Citing growth momentum, CGS-CIMB raises target price on Delfi to $1.65 from $1.50

Indonesia's per capita consumption of chocolate remains lower than other markets

Citing strong growth momentum, CGS CIMB has raised its target price of Delfi following the Indonesia-based chocolate maker’s record 1QFY2023 numbers.

For the three months to March, Delfi reported that revenue and ebitda was up 20.8% and 24.5% y-o-y respectively, driven by strong premium portfolio sales in Indonesia and strong growth in regional markets.

While gross margin dipped q-o-q, it was an improvement y-o-y, as the company’s strategy of selling a bigger mix of premium products gain more traction.

In its May 17 note, analysts Tay Wee Kuang and Izabella Tan, who have an "add" call on the stock, raised their FY2023 earnings forecast for Delfi by 10.7%, and by 10.3% and 9.9% respectively for the following FY2024 and FY2025.

As such, they now rate Delfi worth $1.65, up from $1.50, with the new target price pegged to 15x forward FY2024 earnings.

In addition, they are flagging the possibility of Delfi giving out more special dividends given the strong cash generation and guided capex.

“Our estimated 50% payout ratio implies a modest dividend yield of c.4%, based on our FY2023 estimates,” state Tay and Tan.

Elsewhere, DBS Group Research has kept its “buy” call and $1.52 target price on Delfi.

DBSD05, in its May 17 note, expects y-o-y earnings growth to taper off by 10-15% in subsequent quarters, following the big boost seen in 1QFY2023 because of higher festive demand.

“Nonetheless, we remain cautiously optimistic that the company will be able to deliver yet another delicious set of results for the remainder of the year,” says DBS.

DBS notes that Delfi’s share price has made significant gains already but still trades at a “very attractive” valuation of 5x EV/EBITDA of the current FY2023.

Moreover, it has a strong balance sheet with US$73 million in net cash.

Similarly, UOB Kay Hian’s John Cheong and Heidi Mo continue to like the stock, as they maintain their “buy” call and $1.71 target price.

The 1QYF2023 numbers were within their expectations and they believes Delfi can sustain its revenue growth in Indonesia.

In addition, they see further growth given how per capita consumption of chocolate in Indonesia is around 0.3 kg per person, versus Malaysia’s 0.5kg and more than 5kg for US and most European countries.

Their $1.71 target price is pegged to 17x FY2023 earnings, in line with its long term mean.


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