Detection Technology - Expecting good growth, flat EBIT

Expecting good growth in both SBU and MBU

DT has guided for double digit growth for both BU’s in Q2. We estimate SBU growing 17% and MBU 16% y/y, which is in line with DT’s Q2 guidance. We expect Q2 net sales of 28.5 MEUR (+16.7% y/y, 28.1 MEUR cons.) and 5.4 MEUR EBIT (+2% y/y), 5.1 MEUR cons.). Our EBIT expectation is flat due to increase in R&D spending. Overall, the outlook for SBU is positive with the security market picking up momentum after a decline in the end of last year. Demand is increasing due to the Chinese security market returning to growth and increasing CT investments related to new EU and US airport standards. The outlook for MBU is however more mixed with one key MBU customer ramping down sales of one of DT’s product in H2. Despite this, H2 net sales are expected to grow compared to last year. With SBU exhibiting a good growth profile, we’re looking for color on the possibility of MBU growth mitigating the effects of the product ramp-down in H2.

Flat EBIT this year, but growth story continues

For full year 2019E, we expect net sales to grow 11% to EUR 104m driven by SBU’s return to growth of 17.8% on weak comparables. We expect ‘19E MBU net sales growth to be flat due to the ramp-down of key customer’s product in H2. We expect ‘19E EBIT to be at last year’s level due to increase in R&D spending, increasing share of SBU sales affecting the mix, as well as increased pricing competition.

BUY rating and TP of 23.5 euros maintained ahead of Q2

Our estimates, rating and target price of 23.5 euros remain unchanged ahead of Q2 report.