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After a brutal period of skyrocketing raw material costs, chocolate manufacturer Delfi is finally seeing light at the end of the tunnel. |
Sweet Relief from Plummeting Cocoa Prices
The primary driver behind the renewed optimism is a massive correction in the global cocoa market.
UOB Kay Hian titles its update "Starting To Look Sweet On Cocoa Price Relief," highlighting that cocoa prices have cratered by over 60% from their 2024–2025 peaks.
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This reversal is setting up a "strong margin recovery cycle," say analyts Heidi Mo and John Cheong.
RHB analyst Alfie Yeo echoes this sentiment.
In its report more conservatively titled "Benefitting From Lower Cocoa Prices," he notes that cocoa is down roughly 75% from its 2025 peak.
Because Delfi's gross profit margin has a strong historical correlation with cocoa prices, RHB expects profitability to "improve further on more attractive FY27F input costs".
Gradual Margin Expansion
While the spot price of cocoa has dropped, investors shouldn't expect an overnight explosion in Delfi's profits.
The analysts point out that Delfi’s forward-purchasing strategies will delay the windfall.
 "Rupiah weakness remains a key offsetting factor as raw material costs are largely USD-denominated. Recall that a 3.9% rupiah depreciation in 2024 contributed to a 1.1ppt decline in gross margin. YTD, rupiah depreciation is 2.3%."-- Heidi Mo (photo) & John Cheong |
UOB Kay Hian cautions that the earnings recovery will be "gradual rather than immediate" because Delfi secures its inventory up to 18 months in advance, and a depreciating Indonesian rupiah provides a near-term headwind.
RHB agrees with this lagged timeline, noting that FY26 input costs are already largely locked in due to the company's typical 6 to 12-month hedging.
Therefore, the current cost tailwinds will impact earnings "more markedly in FY27F".
As a silver lining, UOB Kay Hian points out that Delfi’s "shorter cycle enables faster cost pass-through" compared to larger multinational peers, positioning them to bounce back efficiently.
 "We believe that the current cocoa price environment should benefit Delfi more markedly in FY27F, since we envisage that some of its input prices for FY26F would have already been locked in due to hedging of typically 6-12 months out."-- Alfie Yeo, analyst, RHB |
Brand Strength vs. M&A Potential
When evaluating Delfi's strategic moat, the analysts take slightly different angles.
UOB Kay Hian focuses on operational resilience, noting that "own brands strength underpins earnings quality," contributing over 60% of revenue.
Delfi's dominant 50% market share in Indonesia and localized manufacturing are viewed as key assets in navigating volatility.
RHB, on the other hand, views the company's extensive distribution network and dominant market share as making Delfi a highly attractive "long-term takeover target".
Despite sharing the same underlying thesis, the two brokerages diverge on their forecasts and valuation metrics. Conversely, RHB raised its target price more modestly to S$1.33, utilising a 15x blended FY26-27F P/E multiple and notably applied a 2% ESG discount to the intrinsic valuation because Delfi's ESG score sits just below the country median. Here is a tabulated comparison of their forecast financials and valuation metrics:
*Note: UOB uses Adjusted Net Profit, while RHB uses Recurring Net Profit. Ultimately, both brokerages paint a bright picture for Delfi. |
→ See UOB Kayhian report here
