Periodic/Sector reports
Electronics: Despite Persistent Cost Headwinds, 2H26 Earnings Should Improve
MARKET WEIGHT (Maintained)
Analyst
Analyst
Sirithat Prasertwuti
Highlights
Electronics earnings are expected to improve hoh in 2H26, supported by the strong semiconductor cycle in 2026-2027.
For KCE, we see a clear earnings outlook for 2H26-1Q27 due to the successful pass-through of higher costs to customers.
We believe DELTA’s valuation already priced in concerns of a margin squeeze over raw material shortages in 2Q26, ahead of a 2H26 earnings recovery.
We upgrade DELTA to BUY.
We maintain MARKET WEIGHT, with KCE and DELTA as our top picks.
Analysis
The electronics sector faced strong headwinds in 2Q26, especially DELTA and KCE. The electronics companies under our coverage (DELTA, KCE, HANA) posted a net profit of Bt6.67b (+37.8% yoy, -29.1% qoq). Sales came in at Bt74.13b (+40% yoy, +7% qoq). Despite HANA and KCE’s earnings significantly beating consensus by 68% and 30%, respectively, softer sector earnings were mainly dragged by DELTA’s disappointing 2Q26 earnings which were a 30% miss due to raw material shortages (MOSFETs and diodes). DELTA contributed 88% of sector sales and 91% of earnings.
DELTA: Earnings are expected to recover in 2H26, in line with DELTA’s Taiwan outlook. We forecast 2H26 earnings to improve 15% hoh to Bt17.3b (vs Bt15.2b in 1H26), with gross margin improving to 29.4% (vs 26.8% in 2Q26). we expect earnings to recover in 2H26, driven by: a) 5% of delayed orders shifting into 2H26; b) a normalisation in product mix from 2Q26; c) lower rush-order and secondary-market sourcing costs; and d) the absence of a one-time inventory provision that reduced 2Q26 gross margin by 1.5ppts. In addition, DELTA is currently trading below its 2021-24 average forward PE of 73x, a period before DELTA gained data centre exposure, making the current valuation attractive as a trading opportunity.
KCE: Higher PCB prices support earnings visibility over the next three quarters. KCE’s earnings are expected to be the strongest among electronics peers especially in terms of qoq growth in 3Q26, supported by two rounds of PCB price increases in 2H26 and a strong volume outlook from market share gains in 2H26-2027. We forecast KCE’s 2H26 earnings to improve 112% hoh to Bt1.08b (from Bt0.51b), driven by strong PCB volume growth of around 9% qoq in 3Q26 and higher average selling prices (ASP), with the first 9-10% price increase starting in 3Q26 and a second 9-10% increase in 4Q26-2027. In addition, KCE should be able to mitigate some cost headwinds relative to peers, supported by internal laminate sourcing from Thai Laminate Manufacturer Co. (TLM), which supplies 70% of KCE’s laminate needs.
Highlights
Electronics earnings are expected to improve hoh in 2H26, supported by the strong semiconductor cycle in 2026-2027.
For KCE, we see a clear earnings outlook for 2H26-1Q27 due to the successful pass-through of higher costs to customers.
We believe DELTA’s valuation already priced in concerns of a margin squeeze over raw material shortages in 2Q26, ahead of a 2H26 earnings recovery.
We upgrade DELTA to BUY.
We maintain MARKET WEIGHT, with KCE and DELTA as our top picks.
Analysis
The electronics sector faced strong headwinds in 2Q26, especially DELTA and KCE. The electronics companies under our coverage (DELTA, KCE, HANA) posted a net profit of Bt6.67b (+37.8% yoy, -29.1% qoq). Sales came in at Bt74.13b (+40% yoy, +7% qoq). Despite HANA and KCE’s earnings significantly beating consensus by 68% and 30%, respectively, softer sector earnings were mainly dragged by DELTA’s disappointing 2Q26 earnings which were a 30% miss due to raw material shortages (MOSFETs and diodes). DELTA contributed 88% of sector sales and 91% of earnings.
DELTA: Earnings are expected to recover in 2H26, in line with DELTA’s Taiwan outlook. We forecast 2H26 earnings to improve 15% hoh to Bt17.3b (vs Bt15.2b in 1H26), with gross margin improving to 29.4% (vs 26.8% in 2Q26). we expect earnings to recover in 2H26, driven by: a) 5% of delayed orders shifting into 2H26; b) a normalisation in product mix from 2Q26; c) lower rush-order and secondary-market sourcing costs; and d) the absence of a one-time inventory provision that reduced 2Q26 gross margin by 1.5ppts. In addition, DELTA is currently trading below its 2021-24 average forward PE of 73x, a period before DELTA gained data centre exposure, making the current valuation attractive as a trading opportunity.
KCE: Higher PCB prices support earnings visibility over the next three quarters. KCE’s earnings are expected to be the strongest among electronics peers especially in terms of qoq growth in 3Q26, supported by two rounds of PCB price increases in 2H26 and a strong volume outlook from market share gains in 2H26-2027. We forecast KCE’s 2H26 earnings to improve 112% hoh to Bt1.08b (from Bt0.51b), driven by strong PCB volume growth of around 9% qoq in 3Q26 and higher average selling prices (ASP), with the first 9-10% price increase starting in 3Q26 and a second 9-10% increase in 4Q26-2027. In addition, KCE should be able to mitigate some cost headwinds relative to peers, supported by internal laminate sourcing from Thai Laminate Manufacturer Co. (TLM), which supplies 70% of KCE’s laminate needs.
MARKET WEIGHT (Maintained)
Analyst
Analyst
Sirithat Prasertwuti
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