Detection Technology - Earnings to rebound soon enough
DT’s Q3 wasn’t strong yet EBITA was better than estimated; Q4 should see further gradual gains, while next year has significant earnings drivers after a period of low volumes.
Outlook is starting to improve again
DT’s EUR 24.7m Q3 revenue was in line with estimates, while the EUR 2.8m adjusted EBITA was a bit better than the EUR 2.4m/2.7m Evli/cons. estimates as the company has taken some efficiency measures. Q3 revenue would have been down by some 4-5% y/y in terms of fixed currencies; the volume and currency headwinds continue in Q4’25, but it should already be meaningfully better in relative terms even though we estimate Q4 adjusted EBITA to still decline by EUR 0.7m y/y. A rebound in volumes, particularly within SBU, has been due for some quarters and now DT has enough visibility to confirm double-digit growth will resume in Q1’26.
All application areas should resume growth next year
Western aviation security investments, driven by CT, have been expected to continue as most of the upgrades are yet to be completed. The Chinese market still has its challenges, and it remains to be seen how much growth it contributes next year, although there’s strong growth within TFT flat panels. SBU is likely to drive most growth next year, and we expect it to resume the double-digit rate it still saw last year. We estimate FY’26 sales mix to be slightly less favorable than in FY’24 as MBU could remain bigger than SBU, but DT could then do more than EUR 110m in revenue and so also top the earnings high seen last year.
Valuation is not challenging, and could even turn out cheap
DT has significant earnings levers for next year as the currency headwind should fade after Q1’26 while certain big-account specific drivers turn favorable and all application areas should grow. DT could then achieve high single-digit or even double-digit growth for FY’26, driven by a rebound in volumes. DT has taken efficiency measures and refocused some resources as it looks to invest more in e.g. software development. We estimate FY’26 EBIT at around EUR 15m, on which basis DT is valued some 8.5x EV/EBIT. This is already a low level, although on our FY’25 estimates the multiple is 14.5x. The valuation is thus not by any means very demanding, yet the earnings growth gradient for next year is still a bit uncertain. Our new TP is EUR 11.5 (10.5) as we retain ACCUMULATE rating.