EV, Renewables And Data Centers Will Drive Long-Term Secular Trends

Key Takeaways

• AI-driven demand and next-gen power solutions position Delta Electronics for accelerated growth, innovation leadership, and durable margin expansion compared to industry peers.
  
• Electrification, global manufacturing agility, and new full-stack automation offerings provide resilient profitability, recurring revenues, and additional long-term upside.
  
• Cost pressures, high capital demands, and dependence on a few key sectors create risks for Delta's margins, cash flow, and revenue stability amid intensifying competition.

Catalysts

Provides power and thermal management solutions in Mainland China, the United States, Taiwan, Thailand, and internationally.

• While analyst consensus expects robust growth from AI server demand, Delta Electronics' close integration with hyperscalers and cutting-edge power and cooling solutions positions it to capture an outsized share of the forthcoming AI infrastructure boom, potentially driving above-consensus revenue acceleration as new platforms roll out and AI adoption expands enterprise-wide.
  
• Analysts broadly agree that margin expansion will be supported by robotics and AI-related investments, but the underappreciated scale, high gross margin, and rapid R&D-driven product upgrades in Delta's data center and industrial automation portfolio can deliver sustained step-changes in net margins as the company outpaces peers on innovation and operational leverage.
  
• The accelerating electrification of transportation and logistics globally will drive structurally higher demand for Delta's EV charging solutions and power components, positioning the company as a top beneficiary of surging infrastructure buildouts and offering a powerful long-term uplift to top-line growth and earnings.
  
• Delta's proactive and ongoing investment in distributed, geographically diverse manufacturing and assembly capacity enables agile adaptation to tariffs and supply chain disruptions, ensuring resilient profitability and more predictable net margins relative to competitors that remain regionally concentrated.
  
• With the establishment of the Delta Robotic Research Center and forays into containerized AI data centers, the company is rapidly evolving into a full-stack automation and edge infrastructure provider, paving the way for new, high-margin recurring revenue streams and further upside to both revenue growth and earnings quality over time.

Delta Electronics Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Delta Electronics compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Delta Electronics's revenue will grow by 16.9% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 9.3% today to 17.7% in 3 years time.
• The bullish analysts expect earnings to reach NT$132.6 billion (and earnings per share of NT$33.37) by about August 2028, up from NT$43.7 billion today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 17.0x on those 2028 earnings, down from 35.0x today. This future PE is lower than the current PE for the TW Electronic industry at 19.8x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.76%, as per the Simply Wall St company report.

Delta Electronics Future Earnings Per Share Growth

Risks

• Geopolitical tensions and persistent uncertainties around tariffs-including unresolved questions about future rates in Thailand and Taiwan-could pressure Delta's cost structure and make long-term supply chain planning difficult, creating potential headwinds for both operating margins and revenue stability.
  
• Ongoing global wage inflation and higher labor costs in countries where Delta expands manufacturing, coupled with the limited ability to fully localize supply chains in high-cost regions like the US, may compress gross profit margins and reduce earnings over time.
  
• The company's rapid push into technology-diverse areas such as data centers, robotics, and renewables requires sustained high R&D and capital expenditures, which could strain free cash flow and dilute earnings, especially if new initiatives do not achieve scale or market adoption as anticipated.
  
• Heavy reliance on the surge in data center and AI-related orders means Delta is exposed to swings in investment cycles from a few hyperscale customers; a slowdown or change in capital spending from these key clients could drive significant volatility in revenue growth and net profit.
  
• Rising competition from low-cost Asian rivals and the risk of product commoditization in core power electronics and thermal management offerings threaten to erode margins and market share, potentially undermining future revenue and profit expansion.

Valuation

• The assumed bullish price target for Delta Electronics is NT$715.0, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Delta Electronics's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of NT$715.0, and the most bearish reporting a price target of just NT$352.0.
  
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be NT$749.6 billion, earnings will come to NT$132.6 billion, and it would be trading on a PE ratio of 17.0x, assuming you use a discount rate of 6.8%.
  
• Given the current share price of NT$588.0, the bullish analyst price target of NT$715.0 is 17.8% 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.