Delko SA

I bought a small position in Polish micro-cap Delko SA (WSE:DEL) recently. Delko is active in the wholesale distribution of household chemicals, personal care products and cosmetics in Poland. In 2019 the company also bought a chain of 25 grocery stores.

This is the second time I own a few shares of this company. The first time the company really came on my radar was during 2019 when I noticed that the president of the company, Dariusz Kawecki, had been purchasing a lot of shares in the open market. That was during the period from the last quarter of 2018 up until Q2 of 2019. The company was trading at a low P/E multiple and a low price-to-book value ratio at that time. The share price was mostly between 7 and 8 PLN during 2019.

Delko benefited from Covid and during the summer investors actually got excited about the company. Shares were bid up to above 30 PLN. Delko was one of the few companies in my portfolio that did really well during the pandemic. Most of the deep value stuff I owned only got cheaper during the first six months of the pandemic.

Investor excitement in Delko seems to have died down since October, and I think shares now look pretty cheap again. As usual, I will start off with some summary financials about Delko.

Share price: 15.80 PLN
Shares outstanding: 5.98m
Market cap: 94.5m PLN (~$25.4m USD)
Book value Sept. 30, 2020: 105.6m
Net income 2019: 13.3m
Net income Q1-Q3 2020: 17.8m
Net income last twelve months: 19.4m
P/BV: 0.89x
Trailing P/E: 7.1x
LTM P/E: 4.9x

I should note that this is mostly a quantitative buy for me. All of Delko’s reports are in Polish only and this makes it pretty hard for me to get a good understanding of the business. In situations like this, I sometimes end up buying a small position.

Recent results and outlook

Delko’s revenues for the first nine months of 2019 increased from 566.1m to 636.2m (+12.4%) and net income rose from 11.7m to 17.8m (+52.1%). The company seems to have benefited from the Covid pandemic as there was more demand for some of Delko’s products, things like toilet paper and cleaning products:

In the 3rd quarter of 2020, Delko Group achieved record-breaking sales results in its history and financial results.

We owe it both to organic development and the fact that Delko is leading sale of products particularly sought after in the times of COVID-19 – and these are: toilet papers, soaps, washing and disinfecting liquids and other products for cleaning and hygiene.

Delko also has its own products in these categories. Their sales are growing year by year and improves group performance.

The Group sells products both in wholesalers and in 413 drugstores and shops franchise Blue STOP and 70 Delko Group’s own stores (map).

Source: Delko Q3 2020 report, page 2 (translation generated with Google Translate)

The company has been mixed in its messages about the impact of the pandemic on its business.

This was the commentary about the short-term outlook in the Q2 report:

In the short term, the financial results of Delko Group will be good and probably close to the results of previous years. Sales are at a level similar or slightly higher than the same level the previous year.

However, we do not have reliable data that would allow us to make medium and long-term forecasts.

Source: Delko Q2 2020 report, page 58

Results for Q3 of 2020 were quite a bit better than last year though. Sales were 215.7m, up 7.4% from 200.9m last year. Net income was 7.3m and up 62% from last year (4.5m).

This is what management had to say about the near term outlook in the Q3 report:

Despite the restrictions related to COVID-19, the situation in the Company is good and stable. Sales are carried out normally and according to the current forecasts we should end the last quarter and the whole year with good financial and commercial results.

Source: Delko Q3 2020 report, page 4

Dariusz Kawecki made a small insider buy of 3244 shares at a share price of 16.63 PLN. This amounts to about $15k USD, so it’s probably not that meaningful.

Mr. Kawecki also made some comments about the share price of the company in the Q3 report:

The current price of the Company’s shares is very low and attractive in relation to similar companies listed on the WSE. The price to profit ratio or P / E is just 5.67.

Source: Delko Q3 2020 report, page 3


I think Delko is somewhat interesting at this price. It’s not a high quality company by any means, but the company has performed strongly during the pandemic. Results should deteriorate again in the near future though. When the pandemic subsides, it will probably be business as usual, but even compared to recent pre-pandemic years, the company doesn’t look expensive. At today’s price Delko would then be trading at a high single digit P/E multiple. There might still be a few good quarters of above normal results ahead. It does seem that Q4 has been the weakest quarter for the company when I look at their historical results, so I don’t expect a great result there compared to the other quarters of this year.

Delko is a micro-cap with a market cap of only ~25m USD. The float is much smaller however due to the high insider ownership. That can cause some sharp moves upward or downward of the share price. Delko seems to be a company that traders like to bid up when there’s a new turn in the Covid story (like the possible further spread of the new UK Covid strain), and I don’t mind getting a bit of exposure to that (the shares that is, not Covid) at a cheap price either.

This will be the last post on this blog for 2020. I wish you all a happy new year!

Disclosure: long Delko SA (WSE:DEL)

Posted in Polish stocks and tagged .


  1. Nice write up.
    Have you looked at cash conversion (FCFF / Net Income, above 1?).
    They have high debt right? Which might make P/E not the best metric to look at…

    • Thanks!

      In this sort of business I think it’s fairly normal to use debt for working capital needs. They’ve grown sales from 500m in 2010 to 821m for the last twelve months. The company has reduced debt a bit in the last couple of years. FCF has been fairly lumpy at times as well. It doesn’t really concern me at this point, but it is something I’m keeping an eye on.

      I do prefer businesses that throw off a lot of excess cash and that don’t need a lot of extra working capital investment to finance growth. So I usually avoid these types of businesses and if I do buy one, the position tends to be small.

  2. Update: I recently sold my position in Delko at a marginal profit. The company still trades at very low multiples. The vaccinations seem to be working well, also against the newer Covid-variants. I’d expect 2021 to show more typical results for Delko.

    I also didn’t like that the CEO in his annual letter advertised the sale of personal protective equipment in their business. I think this was also the first shareholder letter he wrote in English and not in Polish. These details seemed a bit promotional to me.

    My main reason for selling though is that I have increased my exposure to other Polish stocks in my portfolio since I wrote this post. Delko was definitely the lowest quality business and it just seemed better to put the money elsewhere.

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