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- Detection Technology - Expecting growth to continue despite MBU headwinds
Detection Technology - Expecting growth to continue despite MBU headwinds
Expecting strong growth in SBU, MBU softness in turn
While the security imaging market is experiencing strong demand due to increase in Chinese investments and increasing CT investments related to new EU and US airport standards, DT noted in its Q2 report that it expects a temporary slowdown in medical imaging market growth. DT has guided for Q3 sales to grow above 10%, with SBU net sales growing and MBU sales decreasing. For Q3, we estimate SBU growing 37% and MBU declining 13% y/y, with total Q3 net sales growing 13.6% y/y to 27.9 MEUR (27.6 MEUR cons). Our Q3 EBIT estimate is 4.9 MEUR (5.2 MEUR cons) compared to 5.1 MEUR in Q3’18.
Flat EBIT this year, but growth story continues
For full year 2019E, we expect net sales to grow 14% to 107 MEUR driven by SBU’s return to growth of 28% after a weaker 2018. We expect ‘19E MBU net sales growth to decline 7.6% due to the temporary slowdown in customer demand and 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 in both segments.
BUY rating and TP of 23.5 euros maintained ahead of Q3
Despite the short visibility and trade politics being unpredictable, we see investment case intact due to strong market drivers, especially in China, as well as DT’s compelling strategy and execution capabilities. Our estimates, as well as our BUY rating and target price of 23.5 euros remain unchanged ahead of the Q3 report.