Detection Technology - SBU back in business

Good start to the year, SBU back on track

Q1 result was in line with our expectations. Q1 net sales amounted to EUR 23.1m (+19.3x% y/y) vs. EUR 22.3m/22.6m Evli/consensus estimates. Q1 EBIT was EUR 3.9m (16.7% margin) vs. EUR 4.1m/4.0m Evli/cons. SBU sales grew 22.9% to EUR 14.5m vs. EUR 13.6m Evli estimate. MBU sales were EUR 8.6m vs. EUR 8.8m Evli estimate. R&D costs were EUR 2.5m, up 28% as indicated earlier. SBU market demand has picked up, with increasing CT investments starting in US airports. We have estimated the upcoming airport related EU and US standards to offer DT additional sales in the range EUR 20-30m in the coming years. See our report for more details.

EBIT growth taking a breather this year, longer-term investment case intact

Based on the SBU market pick up, we have moderately raised our sales estimates for ’19-21E. We expect ‘19E 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 mix, as well as increased pricing competition. Despite flat EBIT this year, longerterm investment case is intact. We see DT’s investments this year securing its growth and profitability drivers for the coming years.

Maintain BUY recommendation with new TP of 23.5 (19)

On our estimates, DT is trading at discounts on EV/EBIT, EV/EBITDA and P/E multiples for ’19-20E. We see discount as unjustified given the attractive longer-term investment case. On the back of our revised estimates and valuation, we maintain our BUY recommendation with new target price of 23.5 euros (19).