Q3 Revenue Hits High, Profit Fails to Keep Pace
Delta Electronics (2308) held its third-quarter earnings call on the 29th, reporting third-quarter consolidated revenue of 1970.59億元, up 7.53% quarter-on-quarter and 31.09% year-on-year, a record high. Gross profit was 671.55億元, with a gross margin of 34.08%, down about 1.52 percentage points quarter-on-quarter and 0.79 percentage points year-on-year, falling below the 35% mark. Net profit attributable to the parent company for the quarter was 234.95億元, down 6.54% quarter-on-quarter and up 26.28% year-on-year, with EPS of 9.04元, still the second-highest in history, but profit growth did not fully keep pace with revenue expansion, with the market focusing on inventory buildup and declining gross margin.
39億元 Write-down Erodes Gross Margin
In response to questions about the roughly 39億元 allowance for inventory write-downs in the third quarter becoming a major drag on gross margin, CFO Yu Po-wen noted that inventory write-downs booked in the quarter accounted for about 1.7% of revenue, mainly due to rush orders from customers, design and quality specification changes, and long-and-short material supply from suppliers, which caused a buildup of some raw materials and finished-goods inventories. Chairman Cheng Ping said recent long-and-short materials in the supply chain, adjustments to customer pull-in schedules, and product specification changes had led to higher inventories, and uneven supply, whether at the company or at customers, could cause inventory increases.
Short-term Pain, Aiming for Destocking in Q4
Cheng Ping said the situation should be a short-term phenomenon, only a phased issue, and expects the related inventories to be pulled by customers and gradually digested in the fourth quarter. On market concerns that delays in AI data center construction could keep inventory pressure expanding, he stressed that current order visibility remains high, and mainly the actual delivery timing may move forward or be delayed to match customers' data center buildouts, rather than demand disappearing. Corporate Investment Vice President Liu Liang-fu added that AI data center construction is not a short-term demand of one or two quarters, but a growth trend that could last for years, during which quarterly fluctuations are inevitable and long-term demand should not be judged on a single quarter's performance.
Advance Stocking, Costs Up 2%, Negotiating Price Adjustments
Cheng Ping further noted that as the AI industry has grown very rapidly over the past two years, components and capacity supply are generally tight, so the company must stock up in advance and maintain sufficient safety inventory to retain flexibility in managing customer demand, as without advance preparation there will be no capacity in the future. He admitted that the future safety inventory level may be higher than in the past, somewhat larger than before, but still needs to be managed properly. On raw material costs and product pricing, he said overall material costs have risen about 2% since the beginning of the year, and the company is gradually negotiating price adjustments with customers, with some products likely to reflect new prices in the fourth quarter or the first quarter of next year.