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Why Indonesia’s Chocolate King Is Defying The Cocoa Crisis · Investor Exchange

• 0:02
  At Investor Exchange, it's time for another podcast with your hosts David and Brenda.
• 0:08
  Welcome to The Debate. Today, we're digging into Delphi Limited.
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  For anyone who doesn't know, they are, well, the absolute heavyweights of chocolate
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  in Southeast Asia, think Silver Queen.
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  But a new report from the USMR Research Institute from just this month,
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  January 2026, it paints a really complex picture.
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  The central question is this, is Delphi a resilient leader hitting a major rebound,
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  or is it basically a value trap caught between this cocoa super cycle and some
• 0:36
  pretty brutal currency issues.
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  So for my side, I'm arguing Delphi is a clear outperform with a target price
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  of around 88 Singapore cents.
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  And I have to take the other side of that.
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  Look, the brand is iconic, no question.
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  But the macro environment right now is just toxic for a business like this.
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  We're looking at seriously compressed margins, a structural currency problem,
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  and a commodity cycle that I don't think is done punishing their P&L.
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  I would argue that valuation, while it looks low is actually just a reflection
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  of some very genuine risk, not opportunity.
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  Okay, so let's start with the bull case, the turnaround thesis.
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  If you just zero in on the third quarter of 2025, the recovery,
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  I mean, it's already started.
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  Revenue climbed 6.1%, but the real story is on the operational side.
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  EBITDA, so earnings before interest, taxes, depreciation, and amortization,
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  that surged 16.3% year over year. This isn't a fluke. it's structural.
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  Delphi controls something like 38% of the Indonesian chocolate market.
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  That is a massive economic moat. And crucially, they're shifting their product
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  mix towards their higher margin own brands, you know, their own products like
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  Silver Queen, which grew 3.1%.
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  This matters because those have way better margins than the agency brands they
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  just distribute for others.
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  Yeah, but see, I just, I can't buy that one good quarter signals and all clear.
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  If we just zoom out a bit to the full nine-month performance for 2025,
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  that so-called recovery just vanishes.
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  Total EBITDA is actually down 17.1%. And their gross profit margins have been absolutely crushed.
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  They're down 130 basis points to 26.8%. This is the cocoa super cycle in action.
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  I mean, cocoa prices didn't just go up. They spiked to nearly $12,000 per metric ton in late 2024.
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  And yeah, sure, spot prices have cooled around 6,000, but there is a massive
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  lag effect in this business.
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  Delphi is right now grinding beans they bought at peak prices.
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  That expensive inventory is sitting on their books, and it is going to weigh
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  on margins well into the second half of 2026.
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  I get that. I do. But let me offer a different perspective on their pricing power.
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  The report points out that back in May 2024, Delphi pushed through a pretty
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  significant price hike of about 7%. And the market reaction?
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  Volume was stable. I mean, that is the literal definition of demand inelasticity.
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  Consumers there see Silver Queen
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  as an affordable luxury that they're just not willing to cut back on.
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  And you talk about risk. But look at their safety net here.
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  They generated a record $48.9 million in free cash flow in just the first nine months of 25.
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  They're sitting on a net cash position of over $70 million U.S.
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  Dollars. That is not a company in distress.
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  That's a fortress. A fortress with a structural flaw.
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  Cash is great, but it doesn't solve what I'd call the double whammy of FX risk.
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  This is the detail investors often miss.
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  Delphi's business model has this mismatch. They earn over 60% of their revenue
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  in Indonesia, so an Indonesian rupiah.
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  But their main costs, cocoa, sugar, are priced in US dollars.
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  So when the rupiah weakens against the dollar, their input costs explode in
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  local currency, and the reported growth in U.S. dollars just shrinks.
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  You call it a fortress, I see a business that earns in a soft currency and spends in a hard one.
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  And in a strong dollar world, that just mathematically squeezes your margins,
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  no matter how many chocolate bars you sell.
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  That's a fair point, though. I think the market has already priced that in.
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  I mean, the stock is trading at, what, 11.9 times forward FY26 earnings?
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  That is remarkably low. You compare that to global peers like Hershey or even
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  regional ones like Mayora.
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  And Delphi is at a deep, deep discount. Plus, we have an immediate catalyst
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  on the horizon, the early LeBaron effect.
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  In 2026, the holiday shifts into March.
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  Historically, this always drives aggressive restocking from retailers in the first quarter.
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  So we're about to see a demand surge right when their price hikes have fully taken hold.
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  It's a perfect setup for an earnings beat. An early holiday might boost the
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  top line, sure, but it also brings out the competition.
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  The report notes this isn't just an Indonesia story anymore.
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  Global giants like Mondelez are pushing hard into these markets.
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  Defending that 38% market share, that requires a ton of marketing spend.
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  That's another cost just eating away at profitability.
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  Honestly, I'm just not willing to bet on a full recovery until I see their gross
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  profit margins get back to that historical 28-30% range.
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  Until those high-cost cocoa hedges fully roll off their books,
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  the risk-reward here has just skewed at the downside for me.
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  So to wrap up my view, I see Delphi as a classic recovery play.
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  You're getting a market leader with a safe dividend, about 3.6%,
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  and a very clear path back to margin recovery as commodity costs finally normalize.
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  The tough decisions are behind them.
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  That Q3 inflection was the signal to get in before everyone else figures it
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  out. And I'll just maintain my caution.
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  Cheap can always get cheaper if these macro headwinds stick around.
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  I think investors are better off on the sidelines for now.
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  The mix of cocoa volatility and that currency exposure makes this a show-me story.
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  I need to see sustained proof in the margins, not just one good quarter, before I'm convinced.
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  A classic clash between underlying value and macro volatility.
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  Well, that brings us to the end of our analysis. We hope this deep dive helps
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  you better understand the risks and rewards in Delphi Limited.