DELTA shares surges sharply as the market sees increase in cloud product demands

Shares of DELTA Electronics Plc (DELTA) rose by 11.45 per cent to 199.50 baht per share after Thursday’s morning session ended, an increase of 20.50 baht, making it the most active trading stock with a transaction value of 1,104.2 million baht.

This electronic stock has been rising non-stop since the company reported better-than-expected quarterly results in the second quarter, where most businesses were undergoing the downturns.

Earlier, Enquistock has noted that supply for DELTA data products will increase, and margin will fall as demand for cloud data products may slow down and may be replaced by demands from the auto industry (EV cars).

DELTA anticipates strong sales growth in the rest of 2020 from various new projects in the pipeline. However, its India operation remains problematic due to worsening coronavirus pandemic, which may result in a slump in the company’s earnings.

Analysts at TISCO Securities revised the company’s earnings forecast up by 15 – 17 per cent, reflecting the growing profit margin driven by cloud and PC products demand and improving EV cars manufacturing.

DELTA’s profit margin was raised 80 -110 bps to 24.4 – 24.9 per cent in 2020 and 2021, respectively. TISCO expected the company to report 6.3 billion revenue (up 115 per cent year-on-year) in 2020.

However, Bualuang Securities recommends maintaining positions or taking profits in cloud names, which have significantly outperformed.

“Those now trade at frothy valuations and are exposed to sales growth deceleration risk in 2H20, DELTA’s stock price is likely to be range-bound during 2H20,” said a Bualuang analyst.

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