@uobkayhian.com [[1]] 1Q25 Results: In Line with Expectations Delfi’s 1Q25 revenue of US\$150m (-0.5% yoy) and EBITDA of US\$17m (-27% yoy) were in line with expectations, forming 29% of full-year forecasts amid festive demand. [[1], [2]] Revenue dipped due to currency depreciation, while margins narrowed due to lower operating leverage and higher promotions. [[2]] Despite high cocoa prices, management is confident in navigating near-term pressures, backed by a healthy net cash position of US\$52m and strong cash flow. [[2]] Maintain HOLD rating with a target price of S\$0.82. [[2]] 1Q25 Results Breakdown (US\$m) Year to 31 Dec (US\$m) 1Q25 1Q24 yoy % chg 4Q24 qoq % chg Revenue by Markets: Indonesia 99.3 103.5 (4.0) 74.0 34.2 Regional Markets* 50.5 47.2 7.0 50.2 0.5 Total revenue 149.8 150.7 (0.5) 124.2 20.6 Gross profit 41.9 45.5 (7.8) 31.5 33.0 Gross margin (%) 28.0 30.2 (2.2ppt) 25.4 +2.6ppt EBITDA 17.0 23.3 (27.2) 18.7 (21.4) EBITDA margin (%) 11.3 15.5 (4.2ppt) 15.1 (3.8ppt) *Regional Markets comprise Malaysia, the Philippines and Singapore Detailed Analysis of 1Q25 Results Results in Line: Revenue and EBITDA aligned with expectations, benefiting from festive demand. [[2], [3]] Revenue Dip: Slight revenue decrease due to currency depreciation; constant currency basis saw a 1.5% yoy increase. [[3]] EBITDA Decline: Margins contracted from 15.5% in 1Q24 to 11.3% in 1Q25 due to lower operating leverage. [[3]] Promotional Push: Stronger own brands’ sales in Indonesia and the Philippines driven by increased promotional investments. [[3]] Agency Brands: Some agency brand partners in Indonesia scaled back on promotional spending, leading to flat yoy sales in constant currency terms. Agency brands in Malaysia and the Philippines recorded improved sales. [[3], [4]] Regional Markets Growth: Combined with own brands growth in the Philippines, regional markets posted a 5% yoy increase in constant currency terms. [[3], [4]] Prioritizing Growth: Delfi is prioritizing growth over margins by ramping up promotional investments, especially in premium own brands, to counter competition and gain market share in Indonesia. [[3], [4]] Gross Margin Narrowing: Alongside the forex impact and larger mix of lower-margin agency brands, gross margin narrowed 2.2ppt to 28.0% in 1Q25. [[4]] Key Financials (US\$m) Year to 31 Dec (US\$m) 2023 2024 2025F 2026F 2027F Net turnover 538 503 510 524 537 EBITDA 78 63 60 64 66 Operating profit 67 51 46 50 52 Net profit (rep./act.) 46 34 31 34 35 Net profit (adj.) 46 34 31 34 35 EPS (S\$ cents) 7.6 5.6 5.0 5.5 5.7 PE (x) 7.3 10.0 11.0 10.0 9.7 P/B (x) 1.3 1.3 1.2 1.2 1.1 EV/EBITDA (x) 4.0 4.9 5.2 4.9 4.7 Dividend yield (%) 6.9 5.8 5.3 5.8 6.0 Net margin (%) 8.6 6.8 6.0 6.5 6.5 Net debt/(cash) to equity (%) (10.0) (7.2) (9.8) (12.1) (14.5) Interest cover (x) 64.0 44.5 48.1 51.7 53.3 ROE (%) 18.1 12.8 11.4 11.9 11.7 Consensus net profit – – 30 37 – UOBKH/Consensus (x) – – 1.03 0.91 – Stock Impact Analysis Cocoa Price Surge: Sustained high cocoa prices are expected to weigh on profitability and consumer demand. [[2], [3]] Cocoa futures have surged over 40% yoy, reaching over US\$12,000/tonne in early-25. [[23]] Driven by climate change, crop diseases, and underinvestment in West African farms. [[23]] Strong Balance Sheet: Delfi held a net cash position of US\$51.7m (+7% yoy), supported by robust operating cash flow of US\$37m (+7% yoy). [[23]] Healthy current ratio of 2.01x and low gearing support brand investments and navigating input cost pressures. [[23]] Inventory level is down 7% yoy to US\$90.5m, reflecting tighter inventory management and focus on operational efficiency. [[23]] Earnings Revision/Risk Earnings forecasts are maintained. [[23]] Valuation/Recommendation Maintain HOLD with a target price of S\$0.82, based on a PE-based valuation of 12x 2025 EPS. [[23]] Valuation is pegged to 0.5SD below Delfi’s historical mean PE to reflect earnings near the bottom of the cycle. [[23]] Potential for earnings recovery with normalization of cocoa prices. [[23]] Share Price Catalysts Better-than-expected margins from easing commodity prices. [[23]] Successful premiumisation or diversification of product offerings. [[23]] Peer Comparison Company Ticker Price @ 21-May-25 (lcy) Market Cap (US\$m) PE 2025 (x) PE 2026 (x) P/B 2025 (x) P/B 2026 (x) ROE 2025 (%) Yield 2025 (%) Indo Peers Unilever Indonesia UNVR IJ 1760 4,098 19.5 17.6 26.6 24.9 144.9 4.9 Indofood Cbp Sukses ICBP IJ 10825 7,705 12.7 11.2 2.3 2.0 20.0 2.9 Mayora Indah MYOR IJ 2260 3,084 15.6 13.3 2.7 2.4 17.4 2.5 Garudafood GOOD IJ 372 838 n.a. n.a. n.a. n.a. n.a. n.a. Nippon Indosari ROTI IJ 855 323 13.5 11.9 2.0 1.9 16.5 6.7 Average 15.3 13.5 8.4 7.8 49.7 4.2 Delfi DELFI SP 0.715 339 11.1 10.1 1.2 1.2 11.2 4.9 Profit & Loss (US\$m) Year to 31 Dec (US\$m) 2024 2025F 2026F 2027F Net turnover 502.7 510.2 523.5 537.2 EBITDA 63.1 59.6 64.1 66.0 Deprec. & amort. 12.5 13.7 13.9 14.1 EBIT 50.6 45.9 50.2 51.9 Associate contributions 0.0 0.0 0.0 (0.0) Net interest income/(expense) (0.1) (0.1) (0.1) (0.1) Pre-tax profit (1.4) (1.2) (1.2) (1.2) Tax 49.1 44.6 48.9 50.6 Minorities (15.2) (13.8) (15.1) (15.6) Net profit 0.0 0.0 0.0 0.0 Net profit (adj.) 33.9 30.8 33.8 35.0 Balance Sheet (US\$m) Year to 31 Dec (US\$m) 2024 2025F 2026F 2027F Fixed assets 110.2 111.8 113.3 114.5 Other LT assets 27.1 27.1 27.1 27.1 Cash/ST investment 43.8 51.9 60.2 69.2 Other current assets 247.2 232.2 237.5 242.9 Total assets 428.2 423.0 438.0 453.7 ST debt 24.8 24.8 24.8 24.8 Other current liabilities 124.4 106.3 107.1 108.1 LT debt 0.0 0.0 0.0 0.0 Other LT liabilities 14.5 14.5 14.5 14.5 Shareholders’ equity 264.6 277.5 291.7 306.4 Minority interest 0.0 0.0 0.0 0.0 Total liabilities & equity 428.2 423.0 438.0 453.7 Cash Flow (US\$m) Year to 31 Dec (US\$m) 2024 2025F 2026F 2027F Operating 52.6 42.6 44.4 45.8 Pre-tax profit 49.1 44.6 48.9 50.6 Tax (21.2) (13.8) (15.1) (15.6) Deprec. & amort. 12.5 13.7 13.9 14.1 Associates 0.1 0.0 0.0 0.0 Working capital changes 10.7 (3.1) (4.5) (4.5) Non-cash items (0.1) 0.0 0.0 0.0 Other operating cashflows 1.4 1.2 1.2 1.2 Investing (28.8) (14.3) (14.3) (14.3) Capex (growth) (27.5) (14.3) (14.3) (14.3) Proceeds from sale of assets 0.2 0.0 0.0 0.0 Others (1.5) 0.0 0.0 0.0 Financing (34.9) (19.1) (20.8) (21.5) Dividend payments (26.5) (17.9) (19.6) (20.3) Proceeds from borrowings 0.0 0.0 0.0 0.0 Loan repayment (1.9) 0.0 0.0 0.0 Others/interest paid (6.5) (1.2) (1.2) (1.2) Net cash inflow (outflow) (11.1) 9.2 9.3 10.0 Beginning cash & cash equivalent 55.3 43.8 51.9 60.2 Changes due to forex impact (0.4) (1.0) (1.0) (1.0) Ending cash & cash equivalent 43.8 51.9 60.2 69.2 Key Metrics Year to 31 Dec (%) 2024 2025F 2026F 2027F Profitability EBITDA margin 12.6 11.7 12.2 12.3 Pre-tax margin 9.8 8.7 9.3 9.4 Net margin 6.8 6.0 6.5 6.5 ROA 8.0 7.2 7.8 7.8 ROE 12.8 11.4 11.9 11.7 Growth Turnover (6.6) 1.5 2.6 2.6 EBITDA (18.9) (5.7) 7.6 2.9 Pre-tax profit (24.9) (9.2) 9.7 3.5 Net profit (26.6) (9.3) 9.7 3.5 Net profit (adj.) (26.6) (9.3) 9.7 3.5 EPS (26.6) (9.3) 9.7 3.5 Leverage Debt to total capital 8.6 8.2 7.8 7.5 Debt to equity 9.4 8.9 8.5 8.1 Net debt/(cash) to equity (7.2) (9.8) (12.1) (14.5) Interest cover (x) 44.5 48.1 51.7 53.3
