Detection Technology - Earnings back on growth track
DT’s outlook is turning much brighter now as security CT volumes are recovering after the slump seen last year.
Sales are now growing at a double-digit rate in H1’26
DT’s EUR 29.7m Q4 revenue was in line with the EUR 29.4m/29.2m Evli/cons. estimates, and the EUR 3.7m EBITA also matched the EUR 3.7m/4.1m Evli/cons. estimates despite the sales mix being more tilted towards medical than we expected. Lower volumes within the traditional higher margin security CT area hurt DT’s profitability throughout last year, but now the business is staging a volume recovery. DT also won some big TFT business in China, where the outlook now seems relatively stable from the company’s perspective. In Q1’26 underlying revenue is growing at some 15% y/y rate in terms of fixed FX.
We estimate 10% growth and 12.5% EBITA margin for FY’26
The Q4 revenue decline was due to FX; Q1 should still be impacted by a similar size 5% headwind, but the effect could fade by Q2. We expect DT’s underlying growth to decline a bit in Q2 to 10%, but this should still drive significant earnings growth as security is likely to grow the fastest. FY’26 looks strong for DT as its traditional security CT volumes are recovering after the many setbacks seen last year, but its traction within TFT also looks promising. We estimate FY’26 EBITA to gain EUR 4m y/y; in our view DT’s gross margin should stay flat at about 45% this year as we expect all the three product areas to grow at least at a high single-digit rate. This would leave EBITA margin at 12.5%, some 300bps higher y/y but still about 150bps short of the level seen in FY’24 when security was the largest application area.
Attractive multiples on growing earnings
DT was not the only company having trouble in its sector last year as peer group sales also declined by some 10%. Their revenue is expected to rebound this year at a high single-digit rate; we estimate DT to grow 10% this year, and it has good potential to continue at a similar rate also in FY’27 considering only some 15-20% of global carry-on baggage CT systems have been deployed so far. Such a security CT-driven growth, in addition to the growing TFT volumes, should take DT closer to its 15% EBITA margin target next year. DT is valued 11x EV/EBIT on our FY’26 estimates, and continued earnings growth could take the multiple down to about 8.5x next year. Our new TP is EUR 13.0 (12.0); our rating is now BUY (ACCUMULATE).