Heidi Mo and John Cheong of UOB Kay Hian have raised their target price for Delfi from $1.12 to $1.68, on the premise the cocoa prices, down some 60% from the 2024 peak, means lower cost pressures on the chocolate maker.

In their April 14 note, Mo and Cheong point out that from up to US$12,900 per tonne, cocoa prices are now as low as US$3,200 per tonne, thereby marking a " clear turning point" where Delfi&rsquo s gross margin was compressed to 26.5% in 2025 from 27.4% in 2024. Back in 2018, the company was making gross margins of around 35%.

Last year, margins were further weighed down by a weaker rupiah against the reporting currency, the US dollar, as well as higher spending on promotions.

While Singapore listed, Delfi commands half the chocolate market share in Indonesia.

However, the analysts point out that the benefit from lower cocoa prices will not manifest immediately as the company buys up to 18 months ahead.

Also, rupiah may remain weak and offset lower raw material costs, which are largely denominated in the greenback. As an indication, a 3.9% rupiah depreciation in 2024 contributed to a 1.1ppt decline in gross margin.

" Hence, while the direction of margins is improving, we expect the pace to be gradual rather than immediate," say Mo and Cheong.

They believe that Delfi operates on a shorter product cycle, which means it can pass through differences in costs more quickly than the larger multinationals in the same space. Delfi can manage too by making tweaks in pricing, product sizes, stronger focus on more premium own brands that fetch better margins.

Delfi' s own brands products are seen to continue to generate the bulk of its earnings, posting a growth of 4.9% last year, which has helped to offset declines in production on behalf of other brands.

" This reflects strong brand equity and pricing power, particularly in key products such as SilverQueen and Cha Cha. Given that Delfi' s own brands typically carry higher margins and allow for greater control over pricing and product mix, this stable revenue base positions Delfi well to capture upside as cocoa prices normalise," reason Mo and Cheong.

Their higher target price of $1.68, up from $1.12, is derived after they raise their valuation multiple from the historical mean of 18x to 25.5x FY2027 earnings, which is 0.5 sd above the historical mean.

" With 2025 marking a margin trough, we see Delfi entering an earnings recovery cycle supported by improving gross margins and operating leverage. Delfi currently trades at 18x 2027F PE, or a 25% discount to global peers," the analysts say.

Delfi shares as at 10.25 am, was up 1.68% to $1.21.