• Maintain BUY, unchanged SGD1.68 Target Price implies 35% upside with 3% yield. 2Q19 results are in line with our expectation.
• DELFI LIMITED (SGX:P34)'s 2Q19’s core PATMI is at USD6.2m (+11% y-o-y), which takes the 1H19 total to comprise 57% of our full-year estimates.

2Q19 Revenue Grew 3% YoY to USD112m

• Indonesia saw slower revenue growth of 1.3% y-o-y due to Delfi’s initiative to phase out unprofitable value-for-money products. Excluding the impact of the cessation of these value-segment products, Indonesia sales would have grown by 15% y-o-y.
• Sales from the regional markets grew at a faster 7.8% y-o-y in 2Q19, led by stronger contributions from Malaysia, improved sales from the Van Houten brand and double-digit growth in key brands such as Goya Mini Tubes, Goya Spread, and Delfi Premium in the Philippines. Agency brands also saw improved sales after the price increased in 3Q18 to mitigate the weaker IDR.

2Q19 Core PATMI Increased 11% Y-o-y, Mainly Due to Margin Expansion

• Despite slower revenue growth, Delfi’s PATMI still grew by double digits, as GPM expanded 1.7ppt in 2Q19. With the pruning of unprofitable value-segment products and its greater focus on the premium segment, we expect margins to continue expanding over 2H19.
• Delfi declared an interim DPS of 1.73 cents from 1.47 cents in 2Q18. See Delfi's dividend history.

Buying Premium Chocolates at a Discount

• Our DCF-derived Target Price of SGD1.68 implies 28x FY19F P/E, in line with its peer, Mayora Indah (MYOR IJ).
• Delfi is trading at 22.6x FY19F – which we believe makes it a value BUY.

Source: RHB Invest Research - 14 Aug 2019