Asia Pacific And China Trends Will Drive Coffee Demand

Key Takeaways

• Strong brand, innovation, and premiumization are driving resilient growth and expanding margins in both professional and consumer coffee appliance segments.
  
• Geographic diversification into high-growth markets like Asia and the U.S. reduces risk and supports stable, long-term earnings.
  
• Cost inflation, competitive pressures, unfavorable currency trends, and heavy segment reliance threaten margins, revenue stability, and earnings diversification for De'Longhi.

Catalysts

Produces and distributes coffee machines, food preparation and cooking machines, air conditioning and heating, domestic cleaning and ironing, and home care products.

• De'Longhi's strong growth in Asia Pacific and China is fueled by a booming coffee culture, urbanization, and an expanding middle class with rising discretionary income, supporting long-term volume and revenue growth as these trends are expected to persist.
  
• Sustained premiumization across both the professional and household coffee segments, along with consistent investment in new high-end products and marketing (e.g., the Brad Pitt campaign), is enhancing brand equity, average selling prices, and gross margins, favorably impacting earnings and profitability.
  
• The shift in consumer behavior toward in-home experiences, convenience, and wellness, as seen post-pandemic, continues to drive demand for kitchen appliances and coffee machines, providing resilient topline growth even in uncertain macroeconomic conditions.
  
• De'Longhi's geographic diversification-particularly its increasing share in high-growth markets outside Europe (like the U.S. and China)-broadens its revenue streams and mitigates risk from slowdowns in mature markets, supporting more stable and sustained earnings growth.
  
• Ongoing operational focus on innovation, category expansion, and margin accretive professional segment growth (with Professional EBITDA margins above 25%) strengthens net profitability and positions De'Longhi to benefit disproportionately from long-term global trends in premium appliances.

De'Longhi Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming De'Longhi's revenue will grow by 5.0% annually over the next 3 years.
• Analysts assume that profit margins will increase from 8.8% today to 9.3% in 3 years time.
• Analysts expect earnings to reach €392.4 million (and earnings per share of €2.52) by about August 2028, up from €321.1 million today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as €340.0 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 20.2x on those 2028 earnings, up from 13.7x today. This future PE is greater than the current PE for the GB Consumer Durables industry at 13.8x.
• Analysts expect the number of shares outstanding to grow by 0.49% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 11.52%, as per the Simply Wall St company report.

De'Longhi Future Earnings Per Share Growth

Risks

• Persistent and rising tariff headwinds, particularly in the U.S., China, Indonesia, and Thailand, are leading to significant cost inflation that De'Longhi is only partially able to offset with price increases; this poses an ongoing risk to gross margins and EBITDA, especially given management's admission that price hikes in other regions are not feasible.
  
• The company faces mounting promotional pressure and a more competitive environment in key categories, particularly in the U.S. market, which may force De'Longhi into deeper discounting to maintain volumes, thereby compressing future net margins and potentially revenue growth.
  
• Currency fluctuations and FX headwinds have already caused volatility in reported top-line results; while De'Longhi claims a natural hedge at EBITDA, persistent currency weakness in key markets could still drag on reported revenue and obscure underlying earnings power.
  
• Despite strong recent performance in China, there is an increased risk of competitive entry from both domestic and international brands, and the current high growth is partly dependent on favorable consumer trends and fiscal incentives that could prove less durable, leading to future revenue and margin pressure if the market slows or competition intensifies.
  
• Heavy reliance on the performance of specific segments-namely coffee and Professional-along with slower or flat growth in other categories (e.g., Nutrition), makes De'Longhi vulnerable if consumer tastes shift away from these areas or if innovation lags, risking stagnation in revenue and reduced diversification of earnings streams.

Valuation

• The analysts have a consensus price target of €37.378 for De'Longhi based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €47.7, and the most bearish reporting a price target of just €30.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be €4.2 billion, earnings will come to €392.4 million, and it would be trading on a PE ratio of 20.2x, assuming you use a discount rate of 11.5%.
  
• Given the current share price of €29.14, the analyst price target of €37.38 is 22.0% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.