Analysts are preparing to lower their net profit forecast for Delta Electronics (Thailand) for 2026 and 2027 after the largest company on the Stock Exchange of Thailand (SET) reported lower quarterly earnings than expected as rising costs and a raw material shortage ate into its profit margin.
Delta's second-quarter profit of 6.1 billion baht, down 33% from three months earlier, was 33% below market consensus, even though quarterly revenue reached a record 65 billion baht, said Suwat Sinsadok, managing director of Globlex Securities.
The decline was attributed to the raw material shortage, soaring raw material costs and higher tax and inventory provisions, said Mr Suwat.
Gross and net profit margins plunged despite higher revenue from royalty-based artificial intelligence (AI)-related products, as the benefits were offset by the raw material shortage, rising costs and the 1-billion-baht tax provision under the global minimum tax regulation.
Delta maintained its 30% revenue growth forecast for 2026 as the order delivery shortfall in the second quarter will be carried forward and delivered in the second half of the year, he noted.
Piyathida Sonthisombat, an analyst at Asia Plus Securities (ASPS), said she expects Delta's third-quarter profit to improve seasonally based on existing customer orders. Raw material shortages are likely to ease as the company sources from other suppliers to lift production and sales.
Earnings for the first half totalled 15 billion baht, up 50% year-on-year, amounting to 40% of ASPS's full-year forecast.
"We are likely to downgrade our 2026 and 2027 net profit estimates for Delta, currently at 38 billion baht for 2026, representing annual growth of 55%, and 52 billion for 2027, a gain of 36%," she said.
The brokerage still recommends a "buy" for Delta stock, believing the second-quarter profit will be the year's low, with an improvement in the latter half of 2026 as raw material shortages ease.
Phatipak Navawatana, an analyst with Krungsri Securities (KSS), cited the chip shortage as the main driver of Delta's higher costs in the second quarter.
"We see some downside risk to our forecast, especially if the chip shortage and higher raw material costs cannot be resolved in the third quarter," he said.
KSS's sensitivity analysis suggested Delta needs to achieve revenue growth of 70% from AI-related products this year and next to meet its earnings growth target of 50% for 2026 and 2027.
Chananthorn Pichayapanupat, an analyst with KGI Securities (Thailand), said while product demand remains strong, supply chain management continues to be challenging.
Delta's growth drivers remain on track, propelled by capacity expansions from two new plants now operating at full capacity at Wellgrow Industrial Estate and two more new plants at Bangpoo Industrial Estate.
"We continue to believe Delta will benefit from the global AI-driven investment cycle," she said, adding global server shipment growth is projected at 24% this year.
However, ongoing raw material shortages could continue to delay shipments and pressure profitability, Ms Chananthorn noted.
