Detection Technology - Outlook for H2 remains strong
DT’s Q2 EBIT faced a significant decline due to low sales and increased costs. The outlook for H2 and 2023 seems bright and we expect the company to see a clear profitability improvement in 2023.
SBU and IBU performed well
The strong growth of IBU and SBU wasn’t enough to offset the declined medical segment and Q2 group revenue decreased by 3.3% y/y. MBU suffered from a temporary supply chain issue and its topline decreased by 25.2% y/y while driven by all market segments, IBU and SBU recorded strong double-digit y/y growth of 29.4% and 25.4% respectively. The growth rate could have been higher as some sales were postponed due to the above-mentioned reasons as well as DT’s and its customers’ challenges to acquire components. With lower volumes, spot-component purchases, and increased logistic and R&D costs, DT’s margins tightened, and EBIT fell below the comparison period to EUR 1.2m (5.2% margin).
Demand is expected to further pick up
DT reiterated its guidance for H2, expecting double-digit growth both in Q3 and H2. Furthermore, the company clarified BU level outlook for Q3; expecting MBU and SBU to see double-digit growth while IBU is expected to grow. We foresee some uncertainty in the industrial markets with the global industrial activity decreasing. Meanwhile, we see IBU positioned well in its markets and expect the business to deliver growth even during uncertain times. Furthermore, the company’s management noted that the demand in all segments is picking up.
HOLD with a TP of EUR 20.0
We made only minor changes to our near-term net sales estimates while with soft Q2 profitability and increased cost pressures, our 22E EBIT estimate declined significantly. However, with net sales increasing and component availability improving, we expect 23E EBIT to improve significantly. In our view, with a 23E EV/EBIT multiple of 14x, the company’s valuation is quite neutral. The market environment however includes some uncertainty given signs of the global economy slowing down. We retain our HOLD-rating and TP of EUR 20.0.
The strong growth of IBU and SBU wasn’t enough to offset the declined medical segment and Q2 group revenue decreased by 3.3% y/y. MBU suffered from a temporary supply chain issue and its topline decreased by 25.2% y/y while driven by all market segments, IBU and SBU recorded strong double-digit y/y growth of 29.4% and 25.4% respectively. The growth rate could have been higher as some sales were postponed due to the above-mentioned reasons as well as DT’s and its customers’ challenges to acquire components. With lower volumes, spot-component purchases, and increased logistic and R&D costs, DT’s margins tightened, and EBIT fell below the comparison period to EUR 1.2m (5.2% margin).
Demand is expected to further pick up
DT reiterated its guidance for H2, expecting double-digit growth both in Q3 and H2. Furthermore, the company clarified BU level outlook for Q3; expecting MBU and SBU to see double-digit growth while IBU is expected to grow. We foresee some uncertainty in the industrial markets with the global industrial activity decreasing. Meanwhile, we see IBU positioned well in its markets and expect the business to deliver growth even during uncertain times. Furthermore, the company’s management noted that the demand in all segments is picking up.
HOLD with a TP of EUR 20.0
We made only minor changes to our near-term net sales estimates while with soft Q2 profitability and increased cost pressures, our 22E EBIT estimate declined significantly. However, with net sales increasing and component availability improving, we expect 23E EBIT to improve significantly. In our view, with a 23E EV/EBIT multiple of 14x, the company’s valuation is quite neutral. The market environment however includes some uncertainty given signs of the global economy slowing down. We retain our HOLD-rating and TP of EUR 20.0.